Buy Elgi Equipments Ltd For Target Rs.172.00 - Firstcall Research Ltd

SYNOPSIS

*  Elgi Equipments incorporated in 1960; the company is a market leader and Asia’s largest manufacturer of air compressors and automobile service station equipment.

*  During Q2 FY15, consolidated net profit jumps to Rs. 137.74 million against Rs. 79.11 million in the corresponding quarter ending of previous year, an increase of 74.11%.

*  Revenue for the quarter stood at Rs. 3193.57 million from Rs. 3211.88 million, when compared with the prior year period.

*  Profit before interest, depreciation and tax is Rs. 290.69 million as against Rs. 252.97 million in the corresponding period of the previous year, grew by 14.91%.

*  EPS of the company stood at Rs. 0.87 a share during the quarter, registering 74.11% increased over previous year period.

*  During Q2 FY15, Compressors division registered sales of Rs. 2746.55 mn as compared to Rs. 2789.23 mn in Q2 FY14.

*  During Q2 FY15, Automotive division registered sales of Rs. 320.52 mn as compared to Rs. 312.13 mn in Q2 FY14.

*  Net Sales and Operating Profit of the company are expected to grow at a CAGR of 11% and 5% over 2013 to 2016E respectively.

 

QUARTERLY HIGHLIGHTS (CONSOLIDATED)

Results updates- Q2 FY15,

Elgi Equipments incorporated in 1960; the company is a market leader and Asia’s largest manufacturer of air compressors and automobile service station equipment in India as well as abroad, reported its financial results for the quarter ended 30th Sep, 2014.

The consolidated net profit jumps to Rs. 137.74 million against Rs. 79.11 million in the corresponding quarter ending of previous year, an increase of 74.11%. Revenue for the quarter stood at Rs. 3193.57 million from Rs. 3211.88 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs. 0.87 a share during the quarter, registering 74.11% increased over previous year period. Profit before interest, depreciation and tax is Rs. 290.69 million as against Rs. 252.97 million in the corresponding period of the previous year.

 

OUTLOOK AND CONCLUSION

*  At the current market price of Rs.150.45, the stock P/E ratio is estimated 43.61 x FY15E and 38.87 x FY16E respectively.

*  Earning per share (EPS) of the company for the earnings for FY15E and FY16E is seen at Rs.3.45 and Rs.3.87 respectively.

*  Net Sales and Operating Profit of the company are expected to grow at a CAGR of 11% and 5% over 2013 to 2016E respectively.

*  On the basis of EV/EBITDA, the stock trades at 23.09 x for FY15E and 20.29 x for FY16E.

*  Price to Book Value of the stock is expected to be at 4.60 x and 4.11 x respectively for FY15E and FY16E.

Compressor business grew marginally. Domestic markets improved marginally in specific segments. Company’s performance in the international market contributed to sustain the top line. With improved trend of sales of automobiles in the passenger cars and commercial vehicle sector, the automotive business grew by 3% compared to the same period last year. Sustained improvement in automotive industry performance will tigger fresh investments which in turn will enhance growth opportunities for the division. Hence, we recommend ‘BUY’ in this particular scrip with a target price of Rs.172.00 for Medium to Long term investment.

 

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