Sharekhan's research report on Greaves Cotton
GCL’s revenue growth to moderate substantially in FY20 to 3% attributable to sustained weakness in automotive demand and slowdown in the aftermarket and agri business. Margin pressures to sustain given the negative operating leverage and increased losses in the electric two wheeler business. OPM’s to dip 100 bps to 12.5% in FY20. Earnings to fall 17% in FY20; FY20 and FY21 earnings estimates cut by 13% each to factor in the concerns. Valuations at 17.3x FY21 earnings are close to historical average of 17- 18x.
Outlook
We retain our Hold rating on Greaves Cotton Ltd (GCL) with a revised PT of Rs 125.
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