Hold Greaves Cotton; target of Rs 88: Arihant Capital

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Arihant Capital 's research report on Greaves Cotton

Greaves Cotton (GCL) reported weak set of numbers during Q1FY21, impacted due to Covid related disruption amid auto slowdown. Revenue for the quarter fell by 69% YoY/59% QoQ to Rs 1,471 mn, due to significant decline in sales volumes across the segment. Gross margin of the Company fell by 416 bps YoY/69bps QoQ to 27.8%, primarily, due to high material cost. Sharp decline in revenue and fall in gross margin leading to EBITDA loss during the quarter. Company has reported EBITDA loss of Rs 217 mn vs. EBITDA gain of Rs 613 mn YoY. Loss for the quarter stood at Rs 242 mn as against profit of Rs 382 mn in Q1FY20.

Outlook

We maintain our Hold rating on the stock with a revised target price of Rs 88, valuing it at PE multiple of 13.5x to its FY22E EPS of Rs 6.5, which yields a target price of Rs 88 per share.

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