Hold Greaves Cotton; target of Rs 95: Sharekhan

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Sharekhan's research repor on Greaves Cotton

Greaves Cotton (Greaves) posted higher than expected loss in Q1FY21 impacted by lower offtake from OEM due to COVID-19 and inability to fully pass on cost increases. We expect 3W demand to remain weak in near term as people are reluctant to use them so as to ensure social distancing in COVID-19 times. While non-automotive segment volumes are picking up, it is not sufficient to offset decline in the automotive space. Negative operating leverage and inability to fully pass on cost increases due to weak demand would lead to a decline in margins.

Outlook

At CMP, the stock is trading at 15x FY22 earnings which is close to its long-term historical average of 16-17x. We retain Hold rating on the stock with revised PT of Rs 95.

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