ICICI Direct's research report on Greaves Cotton
Greaves Cotton’s (GCL) standalone revenues came in at Rs 288.2 crore, which fell 41.2% YoY (vs. our estimate of Rs 298.7 crore). Engine segment revenues came in at Rs 266 crore, down 40.4% YoY. On the other hand, e-mobility segment revenue grew 23.9% to Rs 42.5 crore owing to pent-up demand. EBITDA fell 70.5% to Rs 17.5 crore YoY (vs. our estimate: Rs 13.7 crore). While EBITDA margins fell 600 bps to 6.1% (vs. our estimate of 4.6%) impacted by higher operating expenses and lesser revenues. Adjusted PAT (adjusted for exceptional item) was at Rs 3.4 crore, down 91.5% YoY (below our estimate of Rs 4.1 crore). It reported an exceptional item of Rs 31.1 crore.
Outlook
Overall auto engine volumes may stay sluggish in the medium term due to BS-VI transition, 3-W, 4-W auto slowdown amid Covid-19. While Bestway acquisition would expand E-3-W base, new product launches in high speed E-2W vehicles at Ampere and new business initiatives (CNG engines, after market and B2C business) may provide much needed growth uptick in the long term. We build revenue, PAT CAGR of -4.8%, -7.4% over FY20-22E, respectively. We value GCL (base business at 12.0x on FY22E and Ampere at 1.5x P/sales on FY22E) at Rs 75/ share and maintain HOLD rating.
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