Tube Investments (Accumulate): Geojit financial
Tube Investment of India (TII) is a flagship company of Murugappa group. It is one of the leading product manufacture for major industries such as Automotive, Railway, Construction, Mining, etc.
Q3-FY22 revenue grew by 4.3 per cent q-o-q. This was largely driven by double digit growth from the export market and 8 per cent q-o-q from CG power and Industrials.
Despite inflated RM cost, TII margin improved 128bps QoQ owing to superior product mix and cost pass through benefit. CG Industrial & Power Co, which provides power and industrial system related service in India and abroad, will continue to enhance TII product portfolio and revenue mix.
TII’s entry into 3W electric manufacturing, will mark the group’s foray into automobile manufacturer from a ancillary player. Due to supply shortage extended the launch to Q2-FY23.
We expect TIIs diversified approach to de-risk from auto sector and concentrate more on other industrial segments like railways & powers through inorganic form to support long term revenue visibility.
Additionally, Government’s PLI scheme and China plus strategy by major international OEMs to bring incremental growth for medium term.
Given the strong fundamentals and strategic change adopted in the company’s segment mix, we value TII on a consolidated basis and recommend Accumulate with a target price of ₹1,746 at CMP.