TIL Robust performance :: Q2FY11 :: Edelweiss,

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TIL
Robust performance



􀂄 Robust revenue growth; margins intact
TIL reported strong Q2FY11 numbers. Revenue posted strong growth of 75% Y-o-
Y to INR 3,545 mn. The revenue growth was spearheaded by power solution
systems (PSS) and construction & mining systems (CMS), which catapulted 103%
Y-o-Y and 79% Y-o-Y to INR 1,005 mn and INR 2,016 mn, respectively. The
material handling system (MHS) segment reported decent growth of 30% Y-o-Y.
EBITDA margins remained intact at 8.2% Y-o-Y as increase in raw material cost
(up 230bps Y-o-Y) was offset by decline in employee cost (down 200bps Y-o-Y)
and other expenses (down 160bps Y-o-Y).
􀂄 Lower tax rate; bottom lines zooms
The company reported robust PAT growth of 112% Y-o-Y to INR 143 mn primarily
due to lower tax rate (28.7% against 34.3% in Q2FY10) led by higher revenue
contribution from its Singapore and Myanmar subsidiaries, which have lower tax
rates. Also, lower interest cost aided the strong PAT growth.
􀂄 PSS leads the way; MHS a drag
Strong earnings were driven by the PSS segment, which posted flattish EBIT
margin against a decline in both CMS and MHS segments. While the PSS segment
reported 12% EBIT margin, CMS and MHS reported EBIT margin of 9.8% and
3.5%, respectively. TIL sold 52 cranes during the quarter against 37 last year,
leading to fall in margins in the MHS segment given that it has lower margin in
the cranes and stacker business compared to service business.
􀂄 Ex-principal order book at INR 1.8 bn; strong order inflow
TIL had an unexecuted order book of INR 1.82 bn against INR 1.23 bn in Q2FY10,
a 48% growth Y-o-Y. PSS accounts for 56% (INR 1.02 bn), MHS 20% (INR 0.36
bn) and CMS the balance 24% (INR 0.44 bn). The company reported an order
inflow of INR 2.8 bn during the quarter. Management expects good order inflow
traction in H2FY11.
􀂄 Outlook and valuations: Positive; maintain ‘BUY’
We remain positive on the space TIL operates in and believe future growth will be
aided by improvement in the capex cycle and infrastructure spending. Though
management has guided for stronger growth, we prefer to wait for commissioning
of phase I of its Kharagpur plant to revise our estimates. At our EPS of INR 61.8
and INR 63.9, the stock is trading at 11.4x and 11.0x its FY11E and FY12E
earnings, respectively. We maintain ‘BUY’ recommendation on the stock.