Texmaco- Q2FY11 results review:: ICICI Sec

Visit http://indiaer.blogspot.com/ for complete details �� ��


Texmaco BUY 
Building momentum Rs162
Reason for report: Q2FY11 results review



Texmaco’s Q2FY11 EBITDA surged a healthy 22% YoY to Rs430mn (I-Sec:
Rs434mn) and PAT rose 31% YoY to Rs294mn (I-Sec: Rs294mn) with booking of
800 wagons (650 wagons from IR and 150 from private orders) for the quarter.
EBITDA margin was comfortable at 17.6%, up 300bps YoY but down 250bps QoQ.
The Heavy Engineering (HE) division led the strong performance with 51% YoY
growth in PBIT to Rs350mn. Though the number of wagons sold was lower at 800
versus 1,021 in Q2FY10, value per wagon was higher. Topline for Foundry
remained tepid, declining 13% QoQ to Rs340mn – the division’s production was
affected due to lower demand of couplers, however traction has been building on
export orders for FY12. The total order book stands at 5,000 wagons (including
1,200 from private). Further orders of 23,000 wagons are expected in Q3FY11. We
maintain BUY with Rs201 target price.


􀁦 Margin expansion. Q2FY11 EBITDA and PAT margin improved to 17.6%
and12.1% from 15.6% and 10.1% in FY10 respectively on better realisation from HE
division owing to better contribution from covered wagons. PAT margin improved
due to higher interest income at Rs7mn and higher other income at Rs21mn.
􀁦 Robust order book addition. Texmaco’s order book increased to 5,000 wagons in
Q2FY10 from 1,000 wagons in Q1FY10, given the release of Indian Railways (IR)
tender for FY10. Further orders of 23,000 wagons (18,000 wagons FY11 budget and
5,000 wagons FY09 budget) are expected in Q3FY11. The company has not yet
firmed up plans for real estate development and is looking towards process and
technology up-gradations.
􀁦 Recent development. Texmaco has formed consortium with Bombardier
Transportation India Limited to bid to the Ministry of Railways for the manufacture of
electric locomotives. The consortium intends to manufacture, supply and maintain
800 electric locomotives for IR.
􀁦 Valuations. Our sum-of-the-parts value for the pre-demerged Texmaco stands at
Rs26.5bn or Rs201/share. We expect FY11E and FY12E EPS of Rs9.2 and Rs12.3
respectively with earnings CAGR to be 29% through FY10-13E. We believe,
Texmaco is a value play on steadily growing rail-freight segment, driven by demand
of bulk commodities and logistics advantage. Maintain BUY.