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Robust revenue; PAT ahead of estimate
TIL reported strong Q3FY11 consolidated revenue growth, at 22% Y-o-Y to INR
3.8 bn, spearheaded by strong growth in material handling systems (MHS) and
construction & mining systems (CMS); these two businesses grew 40% and 55%,
to INR 0.7 bn and INR 1.8 bn, Y-o-Y, respectively. Power solution systems (PSS)
and international subsidiaries recorded flat growth during the quarter, at INR 0.6
bn and INR 0.9 bn, respectively. For 9mFY11, revenue grew 35% Y-o-Y, to INR
10.3 bn, with international subsidiaries up 59% and CMS up 45%. MHS and PSS
grew moderately at 31% and 21%, respectively. EBITDA margin, at 7.8%, was
below our estimate of 8.6%, but PAT ahead, at INR 155 mn.
Order book at INR 1.8 bn; new plant to operationalise in FY12
TIL had an unexecuted order book of INR 1,812 mn against INR 2,581 mn in
Q3FY10, down 30% Y-o-Y. Of this, PSS accounts for 55.2% (INR 1,000 mn), MHS
26.4% (INR 479 mn) and CMS 18.4% (INR 333 mn). Management expects pickup
in order inflows on the back of increased infrastructure activities. Through
Kharagpur plant (expected to be operational by April 2011), TIL’s capacity is likely
to grow 5x, to 100 units a month. We believe the company is preparing the
ground well in advance, to capitalise on growing opportunities in the road
construction, port equipment and other material handling equipment sectors.
Accordingly, we revise up our EPS estimate by 4% for FY12.
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. Given the
lower margin during 9mFY11, we revise down our FY11 EPS estimate by 8% while
revising up our EPS estimate for FY12 by 4% based on the strong outlook. We
believe the recent acquisition of Bucyrus International (Bucyrus) by Caterpillar,
USA, augurs well for the company as it could start selling the mining products of
Bucyrus from FY12. At our EPS of INR 57.0 and INR 66.6, the stock is trading at
9.9x and 8.4x its FY11E and FY12E earnings, respectively. We maintain ‘BUY’
recommendation on the stock.
Strong volume in material handling, mining
TIL sold 35 cranes during the quarter against 30 last year, leading to a fall in MHS
margins (lower margin in the cranes and stacker business compared with service
& spare). For 9mFY11, MHS sold 87 cranes against 67 cranes last year. Machines
dispatched during the quarter under CMS grew to 373 from 235 last year; for
9mFY11, CMS volume increased to 846 from 636 machines. Gensets sold during
the quarter were 130 against 133; for 9mFY11, TIL sold 393 gensets under PSS
against 333 last year.
Company Description
TIL was established in 1944 by a group of Scotsmen spearheaded by R T Wilson, as a
dealer of Caterpillar Tractor Company, US, for its earth moving equipment. In 1985 it
was renamed TIL. Since 1950, it started expanding its range of dealership to include
other material handling equipments and also formed joint ventures and acquired
companies to expand its equipment business and get access to technologies. It currently
is operating through three business units—material handling equipment which
manufactures cranes, forklifts and reach stackers used across sectors such as ports,
mining, oil & gas, construction and defence; in construction and mining group it sells
equipments and spares for Caterpillar products in North and East India; and in power
solution system it sells generator sets in the 180-2250 KVA range, using Caterpillar
diesel engines. Apart from sale of gensets, it undertakes erection and commissioning of
all relevant installations and spare part sales.
Investment Theme
The company has a differentiated business model where it has the ability to provide total
infrastructure solutions (supplying of spare parts and offering after sales services) rather
than supplying only products which ensures stability in revenues. It has strategic
alliances with leading manufacturers in the world such as Caterpillar, Manitowoc Crane
Group (US), Famak S.A (Poland), and Paceco Corp (US).
TIL has recently approved a scheme of restructuring wherein it will transfer, subject to
shareholder and court approval, the Caterpillar business (construction and mining
solutions and power systems) to a wholly owned subsidiary. With the new manufacturing
plant likely to commissioning by FY12 and increased contribution from CMS, we expect
TIL to maintain its healthy growth.
Key Risks
Slowdown in roads and mining segments could adversely affect the company’s revenues.
Rise in input costs (currently at 75%) and delayed project execution could adversely
affect margins and revenues, respectively.
Increased competition or threat from cheaper imports could hurt TIL’s overall
performance.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Robust revenue; PAT ahead of estimate
TIL reported strong Q3FY11 consolidated revenue growth, at 22% Y-o-Y to INR
3.8 bn, spearheaded by strong growth in material handling systems (MHS) and
construction & mining systems (CMS); these two businesses grew 40% and 55%,
to INR 0.7 bn and INR 1.8 bn, Y-o-Y, respectively. Power solution systems (PSS)
and international subsidiaries recorded flat growth during the quarter, at INR 0.6
bn and INR 0.9 bn, respectively. For 9mFY11, revenue grew 35% Y-o-Y, to INR
10.3 bn, with international subsidiaries up 59% and CMS up 45%. MHS and PSS
grew moderately at 31% and 21%, respectively. EBITDA margin, at 7.8%, was
below our estimate of 8.6%, but PAT ahead, at INR 155 mn.
Order book at INR 1.8 bn; new plant to operationalise in FY12
TIL had an unexecuted order book of INR 1,812 mn against INR 2,581 mn in
Q3FY10, down 30% Y-o-Y. Of this, PSS accounts for 55.2% (INR 1,000 mn), MHS
26.4% (INR 479 mn) and CMS 18.4% (INR 333 mn). Management expects pickup
in order inflows on the back of increased infrastructure activities. Through
Kharagpur plant (expected to be operational by April 2011), TIL’s capacity is likely
to grow 5x, to 100 units a month. We believe the company is preparing the
ground well in advance, to capitalise on growing opportunities in the road
construction, port equipment and other material handling equipment sectors.
Accordingly, we revise up our EPS estimate by 4% for FY12.
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. Given the
lower margin during 9mFY11, we revise down our FY11 EPS estimate by 8% while
revising up our EPS estimate for FY12 by 4% based on the strong outlook. We
believe the recent acquisition of Bucyrus International (Bucyrus) by Caterpillar,
USA, augurs well for the company as it could start selling the mining products of
Bucyrus from FY12. At our EPS of INR 57.0 and INR 66.6, the stock is trading at
9.9x and 8.4x its FY11E and FY12E earnings, respectively. We maintain ‘BUY’
recommendation on the stock.
Strong volume in material handling, mining
TIL sold 35 cranes during the quarter against 30 last year, leading to a fall in MHS
margins (lower margin in the cranes and stacker business compared with service
& spare). For 9mFY11, MHS sold 87 cranes against 67 cranes last year. Machines
dispatched during the quarter under CMS grew to 373 from 235 last year; for
9mFY11, CMS volume increased to 846 from 636 machines. Gensets sold during
the quarter were 130 against 133; for 9mFY11, TIL sold 393 gensets under PSS
against 333 last year.
Company Description
TIL was established in 1944 by a group of Scotsmen spearheaded by R T Wilson, as a
dealer of Caterpillar Tractor Company, US, for its earth moving equipment. In 1985 it
was renamed TIL. Since 1950, it started expanding its range of dealership to include
other material handling equipments and also formed joint ventures and acquired
companies to expand its equipment business and get access to technologies. It currently
is operating through three business units—material handling equipment which
manufactures cranes, forklifts and reach stackers used across sectors such as ports,
mining, oil & gas, construction and defence; in construction and mining group it sells
equipments and spares for Caterpillar products in North and East India; and in power
solution system it sells generator sets in the 180-2250 KVA range, using Caterpillar
diesel engines. Apart from sale of gensets, it undertakes erection and commissioning of
all relevant installations and spare part sales.
Investment Theme
The company has a differentiated business model where it has the ability to provide total
infrastructure solutions (supplying of spare parts and offering after sales services) rather
than supplying only products which ensures stability in revenues. It has strategic
alliances with leading manufacturers in the world such as Caterpillar, Manitowoc Crane
Group (US), Famak S.A (Poland), and Paceco Corp (US).
TIL has recently approved a scheme of restructuring wherein it will transfer, subject to
shareholder and court approval, the Caterpillar business (construction and mining
solutions and power systems) to a wholly owned subsidiary. With the new manufacturing
plant likely to commissioning by FY12 and increased contribution from CMS, we expect
TIL to maintain its healthy growth.
Key Risks
Slowdown in roads and mining segments could adversely affect the company’s revenues.
Rise in input costs (currently at 75%) and delayed project execution could adversely
affect margins and revenues, respectively.
Increased competition or threat from cheaper imports could hurt TIL’s overall
performance.
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