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UBS Investment Research
Tube Investments of India
Strong quarter, Maintain Buy
3QFY11 results strong and in line
Tube Investments of India (TII) reported PAT of Rs519mn (up 190% YoY) and a
pre-exceptional PAT of Rs313mn (up 15% YoY); led by strong revenue growth of
28% YoY (backed by volume growth in all its businesses) and EBITDA margin
improvement of 40bps QoQ to 11.5%. EBITDA of Rs865mn was up 34% YoY.
Impressive growth across segments
TII’s metal formed products business recorded strong revenue growth of 40%
coupled with higher margin of 14% (up 140bps QoQ). The cycles and engineering
business too registered strong revenue growth of 25% and 28% (14% and 23%
volume growth), but margins were impacted by higher steel prices and declined
20-60bps sequentially. However, the company remains confident about
maintaining margins in future.
New product launch and expansion plans
The company plans to launch a new e-scooter model in 4Q with better features and
in lower price scooter range with potentially higher demand. The company also has
significant long term expansion plans in its tubes, bicycles and chain business
requiring an investment of Rs 2.5bn.
Valuation: Reiterate Buy with a PT of Rs197
We maintain estimates, our Buy rating and SOTP based price target of Rs197
which includes Rs106 for TII’s investments in Cholamandalam and Mitsui JV for
general insurance at 50% holding company discount.
Tube Investments of India
Tube Investments, part of the Murugappa Group, operates in three different
segments: bicycles/components, engineering and metal formed products. The
company is a market leader in most of its segments and has a strong product
portfolio, mainly catering to demand from the auto industry. Its products include
bicycles, bicycle components, fitness equipment and electric scooters in the
bicycle segment; precision tubes and cold-rolled steel strips in the engineering
segment; and roll-formed car doorframes, sections for railway wagons, and
automotive and industrial chains in the metal formed products segment.
Statement of Risk
We believe the key risks facing the company are volatility in raw material prices,
competition in the engineering and metal formed products business, cyclical risk
and risk of a global macro slowdown.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Tube Investments of India
Strong quarter, Maintain Buy
3QFY11 results strong and in line
Tube Investments of India (TII) reported PAT of Rs519mn (up 190% YoY) and a
pre-exceptional PAT of Rs313mn (up 15% YoY); led by strong revenue growth of
28% YoY (backed by volume growth in all its businesses) and EBITDA margin
improvement of 40bps QoQ to 11.5%. EBITDA of Rs865mn was up 34% YoY.
Impressive growth across segments
TII’s metal formed products business recorded strong revenue growth of 40%
coupled with higher margin of 14% (up 140bps QoQ). The cycles and engineering
business too registered strong revenue growth of 25% and 28% (14% and 23%
volume growth), but margins were impacted by higher steel prices and declined
20-60bps sequentially. However, the company remains confident about
maintaining margins in future.
New product launch and expansion plans
The company plans to launch a new e-scooter model in 4Q with better features and
in lower price scooter range with potentially higher demand. The company also has
significant long term expansion plans in its tubes, bicycles and chain business
requiring an investment of Rs 2.5bn.
Valuation: Reiterate Buy with a PT of Rs197
We maintain estimates, our Buy rating and SOTP based price target of Rs197
which includes Rs106 for TII’s investments in Cholamandalam and Mitsui JV for
general insurance at 50% holding company discount.
Tube Investments of India
Tube Investments, part of the Murugappa Group, operates in three different
segments: bicycles/components, engineering and metal formed products. The
company is a market leader in most of its segments and has a strong product
portfolio, mainly catering to demand from the auto industry. Its products include
bicycles, bicycle components, fitness equipment and electric scooters in the
bicycle segment; precision tubes and cold-rolled steel strips in the engineering
segment; and roll-formed car doorframes, sections for railway wagons, and
automotive and industrial chains in the metal formed products segment.
Statement of Risk
We believe the key risks facing the company are volatility in raw material prices,
competition in the engineering and metal formed products business, cyclical risk
and risk of a global macro slowdown.
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