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Company Description
Tube Investments of India Limited (TII) is a flagship company of
Murugappa Group, operating in different businesses such as cycles,
welded tubes, automotive and industrial chains, metal door frames and fine
blank components.
Indian Bicycle industry is ~12 mn in size, where Tube is the second largest
player (~4mn units) with BSA , Hercules and Philips brands in the market
after Hero Cycles with ~5mn units sales. Standard segment of the industry
has been stagnant for some time now, while the Special segment has been
growing at ~10% rate. Pune, Chandigarh, Bangalore, Mysore, Coimbatore
and Vijayawada are the main Cities witnessing maximum growth in the
premium segment.
C The second largest cycle player with Its BSA, Hercules brands, is
expected to grow faster than industry with premium launches in urban
market and increasing distribution in rural market
C Given strong relationship with leading OEMs, TII is the market leader in
door frames and chains with ~60% and 40% market share in India
respectively
C Engineering and Metal Formed Product(MFP) segments are expected to
be major beneficiary of rising auto demand in the country
C Acquisition of Sedis, France should add strength to chain division in
engineering and industrial class chains. With the technological leverage
and cost rationalizations, MFP segment should witness improvement in the
margins
C Right-sizing of businesses in financial services subsidiaries has resulted
improvement in asset quality, leading to higher profitability
C With estimated two year revenue CAGR of 19.1% in core operations, we
expect TII to strengthen its leadership position in the industry.
Concern: Slow down in demand of cycles can be negative to company.
Technical Comments
Stock is making a consolidation, trading near all time high of Rs. 164.60. It
showing strength making Bullish Inverse Head & Shoulder and Break-out
above Rs.152 would take the stock to Rs159-165 levels in near term. Stock
trades above all major moving averages with, 100DMA Rs.134 & 200DMA
Rs. 140.
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