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Summary
Titagarh Wagons (TWL) earnings were below expectations with PAT at Rs210 mn with ~19% YoY growth. EBIDTA margins fell by 60bps to 14.9%. Revenue growth stood at ~10%YoY to Rs1.8 bn. Wagon production stood at 900 units for Q2FY12 as compared to 500 units in Q2FY11. Despite the 80% YoY growth in volumes, relative lower revenue and earnings growth has been ascribed to wagon output mix. Predominantly stainless steel wagons were manufactured last year whereas a mix of Carbon-Mg and Steel produced in the current quarter. The change in wagon mix as well as higher power and fuel costs also impacted the margins. The orderbook currently stands at 1,200 wagons (400 IR and 800 non-IR). Indian Railway (IR) wagon orders for FY12 have still not been released and are now likely to be released by December, 2011. Any further delay in IR order may lead to revision of our earnings estimates downwards. We have revised downwards our margin estimates to 15.6% for FY13E from 16.2% earlier though impact on earnings is negated due to higher other income estimated. The stock trades at 9.9x FY12E and 9.6x FY13E EPS and is fairly valued at current levels. We hence downgrade our rating to HOLD from ACCUMULATE earlier, while we rollover our target price to Rs445 on SOTP basis with 9x FY13E EPS of core earnings and stake in Cimmco calculated on BV basis.
Key Highlights
Revenue grew 9.8%YoY to Rs1.8 bn. For the Half year period Revenue growth stood at 26%YoY top Rs3.9 bn.
Wagon dispatch for the quarter stood at 900 units and for the period H1FY12, 1900 units. We have estimated a total wagon production of 3650 units.
EBIDTA margins fell to 14.9% by 60bpsYoY due to change wagon production mix and higher power and fuel charges which increased by 85% YoY. The fall in EBIDTA margins was inline with the fall shown by other industry players in Q2FY12.
PAT grew by 18.8% to Rs210 mn mainly due to the increase in the other income.
Cash and debt stood at Rs1,370 mn and Rs493 mn respectively.
Outlook and Valuation
The IR wagon order is the key deciding factor in the near term as the current orderbook would cover production only upto Q4FY12. The IR order was initially expected to be released in Sept 2011 has seen delays and is now expected to be released in December 2011. Further, wagon space is also becoming increasingly crowded and hence we expect the margins for the next set of orders to be relatively less.
The stock trades at 9.9x FY12E and 9.6x FY13E EPS. Our SOTP valuation for the stock post the rollover amounts to Rs445. Downgrade to HOLD.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Summary
Titagarh Wagons (TWL) earnings were below expectations with PAT at Rs210 mn with ~19% YoY growth. EBIDTA margins fell by 60bps to 14.9%. Revenue growth stood at ~10%YoY to Rs1.8 bn. Wagon production stood at 900 units for Q2FY12 as compared to 500 units in Q2FY11. Despite the 80% YoY growth in volumes, relative lower revenue and earnings growth has been ascribed to wagon output mix. Predominantly stainless steel wagons were manufactured last year whereas a mix of Carbon-Mg and Steel produced in the current quarter. The change in wagon mix as well as higher power and fuel costs also impacted the margins. The orderbook currently stands at 1,200 wagons (400 IR and 800 non-IR). Indian Railway (IR) wagon orders for FY12 have still not been released and are now likely to be released by December, 2011. Any further delay in IR order may lead to revision of our earnings estimates downwards. We have revised downwards our margin estimates to 15.6% for FY13E from 16.2% earlier though impact on earnings is negated due to higher other income estimated. The stock trades at 9.9x FY12E and 9.6x FY13E EPS and is fairly valued at current levels. We hence downgrade our rating to HOLD from ACCUMULATE earlier, while we rollover our target price to Rs445 on SOTP basis with 9x FY13E EPS of core earnings and stake in Cimmco calculated on BV basis.
Key Highlights
Revenue grew 9.8%YoY to Rs1.8 bn. For the Half year period Revenue growth stood at 26%YoY top Rs3.9 bn.
Wagon dispatch for the quarter stood at 900 units and for the period H1FY12, 1900 units. We have estimated a total wagon production of 3650 units.
EBIDTA margins fell to 14.9% by 60bpsYoY due to change wagon production mix and higher power and fuel charges which increased by 85% YoY. The fall in EBIDTA margins was inline with the fall shown by other industry players in Q2FY12.
PAT grew by 18.8% to Rs210 mn mainly due to the increase in the other income.
Cash and debt stood at Rs1,370 mn and Rs493 mn respectively.
Outlook and Valuation
The IR wagon order is the key deciding factor in the near term as the current orderbook would cover production only upto Q4FY12. The IR order was initially expected to be released in Sept 2011 has seen delays and is now expected to be released in December 2011. Further, wagon space is also becoming increasingly crowded and hence we expect the margins for the next set of orders to be relatively less.
The stock trades at 9.9x FY12E and 9.6x FY13E EPS. Our SOTP valuation for the stock post the rollover amounts to Rs445. Downgrade to HOLD.
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