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http://www.kotaksecurities.com/pdf/dmb/MorningInsight28022012.pdf
TRACTORS INDIA LTD (TIL)
RECOMMENDATION: REDUCE
TARGET PRICE: RS.310
FY13E P/E: 8.5X
q TIL has been observing sluggish demand across power system and construction divisions. Muted public spending in various infrastructure
projects viz. roads, power, mining has been affecting company's business.
q Construction and mining division has been severely affected and have resulted in substantial increase in finished goods inventory. Working capital has been soaring through 9MFY12 on account of increasing debtor
days.
q Managements expects operating margins to remain under pressure over
the next two quarters due to 1) volatility in raw material prices 2) inability of the company take price hike on Caterpillar products.
q Demand in Material handling division (MHS) has been resilient through
9MFY12. Management expects meaningful contribution from the segment going ahead. Company has spent partly for the committed capex
of Rs 1.5 bn for a Greenfield project at Khadagpur to increase capacity in
the MHS division.
q Management has been exploring various options to raise funds for the
funding of the Capex. It has also taken approval from the shareholders to
raise equity through the QIP route.
q We expect the company and peer group business to remain under pressure over next two quarters. Rising interest rate and input price trend
would remain the key variable to monitor.
q We considerably reduce our earnings estimate for FY12 & FY13 to factor
in 1) delay in government infrastructure projects 2) increasing input
prices 3) rising interest rate scenario. We turn cautious on the increasing
trend in debtor days and swelling up of company's working capital
needs.
q We therefore change our rating to 'Reduce' from 'BUY' earlier on the
company's stock with a one year DCF price target of Rs 310 (Rs 560 earlier).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://www.kotaksecurities.com/pdf/dmb/MorningInsight28022012.pdf
TRACTORS INDIA LTD (TIL)
RECOMMENDATION: REDUCE
TARGET PRICE: RS.310
FY13E P/E: 8.5X
q TIL has been observing sluggish demand across power system and construction divisions. Muted public spending in various infrastructure
projects viz. roads, power, mining has been affecting company's business.
q Construction and mining division has been severely affected and have resulted in substantial increase in finished goods inventory. Working capital has been soaring through 9MFY12 on account of increasing debtor
days.
q Managements expects operating margins to remain under pressure over
the next two quarters due to 1) volatility in raw material prices 2) inability of the company take price hike on Caterpillar products.
q Demand in Material handling division (MHS) has been resilient through
9MFY12. Management expects meaningful contribution from the segment going ahead. Company has spent partly for the committed capex
of Rs 1.5 bn for a Greenfield project at Khadagpur to increase capacity in
the MHS division.
q Management has been exploring various options to raise funds for the
funding of the Capex. It has also taken approval from the shareholders to
raise equity through the QIP route.
q We expect the company and peer group business to remain under pressure over next two quarters. Rising interest rate and input price trend
would remain the key variable to monitor.
q We considerably reduce our earnings estimate for FY12 & FY13 to factor
in 1) delay in government infrastructure projects 2) increasing input
prices 3) rising interest rate scenario. We turn cautious on the increasing
trend in debtor days and swelling up of company's working capital
needs.
q We therefore change our rating to 'Reduce' from 'BUY' earlier on the
company's stock with a one year DCF price target of Rs 310 (Rs 560 earlier).
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