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UBS Investment Research
Tube Investments of India
S trong 1Q results; segmental trends mixed
Event: 1QFY12 results strong operationally and beat
Tube Investments of India (TII) reported PAT of Rs500mn (up 24% YoY), ahead
of UBS and consensus estimates. This was led by strong revenue growth of 22%
YoY (backed by volume growth in engineering and metal formed products
business) and EBITDA margin improvement of 30bps QoQ/YoY to 11.8%, despite
raw material cost pressures. EBITDA of Rs1,026mn was also up 25% YoY.
Mixed segmental trends
TI’s engineering/metal formed products segment grew strongly by 30%+ YoY
along with 150bps/390bps improvement in EBITDA margins at 9.7%/14.1%. This
was led by higher volumes growth and thus, operating leverage. However, the
cycles segment performance was disappointing - muted growth and 260bps YoY
decline in margins at 6.9%, led by low bicycles demand in 1Q beginning, reduced
e-scooter sales and competitive pressures. EBIT ROCEs for the cycles improved
QoQ to 88% and was up YoY in engineering/metal formed products segment.
Action: Buy, consumption/infra play with value unlocking potential
We maintain our estimates and reiterate our positive view on TI. We believe that
the current price (Rs163), at best, reflects only TI’s bicycle, auto/infra parts
businesses and does not reflects its investment holdings (in Chola) – which we
estimate is worth Rs49/share based on book value and Rs94/share based on our fair
valuation
Valuation: Maintain Buy with a price target of Rs200
We lower our SOTP based PT to Rs200, on our recent downgrade in Chola PT
(60.56%stake). It includes Rs47 for TI’s investments at 50% holding co. 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
S trong 1Q results; segmental trends mixed
Event: 1QFY12 results strong operationally and beat
Tube Investments of India (TII) reported PAT of Rs500mn (up 24% YoY), ahead
of UBS and consensus estimates. This was led by strong revenue growth of 22%
YoY (backed by volume growth in engineering and metal formed products
business) and EBITDA margin improvement of 30bps QoQ/YoY to 11.8%, despite
raw material cost pressures. EBITDA of Rs1,026mn was also up 25% YoY.
Mixed segmental trends
TI’s engineering/metal formed products segment grew strongly by 30%+ YoY
along with 150bps/390bps improvement in EBITDA margins at 9.7%/14.1%. This
was led by higher volumes growth and thus, operating leverage. However, the
cycles segment performance was disappointing - muted growth and 260bps YoY
decline in margins at 6.9%, led by low bicycles demand in 1Q beginning, reduced
e-scooter sales and competitive pressures. EBIT ROCEs for the cycles improved
QoQ to 88% and was up YoY in engineering/metal formed products segment.
Action: Buy, consumption/infra play with value unlocking potential
We maintain our estimates and reiterate our positive view on TI. We believe that
the current price (Rs163), at best, reflects only TI’s bicycle, auto/infra parts
businesses and does not reflects its investment holdings (in Chola) – which we
estimate is worth Rs49/share based on book value and Rs94/share based on our fair
valuation
Valuation: Maintain Buy with a price target of Rs200
We lower our SOTP based PT to Rs200, on our recent downgrade in Chola PT
(60.56%stake). It includes Rs47 for TI’s investments at 50% holding co. 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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