Greaves Cotton Ltd
Industrials - Capital Goods
Volume Pick-up and Easing Cost Pressures to Aid Growth
Greaves consolidated revenue (net) remained flat at 1.1% at Rs.16,344mn nevertheless consolidated EBITDA dropped by 9.0% to Rs.2,434mn which are however higher by 2.4% and 1.6% respectively than my full year FY17 estimates. In terms of volumes, for FY17 for 3 Wheelers engines reached to 270k, 4 Wheelers-30k, Power Gen-32k, Power Tillers-3.8k and Pumps-90k. Despite volume growth in other segments, drop in auto volumes was majorly due to demonetisation during the peak season and switch from BS3 to BS4 standards which came in with higher realisation aided flat revenues for FY17.
Revenues flat for FY17; Product mix contributes positively: Consolidated revenues for FY17 were flat at Rs.16,344mn and the same for Q4FY17 dropped by 3.4% to Rs.3,907mn. In terms of segments, Engines segment revenues (gross) were flat at Rs.17,565mn however, de-grew in Q4FY17 by 5.8% QoQ to Rs.4,123mn. Volume drop on YoY in the auto engines segment by 9.0%-10%, while volumes were higher by 60.0% for powergen, for tillers at 8.6% and for pumps at 12.5%.
Switch from BS3 to BS4 in the domestic market ushered in price hikes in the range of 8.0%-10.0% which aided for volume drop.
Margins were under pressure; expected to normalise going forward: Absolute EBITDA, EBIT and PAT came in at Rs.2,434mn, Rs.2,530mn and Rs.1,807mn which were lower by 9.0%, 14.9% and 10.1% respectively. Material margin dropped by 66bps due to material mix, inventory positions, higher staff costs and other costs dented margins further. EBITDA, EBIT and PAT margins were lower by 166bps, 291bps and 138bps to come in at 14.9%, 15.5% and 11.1% respectively.
Valuation and Outlook
Grevaes domestic market to turn robust with BS4 implementation apart from new product launches like Leap engines, new geographical presence, potential addition of customers, ‘Greaves Auto Care’-new service offering and fructification of R&D efforts for BS6 engines could all shape into FY18E, FY19E and beyond. We roll forward our valuation to FY19E estimates and revise our price target upwardly to Rs.203.
Industrials - Capital Goods
Volume Pick-up and Easing Cost Pressures to Aid Growth
Greaves consolidated revenue (net) remained flat at 1.1% at Rs.16,344mn nevertheless consolidated EBITDA dropped by 9.0% to Rs.2,434mn which are however higher by 2.4% and 1.6% respectively than my full year FY17 estimates. In terms of volumes, for FY17 for 3 Wheelers engines reached to 270k, 4 Wheelers-30k, Power Gen-32k, Power Tillers-3.8k and Pumps-90k. Despite volume growth in other segments, drop in auto volumes was majorly due to demonetisation during the peak season and switch from BS3 to BS4 standards which came in with higher realisation aided flat revenues for FY17.
Revenues flat for FY17; Product mix contributes positively: Consolidated revenues for FY17 were flat at Rs.16,344mn and the same for Q4FY17 dropped by 3.4% to Rs.3,907mn. In terms of segments, Engines segment revenues (gross) were flat at Rs.17,565mn however, de-grew in Q4FY17 by 5.8% QoQ to Rs.4,123mn. Volume drop on YoY in the auto engines segment by 9.0%-10%, while volumes were higher by 60.0% for powergen, for tillers at 8.6% and for pumps at 12.5%.
Switch from BS3 to BS4 in the domestic market ushered in price hikes in the range of 8.0%-10.0% which aided for volume drop.
Margins were under pressure; expected to normalise going forward: Absolute EBITDA, EBIT and PAT came in at Rs.2,434mn, Rs.2,530mn and Rs.1,807mn which were lower by 9.0%, 14.9% and 10.1% respectively. Material margin dropped by 66bps due to material mix, inventory positions, higher staff costs and other costs dented margins further. EBITDA, EBIT and PAT margins were lower by 166bps, 291bps and 138bps to come in at 14.9%, 15.5% and 11.1% respectively.
Valuation and Outlook
Grevaes domestic market to turn robust with BS4 implementation apart from new product launches like Leap engines, new geographical presence, potential addition of customers, ‘Greaves Auto Care’-new service offering and fructification of R&D efforts for BS6 engines could all shape into FY18E, FY19E and beyond. We roll forward our valuation to FY19E estimates and revise our price target upwardly to Rs.203.
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