Target: ₹571
CMP: ₹507.75
Talbros Automotive Components Ltd (TACL) manufactures gaskets and forgings products which are used across the automobile industry as well as in industrial segment. India’s domestic automobile demand is expected to revive driving strong growth for the company.
The Government is also looking to promote manufacturing of auto components in India by offering various incentives. TACL has established relationships with globally reputed companies. These associations have helped the Talbros group, to develop strong innovative technologies, resulting in 250 products launched each year.
Diversified nature of the company’s products enable it to withstand slowdown pressures.
With moderate capex requirement and increased utilisation going forward, we expect return ratios to improve. The easing of chip shortage is likely to drive higher exports in the coming years.
We expect TACL’s Revenue/EBITDA/PAT to grow at 17/19/18 per cent CAGR over FY21-FY24E, led by increased demand from automotive as well as industrial segments.
We believe investors can buy the stock in ₹505-515 band and add on dips to ₹435-445 band (8.5x FY24E EPS) for a base case fair value of ₹571 (11x FY24 EPS) and bull case fair value of ₹623 (12x FY24 EPS) over the next two quarters.