Comments
Centrum Broking
Shivam Auto (Buy)
CMP: ₹135.60
Target: ₹180
Shivam’s overall revenues for the quarter stood at ₹113 crore, lower than our expectations by 5.6 per cent. However, operating performance was better than our expectations with operating profit margins at 19.5 per cent versus estimate 18.5 per cent largely driven by improvement in gross margins. Gross margins at 56.2 per cent improved by 128 bps y-o-y and 217 bps q-o-q. PAT stood at 7.8 crore vs estimate ₹7.2 crore, beating our estimates by 7.3 per cent.
We believe that strong focus on R&D in the past few years will drive growth in earnings coupled with diversity in client profile across segments and geographies. Hero MotoCorp is one of the largest clients for Shivam accounting for about 80 per cent of its overall revenue’s and the later caters to 70-75 per cent of HMCL’s gear and shaft requirements. To address the new opportunities, the company is investing about ₹2 crore to set up a plant each in Bengaluru and Rohtak.
We like Shivam on account of segment it operates in offering decent market opportunity and healthy margins, strategic approach to growth laid out in FY15 to play out in the long run. This coupled with improving margins, return ratio and better gearing makes a compelling investment case.
Comments
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.