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  • Stock recommendation: Talbros Automotive Ltd – BUY – TP Rs.396

    Publish date: August 16, 2018


    Result Update

    TBA reported robust revenue growth and strong EBITDA margin YoY. Robust demand and execution of recent order wins helped the company report significant growth in net profit.


    Key Highlights

    • Consolidated revenue for TBA grew by 54% YoY to Rs1,232mn.
    • Consolidated revenue only includes standalone gasket and forging revenue; as for joint venture, under IndAS, the net profit is taken in share of profit from JV/associates.
    • Consolidated EBITDA grew by 91% YoY to Rs134mn.
    • Strong revenue growth coupled with operating leverage led to EBITDA margin expand from 8.8% in 1QFY18 to 10.9% in 1QFY19, in line with our estimate of 11%.
    • Consolidated PAT grew from Rs27mn in 1QFY18 to Rs62mn in 1QFY19.

    Valuation & Outlook

    • TBA’s revenue growth outlook is looking strong on the back of healthy auto demand across segments and new order wins by the company. TBA is expected to witness high revenue growth in forging division and MMT JV. We expect strong revenue growth to translate into operating leverage benefit for the company and thereby factor in gradual improvement in EBITDA margin.
    • At the CMP, the stock is available at attractive valuation. We retain BUY on the stock with unchanged price target of Rs396.

          

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