Dear All,
Forwarding you the Bull’s Eye Scrip Research Report for Week 46.
Goodyear India (GIL), a subsidiary of Goodyear Tire and Rubber Company, USA,
is the sixth largest tyre manufacturing company in India having an overall market
share of 5.5%. GIL is a dominant player in the tractor tyre segment with a market
share of ~27%. The company has announced the sale of a piece of land in
Ballabgarh, Faridabad, which is a potential upside for the stock. We recommend
Buy on GIL with a target price of `369 based on a target PE of 7x for CY2012E.
Investment rationale
Dominant player in the tractor tyre segment: GIL is a market leader in the tractor
tyre segment. The company has a market share of ~22.7% in the tractor front
tyres segment and ~33.5% in the tractor rear tyres segment. Tractor tyres
accounted for ~55% of the company’s tonnage offtake in CY2009. According to
industry sources, the overall tractor industry has grown by ~25%, with the
domestic industry registering growth of ~21% for the first 11 months of FY2011.
We expect demand for tractors to remain robust, helping the company to register
revenue CAGR of 16% over CY2010–12E.
Brand in a commodity industry: GIL caters to high-end brands such as Audi,
BMW, Land Rover, Mitsubishi and Porsche. The company has a brand name in the
commodity business with stupendous ROIC of 300% for CY2010 in comparison to
less than 20% of other listed peers.
Upside trigger from the sale of Ballabgarh land: GIL has made an announcement
to the BSE for the sale of a piece of land located in Ballabgarh, Faridabad, after it
obtains necessary approvals. This may give an upside trigger to the stock.
Outlook and valuation
At `303, the stock is trading at 9.4x and 5.8x its CY2011E and CY2012E
earnings, respectively. We expect the company’s revenue and profit to witness
CAGR of 16% and 27.5%, respectively, over CY2010–12E. The company is
expected to have cash reserves of `350cr for CY2012E, excluding cash from the
sale of land. We recommend Buy on GIL due to attractive valuations with a target
price of `369. These valuations do not include realisation from the sale of
Ballabgarh land, which may lead to further upsides.
Kindly click on the following links to view the Report.
If you have any further queries, feel free to call us on 022 39357600, Extn: 6864 / 6865 or mail us at advisory@angelbroking.com
With best regards,
Fundamental Advisory Desk
Angel Broking
Akruti Star,6th Floor, Road No.7,MIDC, Andheri (E),Mumbai – 93.
Call : (91) (022) 39357600 Ext. 6864,6865
Website : www.angelbroking.com
Disclaimer: Ours is an advisory role. The final decision and consequences based on our information is solely yours. Moreover, in keeping with regulatory guidelines, we do not guarantee any returns on investments. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.
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