Dec 04, 2013, 01.59 PM IST
ICICIdirect.com is bullish on Setco Automotive and has recommended to buy the stock for a target of Rs 102 in its November 27, 2013 research report.
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Buy Setco Automotive; target of Rs 102: ICICIdirect.com
ICICIdirect.com is bullish on Setco Automotive and has recommended to buy the stock for a target of Rs 102 in its November 27, 2013 research report.
Like this story, share it with millions of investors on M3
Buy Setco Automotive; target of Rs 102: ICICIdirect.com
ICICIdirect.com is bullish on Setco Automotive and has recommended to buy the stock for a target of Rs 102 in its November 27, 2013 research report.
"Setco Automotive's (Setco) Q2FY14 results were lower than our estimates as sluggishness in the OEM segment continued. The topline at Rs 73.8 crore was flattish YoY and 15 percent higher QoQ. This was mainly due to sustained aftermarket demand, which helped offset the weakness in OEM demand where volumes have shrunk ~30 percent YoY. Margins at 9.5 percent were significantly lower than our estimates and declined ~240 bps QoQ as rupee depreciation led to increased raw material costs. Also, an increase in employee costs (linked to incentive payment in the quarter) led to margins slipping to the single-digit territory. Subsequently, PAT came at Rs 6.9 crore, as other income was boosted by preference dividend from the associate company. For Setco, the big opportunity will come in the form of emission norm changes in FY15E, as demand for BS-IV compliant clutches increases. We continue to like the segment leadership of Setco, consistent margin performance and decent return ratios."
"We feel Setco's strong leadership profile in the M&HCV clutch segment is a strong USP. With a consistent financial performance and decent return ratios, we feel valuations are attractive and multiples will expand as the market begins to discount the short-term pain of the CV cycle. We value Setco at 7.5x FY15E EPS to arrive at a TP of Rs 102 and maintain BUY," says ICICIdirect.com research report.
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