East India Securities has maintained 'Buy' on Talbros Automotive Components (TACL) after the company declared its second quarter results. The stock broker fixed price target at Rs 193.
Commenting on the results, East India Securities said, ''TACL's consolidated net sales for the quarter de-grew by 0.7% to Rs 974.8 million, whereas the standalone revenues de-grew by 0.6% to Rs 773.2 million. This was due to erratic order schedule from key OE customers along with Slowdown in 2 wheeler and LCV demand. Forging segment continued to remain in pain on account of weaker Euro, as 56% of revenue comes from exports in this segment.''
Commenting on the investment rationale, the stock broker said, ''TACL witnessed a subdued 1HFY16 due to subdued economy and adverse currency movement. Its core gasket business commands 38% of the gasket market in India. The company has been continuously diversifying its product portfolio by new product launches and increasing client footprint. The new heat shield line is currently under installation process and will be operational by January 2016.
Apart from this the company continues to take steps towards cost optimization which continues to help them improve their margins. The positive impact of lower commodity prices is expected to get reflected in the second half, thus improving EBITDA margin. At current market price of Rs 114 a share, the stock is trading at 5.5x FY17E EPS.
We maintain our price target at Rs 193 a share which implies 9.3xFY17E EPS. The share price of the company still offers handsome 70% gain from current levels. Thus, we maintain Buy rating on the stock.''
