12 Reasons Geojit Has A Buy On The Stock Of This Well-Diversified Company
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Investment
oi-Sunil Fernandes
Geojit has has a “buy” call on the stock of Tube Investments and believes that investors pay a higher premium for companies that focus on newer technologies.
“Keeping this fact in mind, we have selected a company, which is using its existing cash flows to build new technologies and make itself future-ready. The company has set out a vision to transform itself by looking at expanding the top line and bottom line through an inorganic route. Last year, it acquired CG Power and turned around the business. One can expect more such inorganic growth moves from the company,” the brokerage has said.
Here is the summary of the reasoning for recommending to buy the stock of Tube Investments of India by Geojit Securities.
1) The company did extremely well in the first and second quarter of the current financial year during which the sales of the company increased by 100 percent and net profit by 500 percent.
2) The company will start manufacturing electrical vehicles from April to June 2022. If this product finds customer acceptance, it can re-rate the counter further.
3) Tube Investments of India is the first from India to produce optical lenses for auto cameras. This business has great prospects as in the future all cars will be fitted with Advanced Driver Assistance Systems (ADAS).
4) The company performed well despite its heavy reliance on the Auto sector-which faced a slowdown. This shows that the management knows how to navigate through the tough situation.
5) Tube Investments of India wants to use cash flow from the present business to fund the future higher growth opportunities.
6) Institutional investors like this company and have a stake as high as 41 percent.
7) The company has relied on exports to counter the domestic slowdown, and it will continue to focus on exports as it has a higher margin.
8) The company has two listed subsidiaries CG Power and Shanthi Gears.
9) The company has a bicycle business which is B2C, having a turnover of close to Rs 1,000 crore. This business can be a separate listed entity in the future. This can unlock value for the shareholders.
Auto, as well as infrastructure, should do well as the economy is bouncing back. This should help the company to report smarter top line as well as bottom-line growth.
10) The company margins in the second half would be better than the first half as it will be able to pass on the hike in the input cost now.
11) We believe that company will report its highest ever net profit in the current financial year.
12) Our technical indicators suggest a bullish trend.
Superb Quarterly numbers by Tube Investments of India
Tube Investments of India saw a consolidated Revenue for the quarter was Rs.3,262 Cr as against Rs.1,193 Cr inthe corresponding quarter of the previous year. The profit before tax (before exception)
for the quarter was at 287 Cr as against Rs. 136 Cr in the corresponding quarter of the
previous year.
CG Power and Industrial Solutions Ltd, a subsidiary company, in which the Company holds 52.61% stake, registered a consolidated revenue of Rs.1,454 Cr during the quarter as against Rs. 664 Cr in the corresponding quarter of the previous year. Profit before tax (before exceptional items) for the quarter was Rs.144 Cr as against a loss of Rs.37 Cr in the corresponding quarter of previous year.
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