Tube Investments: Muted Q1; gradual recovery ahead - AXIS Capital

Tube Investments (Bloomberg: TI IN; BUY, TP - Rs 502, 26% upside from CMP of Rs 400)

Tube Investment's (TI) Q4 standalone PAT was muted at ~Rs 180 mn (Rs 190 mn in Q1FY15), largely due to lower margin in the engineering division. While the cycle division reported strong volume growth coupled with margin expansion, higher costs associated with the large diameter tube mill which was commissioned in Q3 dragged profitability down. We expect the division to stabilize in H2FY16 which should help improve margin.

We expect 20% CAGR in consolidated proforma PAT over FY15-17, driven by (1) standalone operations which will benefit from additional revenue from the new tube mill and cost cutting initiatives and (2) financial services (Chola Investments and Chola MS Gen Insurance) which will continue their growth path. Maintain BUY with SoTP-based TP of Rs 502.

Shares of TUBE INVESTMENTS OF INDIA LTD. was last trading in BSE at Rs.401 as compared to the previous close of Rs. 406.15. The total number of shares traded during the day was 4387 in over 105 trades.

The stock hit an intraday high of Rs. 410 and intraday low of 399.8. The net turnover during the day was Rs. 1762426.

Source : Equity Bulls

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