Fundamental

Greaves Cotton



Company Overview

Greaves Cotton Ltd. (GCL) is a Thapar Group promoted company, founded in 1859 and headquartered in Mumbai. It is a leading manufacturer of light weight single/dual cylinder’s diesel and petrol engines, used in the auto and industrial sectors. GCL is a dominant player in the domestic three-wheeler market, and has made significant inroads into the emerging four wheeler small commercial vehicle segment. The company enjoys a strong market positioning in the 3-wheeler (3W) diesel engines market, given their exclusive diesel engines supply agreement with industry leaders. The company operates in four main business verticals, namely 1) Automotive Engines, 2) Industrial Engines, 3) Auxiliary Power and 4) Farm Equipment.

Outlook & Valuation

At CMP of Rs 119, Greaves Cotton is trading at FY19E and FY20E, P/E multiples of 15.5x and 13.9x respectively. We value the stock at a FY20E target P/E multiple of 20x, which yields a target price of Rs 171 per share. We are bullish on the future prospects of GCL and have a BUY rating and a target price of Rs 171 (20x FY20E earnings), which gives an upside potential of 43.7%.


Tags: Fundamental PickGreaves Cotton


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