HI-TECH GEARS LIMITED
HI-TECH GEARS LIMITED
HI-TECH GEARS LIMITED
You also want an ePaper? Increase the reach of your titles
YUMPU automatically turns print PDFs into web optimized ePapers that Google loves.
<strong>HI</strong>-<strong>TECH</strong> <strong>GEARS</strong> <strong>LIMITED</strong> March 5, 2012<br />
Present Price: Rs.155<br />
Target Price: Rs.210<br />
Upside: 35%<br />
Time Horizon: 12 months<br />
Investment Rationale<br />
Key-beneficiary of the sustained trend in the automobile segment: Hi-Tech Gears Limited (Hi-Tech Gears)<br />
manufactures automotive gears and shafts at Bhiwadi, Rajasthan, mainly for 2- wheelers like Hero Honda,<br />
Escorts, among others. The company has an in-house forging unit and derives close to 20% of its revenues from<br />
exports.<br />
Set up another plant: The company has set up another plant near its mother plant for manufacturing of<br />
transmission auto components for CVs and passenger vehicles.<br />
Investor-friendly policies: Hi-Tech Gears distributed bonus shares in the ratio of 1:1 last year. The company has<br />
consistently maintained a pay-out ratio of around 20% over the last several years, barring FY’09.<br />
Company Background: Incorporated in 1986, Hi-Tech Gears Limited (Hi-Tech Gears) manufactures automotive<br />
shafts and gears at Bhiwadi, Rajasthan. Over a period of time, the company has added other automobile<br />
manufacturers as its clients. The existing promoters, Kapuria family owns 55% stake in the company.<br />
Financials: The company has posted net sales of Rs.453 crore and net profit of Rs.35 crore in FY’11. This<br />
translates into an EPS of Rs.18 on ex-bonus equity of Rs.18.7 crore. The company clocked net profit of Rs.32<br />
crore(29.4% y-o-y increase) on net sales of Rs.375 crore(21.8% y-o-y increase). We expect the company to clock a<br />
net profit of Rs.44 crore during the present year, translating into an EPS of Rs.24. With the new plant contributing<br />
full-fledged, EPS for 2012-13 should be over Rs.30.<br />
Valuation & Recommendation: Considering the consistent track record, focused management, investor-friendly<br />
policies, and attractive valuation if we were to assign a multiple of 7 to FY’13E earnings, we arrive at a target<br />
price of Rs.210. This provides an upside of 35% over the next 9 to 12 months. (Detailed report shall follow soon)<br />
PCG Research<br />
Nirmal Bang Securities Pvt. Ltd.<br />
B-2, 301/302, 3 rd Floor, Marathon Innova, Off Ganpatrao Kadam Marg, Lower Parel (West), Mumbai – 400013<br />
Tel: 3926800O
Note<br />
Disclaimer<br />
This Document has been prepared by Nirmal Bang Research (A Division of Nirmal Bang Securities Pvt Ltd). The<br />
information, analysis, and estimates contained herein are based on Nirmal Bang Research assessment and have<br />
been obtained from sources believed to be reliable. This document is meant for the use of the intended recipient<br />
only. This document, at best, represents Nirmal Bang Research opinion and is meant for general information only.<br />
Nirmal Bang Research, its directors, officers or employees shall not in, anyway be responsible for the contents<br />
stated herein. Nirmal Bang Research expressly disclaims any and all liabilities that may arise from information,<br />
errors, or omissions in this connection. This document is not to be considered as an offer to sell or a solicitation<br />
to buy any securities. Nirmal Bang Research, its affiliates and their employees may from time to time hold<br />
positions in securities referred to herein. Nirmal Bang Research or its affiliates may from time to time solicit from<br />
or perform investment banking or other services for any company mentioned in this document.
Change language