Edelweiss bullish on Grindwell Norton
MUMBAI: Edelweiss Securities has upgraded the ratings on Grindwell Norton to buy with a target price of Rs 390 citing pick up in automotive segment and pent up demand in industrial amidst sluggish manufacturing activity.
Shares of Grindwell Norton gained 1% to Rs 334 on Friday. Edelweiss target price will give an upside of nearly 17% from the current level. Shares of Grindwell gained nearly 3% so far this year.
Company’s revenue for the quarter ended December 31, 2016 grew by strong 16% YoY amid tough market conditions. Though EBITDA grew 4%, EBITDA margin dipped 153bps YoY to 14.0% on higher employee cost and other expenditure.
Abrasive and ceramic segments grew by healthy 12% YoY each, while others segment growth surged 51% YoY. Company’s’ net profit moved up 11% YoY.
“Going forward, expected upturn in automotive industry will favour GWN as it has high exposure to automobile and auto ancilliaries sectors versus competition” said Shradha Sheth, analyst, Edelweiss Securities.
“We estimate sales CAGR of 15% and EBITDA CAGR of 17% over FY 2017-19. On strong product portfolio of 30,000 SKUs with 30% revenue contribution from new products, wide distribution network, benefits of strong parentage, and expected 339bps expansion in RoE to 20%”.
Shares of Grindwell Norton gained 1% to Rs 334 on Friday. Edelweiss target price will give an upside of nearly 17% from the current level. Shares of Grindwell gained nearly 3% so far this year.
Company’s revenue for the quarter ended December 31, 2016 grew by strong 16% YoY amid tough market conditions. Though EBITDA grew 4%, EBITDA margin dipped 153bps YoY to 14.0% on higher employee cost and other expenditure.
Abrasive and ceramic segments grew by healthy 12% YoY each, while others segment growth surged 51% YoY. Company’s’ net profit moved up 11% YoY.
“Going forward, expected upturn in automotive industry will favour GWN as it has high exposure to automobile and auto ancilliaries sectors versus competition” said Shradha Sheth, analyst, Edelweiss Securities.
“We estimate sales CAGR of 15% and EBITDA CAGR of 17% over FY 2017-19. On strong product portfolio of 30,000 SKUs with 30% revenue contribution from new products, wide distribution network, benefits of strong parentage, and expected 339bps expansion in RoE to 20%”.
