ICICI Securities is bullish on Varroc Engineering recommended buy rating on the stock with a target price of Rs 283 in its research report dated June 26, 2020.
ICICI Securities research report on Varroc Engineering
Varroc Engineering’s (VEL) Q4FY20 operating performance missed estimates due to Covid-related shutdown and supply chain disruptions from China. VLS sales declined ~10% YoY to EUR233mn while margins slumped by ~690bps YoY to 2.5%. FCF generation (~Rs4.4bn) in FY20 has been strong considering the large capex incurred (Rs9.7bn). FY22 is likely to be an inflection year for the global lighting business (VLS) as steep fixed initiatives are likely to provide additional boost to profitability as new plants stabilize and revenues ramp up. India business is expected to benefit from domestic two-wheeler demand recovery coupled with increased BS-VI content.
Outlook
Stock is trading at ~16% FY20 FCF yield which we believe remains alluring. We maintain our BUY rating on the stock.
For all recommendations report, click here
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
WEBINAR: Tune in on June 30 at 11am to find out how term insurance can provide risk protection during tough times. Register Now!
Read More
