Target: ₹2,855
CMP: ₹3,187.85
Tube Investments of India’s, flagship company of the Murugappa group, Q2-FY24 consolidated revenue grew 14 per cent y-o-y, driven by Industrial, Metal Forming and Engineering segments. However, bicycle demand continue to witness negative growth. Tube Investments’ margin contracted by 61 bps y-o-y owing to deleveraging and increase in employee cost. Sales for e-3Ws have commenced with an annual capacity of 19,000 units. Sales started for 3-W at a moderate space and currently concentrating on the southern states. Whereas, E-tractor & E-trucks at its homologation stage.
Foreseeing government infrastructure spending, Tube Investment is expanding its capex on large diameter tubes with an estimated value of ₹140 crore and expects to generate a revenue of ₹400 crore.
Tube Investment has a diversified revenue stream with strong growth in the core sector, and industrial segments like railways & power through inorganic form continue to support long term revenue visibility. However, delay in the EV ramp up is not supporting the current valuation. We believe most of the positivity’s have been factored in the price and expect consolidation in the valuation for near term. We value TII on 43x FY25E EPS recommend sell rating at CMP.