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IDBI Capital
GNA Axles (Buy)
Target: ₹295
CMP: ₹258.40
GNA Axle (GNA) Q2-FY21 result was above our estimates on all parameters. Revenue for the quarter stood at ₹222 crore above our estimates on account of strong orders from Meritor and domestic tractor players.
We believe NA/SA/ European market has seen strong recovery post pandemic. We expect domestic M&HCV truck market to perform relatively better in H2-FY21 on account of economic growth recovery, higher road/construction activities and improving financial profile of fleet operators.
We expect revenue decline of 18 per cent for FY21 due to weaker Q1, stable Q2 and strong recovery in Q3/Q4. We anticipate revenue growth of 15 per cent/9 per cent for FY22/FY23 on account of strong recovery in NA truck market and domestic truck market. We introduce our FY23 estimates and anticipate revenue and earnings to grow at approximately 4 per cent and 3 per cent CAGR over FY20-FY23 with EBITDA margin of about 15 per cent.
We have arrived FY23E EPS at ₹32.7, factoring in volume growth/better realizations. We change our rating to buy (earlier reduce) and arrive at a TP of ₹295 (earlier Rs 160) based on PER of 9x FY23 EPS.
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