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Geojit Financial
Tube Investment (Buy)
Target: ₹1,306
CMP: ₹1139.6
Tube Investment of India (TII) is a flagship company of Murugappa group. It is one of the leading product manufacturers for major industries such as Automotive, Railway, Construction, Mining, etc.
TIIs strategy to de-risk from the auto sector (Revenue mix of 70 per cent) and concentrate more on industrial segments through acquisitions or inorganic growth, to support long term revenue visibility.
Acquisition of CG Industrial & Power Co, which provides power and industrial system related service in India, and abroad will enhance TII’s product portfolio and revenue mix.
TII’s entry into 3W electric manufacturing will mark the group’s foray into automobile manufacturer from an ancillary player. It is planning to start production & selling electric 3W by Q4-FY22.
We expect the revenue and PAT to grow by 21 per cent/60 per cent CAGR over FY21-23 owing to diversified product mix and value migration.
Given the strong fundamentals and strategic change adopted in the company’s segment mix, we value TII on a consolidated basis and recommend Buy rating with a target price of ₹1,306.
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