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LKP Securities
Greaves Cotton (Buy)
CMP: ₹79.5
Target: ₹100
Greaves is a ₹2,000 crore entity operating in engines (53 per cent of revenues), gensets, pumps & farm equipment (20 per cent of revenues), aftermarket & spares (20 per cent of revenues) and e-mobility (7 per cent of revenues)
While the long auto slowdown culminating into a lockdown did have an adverse impact on revenues, margins got impacted more due to the transition from BS-4 to BS-6 which entailed cost increases which were not fully passed on to auto OEM’s. However, with its CREST Engine Technology offering superior fuel efficiency and renewed growth momentum in non-auto engines, we believe Greaves is well on track with its derisking strategy towards non-auto segments.
With Ampere now emerging as the fastest growing E-2Wheeler brand in India with a market share of over 20 per cent, Greaves is well on track to make the transition from diesel to clean fuel and once the three wheelers come on road, Greaves will get a boost as it is a formidable force in the cargo segment.
Thrust on localisation and cost control should in our view help cut losses in Ampere going forward even as the Non-Auto Engine Portfolio is emerging as a highly profitable segment for Greaves.
With over 6000 retail outlets and close to 300 new mobility outlets, Greaves is now all set to launch its new high speed Scooter — Magnus this month.
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