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Centrum Wealth
Igarashi Motors (Accumulate)
CMP: ₹432.30
Target: ₹490
Igarashi Motors India Ltd (Igarashi) manufactures small, direct current (DC) electric motors for the automotive sector. The rising share of electronic content per car has resulted in growing demand for electric motors. The company is currently owned by global electric motor manufacturer Igarashi Electric Works (IEW), Japan.
Ninety seven per cent of Igarashi’s FY14 revenue was derived from export markets with sales split between US, Europe and Asia. The key growth drivers for Igarashi’s electric motors are: 1) Content per car increasing; 2) Fuel efficiency as well as emission reduction mandates for automakers worldwide; and 3) Revenue synergies with new Japanese parent IEW. We expect robust revenue CAGR of 24 per cent over FY2015E-17E.
Risk: 1) volatility in raw material prices; 2) Lower fuel prices reducing the incentive to produce fuel efficient cars; and 3) Appreciation of rupee.
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