Setco Automotive Ltd. Initiating Coverage-SIHL ... - all-mail-archive

all.mail.archive.com

Setco Automotive Ltd. Initiating Coverage-SIHL ... - all-mail-archive

Setco Automotive Ltd.13 April 2012Key Assumptions & ValuationDCF Based Valuation for SetcoRs. Cr. FY13E FY14E FY15E FY16E FY17E FY18E FY19E Terminal ValueFree Cash Flow 13 24 26 33 38 43 50 639NPV of Cash Flow 12 21 21 24 25 26 28 -NPV Enterprise Value - - - - - - - 524Source: SIHL ResearchTerminal Growth Rate 4%Beta 0.33Risk Free Rate 9%Market Premium 8%Post Tax Cost of Debt 6.2%Cost of Equity 11.0%WACC 8.6%Debt (Rs. Cr.) 121Equity (Rs. Cr.) 118Total Enterprise Value 524Net Debt (Rs. Cr.) 106No of Shares (Cr.) 1.76Value per Share 237Valuation Subsidy Investment Valuation Method Value per ShareStandalone Business - DCF Valuation 237Setco Automotive UK Ltd 100% 30% discount to FY14 BV of Rs.9.9 7Setco Automotive (NA) Inc 100% 30% discount to FY14 BV of Rs.7.5 5Source: SIHL ResearchTarget Price 249CMP 206Expected Return 21.3%Outlook & ValuationSetco has pro-actively increased its capacity over some years which have helped in maintainingits market dominance. With a CAGR growth of 11-12% of OEMs coupled with largely untappedOES and export segment, we estimate a 20% CAGR growth in revenues from FY12-14E. Due tointroduction of BS III norms for CVs, we estimate significant upgradation in CV clutches whichwould translate into higher realization per clutches. Higher CV sales in FY10 and FY11 will leadto higher demand in OES segment which result into higher operating efficiency as margin in OESis higher as compared to OEM.We recommend a BUY with a Target price of Rs.249 on DCF basis; with an investment horizonof 12 months and upside potential of 21%.10 | P a g e

More magazines by this user
Similar magazines