Greaves Cotton signs a pact with Piaggio for BS-VI engines

As per media reports, Greaves Cotton has signed an agreement with Piaggio Vehicles India to develop new diesel and clean energy engines.

Jan 04, 2018 05:01 IST India Infoline News Service

Greaves Cotton
The new engines will be as per BS-VI emission norms and will run on diesel and alternate fuels in the clean energy space. Greaves Cotton has long term association with Piaggio India (a unit of Italian motor vehicle manufacturer) and has supplied over 5mn engines to the company.
We expect Greaves Cotton’s automotive segment, particularly three wheelers (3W) to recover from the lows of FY17 following fading of demonetization impact, increased ease in funding, growth in intra city transportation and economic revival. We expect it to benefit by virtue of its dominant 75% market share in 3W diesel engines.
We are positive on the stock, as it is well poised to strengthen its presence across all segments riding on impending economic revival. We expect sales and PAT CAGR of 14.5% and 18% respectively over FY17-19E. Greaves Cotton currently trades at 13xFY19E P/E. The company deserves higher valuation on back of improving performance, healthy balance sheet as well as returns and average FCF yield of 5%.
Greaves Cotton Ltd ended at Rs 141.85, up by Rs 1.85 or 1.32% from its previous closing of Rs 140 on the BSE.

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