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.