Tube Investments: Focus on execution; 3W EV sale begins

15 Jun 2023 , 10:44 AM

Recommendation: Add; Target price: 2702

At analysts of IIFL Capital Services recent plant visit and meetings in Chennai, TI mgmt seemed well-focused on driving lean manufacturing initiatives across operations, to sustain competitiveness and expand margins for the core business. 3W EV sales have commenced in South, backed by a strong product offering even as charging-infra expansion holds the key to adoption. EV truck sales too should commence shortly. Meanwhile, the leadership is focusing on executing multiple new forays with further acquisitions to be opportunistic. Analysts of IIFL Capital Services retain ADD.

Lean manufacturing – gains to flow over medium term: 

Compared to last year, analysts of IIFL Capital Services visit to the 2 core plants of TI highlighted gains from lean manufacturing, which started in late 2021. While external consultants give the nudge, changes happen through in-house solutions and practices with focus on driving up productivity (machines & employees) and lowering costs & wastage. Mgmt indicated that some gains have flowed in, but a large part is yet to materialise as these changes get fully implemented. Overall, analysts of IIFL Capital Services should see higher yield and profitability even as some part of gains is passed to the customers, so as to sustain competitiveness. 

3W EV sales begins, Trucks sales to commence shortly: 

3W EV sales have commenced with ~40 units sold till date in a few southern states. Sales in Tamil Nadu are yet to start as regulatory approvals come in. At the dealership, analyst of IIFL Capital Services saw the Montra Super Auto and it seemed as a strong offering to start with; even as the company resolves the initial product issues. Key to adoption is availability of charging infra, given the long charge times with 150km range. With homologation approval of the inhouse manufactured truck likely, the 55T EV truck sales will start soon.

FY24 to see strong focus on executing ventures:

 Post the forays / acquisitions across EVs, electronics, CDMO (greenfield facility) and medical equipment (Lotus Surgicals) over past year or so, TI management is focused on execution — in terms of production ramp-up for EVs, setting up capacity for CDMO and integration of operations. Evaluation of new forays/acquisitions would be opportunistic.