MBL makes engine bearings, bushes
and thrust washers for commercial vehicles (CV). Bearings business represents
55% of its total sales, where it caters only to CVs. On that backdrop, the recovery
in the CV sales is going to be positive for MBL. Company claims that the bearings
business has certain entry barriers, hence its customer base is sticky in nature. We expect MBL to report net revenue/PAT CAGR of
15.0%/17.8% respectively over FY2017-20E due to recovery in CV volumes,
addition of clients, increasing wallet share and rising aluminum die casting and
exports business. We expect MBL to continue report EBITDA margins between 28-
29% and ROE of 27-29% during this period. We also expect company to pay
dividend at 30-40% payouts. At the CMP of `92, the stock trades at a P/E of 16x
its FY2020E EPS of `5.7. We initiate coverage on the stock with a Buy
recommendation and Target Price of `114 based on 20x FY20E EPS, indicating
an upside of 25% from the current levels.

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