Going ahead, we expect TWOIL to report standalone net sales CAGR of ~9% over
FY2014-16E to ~Rs1,196cr owing to some improvement in sales volume and
possible price hikes (the company would be able to take price hikes due to its
strong brands and better quality of products). We believe that the company would
perform better in the “Bazaar” segment owing to strong distribution network and
tie-ups with leading OEMs. Further, the company is expanding its footprint in
international markets through acquisitions, incorporation of new companies, joint
ventures or franchisees; which would aid the revenue growth for TWOIL in the
coming years. On the profitability front, we forecast TWOIL to report a standalone
net profit CAGR of ~7% over FY2014-16E to Rs78cr owing to healthy sales and
better operating margin due to cost effective management strategy.
At the current market price of Rs12,076, the stock trades at a PE of 14.6x and
13.1x its FY2015E and FY2016E EPS of Rs828.6 and Rs919.0, respectively. We
initiate coverage on the stock with a Buy recommendation and target price of
Rs14,704, based on 16x FY2016E EPS, indicating an upside of ~22% from the
current levels.

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