Motilal Oswal Reiterates 'Buy' Rating for Tube Investments of India with Target Price of ₹4,750

Investments Indian Investments

Posted by NewAdmin on 2025-02-06 08:47:41 |

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In a recent analysis dated November 5, 2024, Motilal Oswal Financial Services reaffirmed its 'Buy' recommendation for Tube Investments of India (TIINDIA), setting a target price of ₹4,750. This valuation is based on a Sum-of-the-Parts (SoTP) approach, considering 36 times the standalone business earnings, valuing listed subsidiaries with a 15% holding company discount, and adding ₹353 per share for the company's three electric vehicle (EV) ventures.

Despite a subdued performance in the second quarter of FY25, where the standalone Profit Before Interest and Tax (PBIT) margin stood at 9.9%—a 110 basis points decline year-over-year—Motilal Oswal remains optimistic about TIINDIA's growth prospects. The dip in margin was attributed to one-off challenges in the engineering segment and pricing issues in the railway sector. However, the management anticipates a robust second half of FY25, driven by strong two-wheeler volumes, improved export figures, and diversification beyond the automotive sector.

The engineering division reported a revenue of ₹1,323 crore for the quarter, up from ₹1,274 crore in the same period the previous year, though PBIT slightly decreased to ₹162 crore from ₹169 crore. The metal-formed products segment saw revenue rise to ₹404 crore, with PBIT declining to ₹46 crore from ₹53 crore year-over-year. The mobility segment's revenue was ₹168 crore, down from ₹177 crore, but it reduced its loss before interest and tax to ₹0.36 crore from ₹3 crore, indicating improvement.

Motilal Oswal has adjusted its consolidated Earnings Per Share (EPS) estimates for FY25 and FY26 downward by 24% and 14%, respectively, to account for moderate demand in the domestic passenger vehicle and commercial vehicle markets, as well as a slower-than-expected ramp-up at CG Power. Despite these adjustments, the firm maintains a positive outlook on TIINDIA, citing the company's strategic initiatives and potential for growth in emerging sectors like electric vehicles.

As of the latest update, TIINDIA's stock is trading at approximately 65 times and 54 times the projected consolidated EPS for FY26 and FY27, respectively. The company's diversified portfolio and strategic investments position it well for future growth, making it an attractive option for investors seeking exposure in the engineering and automotive sectors. 

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