The Tube Investment stock predicts a sharp rise ahead; Long-term strategy, 3-wheel electric, PLI to drive


Tube Investment of India (TII) is poised for a good rally ahead in the stock markets with a long-term growth strategy and a foray into the electric three-wheeler market with Optic Lens to work in favor of the stock. Due to strong fundamentals and a strategic shift adopted by the company, Geojit Financial Services has recommended “Accumulate” on the stock with a target price of Rs 1,746 each going forward.

On Tuesday, Tube Investments stock made a massive correction and approached the level of Rs 1,455 each before closing at Rs 1,476.30 each down Rs 90.25 or 5.76% on BSE . The stock stood at Rs 1566.55 each on Monday.

In its report, Geojit said that Tube Investment’s long-term strategy to insulate itself from the cyclical nature of the automotive sector through organic and inorganic growth and to enter a new business such as an OEM EV is largely in place for the business. The growth share in the export market of legacy products such as engineering and IT cycles is increasing in double digits due to entry into new geographies and export incentives.

The acquisition of CG Power became positive for the company. It is well placed to take advantage of CG power’s global market leadership. Tube Investments has set a modest target of Rs5000 crore and 500 crore revenue and PBT in four to five years for CG.

Furthermore, Geojit’s report states that Tube Investment’s entry into 3W electrical manufacturing with an outlay of Rs200cr will also mark the group’s foray into full automotive manufacturing. The technology and prototype for the three-wheeled electric vehicle have already been developed and will be a combination of in-house help and design support from a Korean company.

“Due to a shortage of semiconductors, the company has extended the vehicle launch time to T2FY23 from T4FY22. The company has also made a small foray into optical lenses or automotive vision products. and other industries.In an initial phase, the existing factory has already been set up for a capacity of half a million lenses per month and is running for its certification process with a flagship customer “Adds Geojit’s note.

In Q3FY22, Tube Investment revenue increased 4.3% quarter-on-quarter, driven by double-digit growth in the export market and 8% quarter-on-quarter growth in CG power and Industrials. Its standalone business, including Shanti gears., which largely consists of legacy business, grew 16% year-on-year (0.8% quarter-on-quarter). With an export share of 20% currently in the engineering sector, Tube Investments reiterated that it should be 30% in 2-3 years, and for industrial activities 40% coming from export. Overall, the company is aiming for a 30% export share of its business in the medium term.

In its assessments, Geojit’s rating said, “We expect a diversified approach from TII to de-risk the automotive sector and focus more on other industry segments such as railways and power through the inorganic form to support long-term revenue visibility.In addition, the government’s PLI program and China plus the strategy of major international OEMs to deliver incremental growth in the medium term.We are renewing and valuing TII on a consolidated basis, with a P/E of 26x FY24E EPS and recommend the Accumulate rating with a target price of Rs.1,746 at CMP.

Tube Investments is among the applicants that have received government approval for the PLI program under the Component Champion Incentive Scheme. PLI for automotive and automotive components industry has witnessed stellar demand from automakers with a proposed investment of a whopping Rs74,850 crore against the target estimate of 42,500 crore. 75 candidates were approved under the “Component Champion Incentive Scheme”.

The Component Champion Incentive program is a “sales value tied” program, applicable on advanced automotive technology vehicle components, knock down (CKD)/semi knocked down (SKD) kits, 2 wheel vehicle aggregates, 3 wheelers, passenger vehicles, utility vehicles and tractors, etc.

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