Tube Investments - Margin In Line Despite

BSE Index Analysis, Securties , Standard Experts 

Tube Investments : 

Margin In Line Despite Tough Environment

Reco : Buy    

Cmp : 148    

Target : 195

Tube Investment (TI Q4 operating performance was in line with our expectation. EBITDA came in at ~ Rs 1 bn (Rs 0.9 bn in Q4FY11), largely due to the ability to partially pass on increased costs in engineering and metal formed products. PAT was up 24% yoy to Rs 578 mn on (1) higher dividend from Chola Investments & Finance and (2) lower depreciation and interest outgo.

General Insurance Potential to clock Rs 1 bn PAT: For FY12, Chola MS General Insurance Co registered 44% growth in gross written premium to Rs 15 bn. After providing Rs 660 mn for motor pool losses, it reported PAT of Rs 190 mn (loss of Rs 230 mn in FY11). Positive IRDA directive on amortizing motor pool losses over next 2 years should augur well for the company.

Key highlights (standalone)
Cycles: Revenue was up 15% YoY at Rs 3 bn. EBIT margin at 5.4% (4.8% in Q3FY11) was below our expectation of 6.5% due to higher proportion of standard cycles (due to state elections) yielding lower realization, and inability to pass on cost increase. We expect 5-7% volume growth over next couple of years with 6% sustainable long term margin. .