Monday, June 21, 2021

Tube Investments of India Ltd (540762) – Rising Demand for premium MTB and kids cycles

Tube Investments of India Ltd (540762) closes   at 1192.15 with  a  Fall   of   -3.30%   on    18-June-2021  with formation of  a  Long Red  Candle    on Daily  Price Chart.

About the Company : Tube Investments of India Limited is an India-based mobility focused manufacturing company. The Company is engaged in manufacturing products for automotive and industrial applications. It operates through three segments: engineering, bicycles and metal formed products. The engineering segments is engaged in manufacturing cold drawn welded (CWD) and electric resistance welded (ERW) tubes, tubular components, large diameter tubes for hydraulic cylinders and off-road applications, and special grade cold rolled steel strips (CRSS). The bicycles segment is engaged in manufacturing and marketing a wide range of bicycle brands, fitness equipment and accessories. The metal formed products segment is engaged in manufacturing and supplying auto and industrial chains, blanking components, motor casings and metal formed products for automotive, industrial and railway segments

Strength  : 1. Sales are likely to touch 1.45crore units in FY22 compared to 1.2 crore in the last fiscal.  According to most sellers, the key drivers of demand are the surge in non­contact and non­equipment fitness sports due to social distancing norms. Of the four major segments — standard cycles, export range, premium and kids cycles — only premium and kid segments have driven up the demand.

2. In the 2020 fiscal the kids and premium segment cumulatively enjoyed a 40 per cent share of the overall cycle sales& it will increased to 50% in FY2022

3. Demand for cycles was mostly driven by metropolitan and Tier-1 cities, where demand grew by almost 100 per cent.

Financials : Tube Investments of India Ltd  has posted Net Sales / Revenue   of 6083.30 Cr & Net Profit of  286.30 Cr in FY2021 and expected to post Net Sales / Revenue   of 5355.60 Cr & Net Profit of 452.10Cr in FY2022 & Net Sales / Revenue   of 6183.20 Cr & Net Profit of 468.20 Cr in FY2023.

EPS will be improved from 14.85 in FY2021 to 29.50 in FY2023, reduction of debt from 209.50Cr to 66.00Cr with increase in Free Cash Flow from 125.20 Cr to 525.50 during the same period. Book Value Per Share will increase from 113 to 161 in FY2023.

Valuations  : The Company is now Trading at X 4.80   of its  valuations of its FY2021 earnings with ~380% Premium and X3.05 of its FY2022 earnings with ~205% premium & X2.95 of its FY2023 earnings with ~195% premium

Margin of Safety (1Yr Bond Yield: Value>1 ) is now  0.30   which  makes is attractive after a ~70 Decline in Price . The  Equity Value Per Share ( Enterprise Value Method ) is  1000.60

If We factor its FY2023 earnings/valuations, its Price arrives at 1922.

Disclaimer : We are / may going to take exposure shortly.

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