Pick Of The Week: Automotive Axles

HDFC Securities | Nov. 5, 2018, 12:19 p.m.

Valuation

Going forward, the company’s ability to improve its scale of operations and margins, maintain its strong financial profile amidst the ongoing capex programme, expand its market share in the domestic market and the capacity to de-risk its performance from the inherent cyclicality of the M&HCV industry will be key rating sensitivities.
At CMP of Rs 1,166 the stock quotes at 11.5x FY20E EPS. We feel investors could buy the stock at the CMP and add on dips to the Rs 1,065-1,075 band (10.5x FY20E EPS) for sequential targets of Rs 1,320 (13x FY20E EPS) and Rs 1,475 (14.5x FY20E EPS) in three to four quarters.



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