Buy Tega Industries, target price Rs 590: JM Financial

JM Financial has buy call on Tega Industries with a target price of Rs 590. The current market price of Tega Industries is Rs 456.05. Time period given by analyst is one year when Tega Industries Ltd. price can reach defined target.

Tega Industries Ltd., incorporated in the year 1976, is a Small Cap company (having a market cap of Rs 3032.58 Crore) operating in General sector.

Tega Industries Ltd. key Products/Revenue Segments include Rubber Products, Export Incentives, Sale of services, Service Charges, Scrap and Commission for the year ending 31-Mar-2021.



Financials
For the quarter ended 31-03-2022, the company reported a Consolidated Total Income of Rs 302.47 Crore, up 15.71 % from last quarter Total Income of Rs 261.40 Crore and up 17.51 % from last year same quarter Total Income of Rs 257.40 Crore. Company reported net profit after tax of Rs 48.12 Crore in latest quarter.

Investment Rationale
The brokerage notes that the valuation gap for Timken has narrowed vs. other bearing companies on PER basis given a) decline in share of traded goods YoY (47% of COGS vs. 50%) due to higher share of exports, aiding margin expansion, b) better return ratios due to operating leverage benefits as capacity utilisation improved, and c) improvement in pay-out ratio, through it is still lower vs. peers. It continues to maintain BUY with a TP of INR 2,700, valuing the stock at 40x given better EPS growth profile of 25% CAGR over FY22-24E (vs. 17% CAGR in the past 5/10 years) and superior RoE of 22-23% vs. 16% in the past 10 years.


Promoter/FII Holdings
Promoters held 79.17 per cent stake in the company as of 31-Mar-2022, while FIIs owned 2.17 per cent, DIIs 8.95 per cent.