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Greaves Cotton: Does the GST Led Correction Merit a Relook - Views on News from Equitymaster
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  • Sep 20, 2017 - Greaves Cotton: Does the GST Led Correction Merit a Relook

Greaves Cotton: Does the GST Led Correction Merit a Relook
Sep 20, 2017

Greaves Cotton recently announced its first quarter results for FY18. Sales and profits were subdued mainly on account of GST implementation.

Greaves Cotton has outlined a strategy to go from primarily a Diesel Engine provider to a Fuel Agnostic one. As part of this strategy, Greaves Cotton entered into a technology partnership agreement with Pinnacle Engines. With this Greaves Cotton will be able to introduce Opposed Piston Petrol/CNG BS-VI compliant engines and expects to be market ready ahead of the BS-VI launch.

What should subscribers do?

Greaves cotton recently entered into an agreement with Atul Auto to jointly develop power train solutions to meet BS VI norms. Greaves will be looking at developing a new range of fuel agnostic power train solutions using diesel, petrol, CNG and electric power.

Also with GST a reality, the gradual shift from the unorganised to the organised sector will help Greaves Cotton in the long run.

With multiple growth levers in place and a stable financial position, Greaves Cotton is well positioned to ride several subplots of the India's growth story.

On the PEG (price to earnings growth matrix), the stock currently trades at a forward PE of around 12.1x as per our estimated FY20 earnings. When you divide this with the expected growth rate, we get a PEG in the region of 0.79, which is about 23% discount to the Sensex PEG.

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