Hold On To The Scrip - TIL

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TIL, (formerly known as Tractors India), formed a part of our recommendation in Choice Scrip column in the May 26-June 8, 2008 issue at Rs 421. Strong fundamentals, huge capex plan, consistent performance, improving margins, international tie-ups and last but not the least, attractive valuations were the factors considered while recommending it as a Choice Scrip. However, the counter hasn't performed up to our expectations and is currently trading at Rs198, down 53 per cent from the recommended levels.

In its material handling division,TIL provides cranes 10 MT to 100 MT and is a leader in India with 75 per cent market share. In the construction equipment division TIL provides earthmoving equipments and other construction equipments of Caterpillar and is an exclusive distributor for the company in Northern and Eastern region. The power segment focuses in the assembly and the commissioning of diesel generator sets.

On analysing the results we found that the company actually has given good set of numbers not only in the last quarter of 2008, but also in the first quarter of FY09. In Q1FY09TIL's topline increased 42 per cent to Rs 185.59 crore (Rs 130.74 crore),while the bottomline during the same period increased 44.8 per cent to Rs 5.72 crore (Rs 3.95 crore).However, the company operating margins have marginally declined by 24 basis points.

The counter is fundamentally sound and hence probability of it bouncing back once the market stabilizes is quite high. Hence investors can continue to hold the scrip. Besides, at market cap to sales of 0.29x and PE of just over 6x, long term investors can even accumulate the counter on declines.