TIL Limited

An Investment Idea

TIL, strong player in the construction equipment and material handling business and power systems, in eastern sector, has reported superb performance for Q2 FY 2008.

Net Sales grew @ 23.9% to Rs.176.44 crore (Rs. 142.35 crore) led by 54% growth in Construction equipment sales and 11.4% growth in Power systems business. OPM% enhanced to 8% (7.7%) with improvement in PBIT margins of all its business. Improved sales, better margins coupled with a higher othe income of Rs.1.57 crore (Rs.94 lakh), led to 69.2% spurt in PBT to Rs.9.34 crore (Rs.5.52 crore). A lower tax rate of 34.5% (40.8%) further perked up PAT by 87.2% to Rs.6.12 crore (Rs.3.27 crore). For H1 FY08, Net Sales was up by 22.9% to Rs.308.43 crore (Rs.250.97 crore). OPM% improved to 8.9% (8.2%). PBT zoomed by 81.4% to Rs.15.87 crore (Rs.8.75 crore) and PAT was up by 85.5% to Rs.10.35 crore (Rs.5.58 crore).

TIL’s major products include mobile cranes, forklift trucks, tractors, wheel loaders, industrial generator sets and diesel engines. Thus, TIL caters to wide range of industries like construction, ports, mining, steel, cement etc. It is also a dealer for some international equipment manufacturers like Caterpillar. Caterpillar has increased its focus on Indian market and has commenced manufacturing new models in India which augurs well for TIL. Company is planning a JV finance company to be promoted by TIL, Singapore-based Caterpillar Services Asia and another Indian promoter. This JV will finance construction equipment especially those certified by Caterpillar.

Huge investments are coming up in the steel sector in eastern belt, which in turn will spur demand for equipments used in coal limestone and iron ore mining. The power systems business will benefit from increased demand in malls, IT/ITeS industry and precision manufacturing industry.

In material handling business, TIL plans to introduce Rubber Tyred Gantry Cranes and electric level luffing cranes for Container handling operations at ports and inland container depots. This is a high growth area on account of strong investments in port sector. For this purpose, it has entered into technical tie-up with Pasico, USA (has 30% market share world-wide in this type of port equipment). This business is expected to sustain the growth momentum in view of GDP growth of ~ 8%, thrust on infrastructure spending as well as huge capex lined up by corporates.

Also in the pipeline are expansion plans of its facilities to serve the growing demand of the industry. With this TIL is well poised to meet the additional demand coming from ongoing capex across sectors like coal mining, ports, retail and IT/ITES.

At CMP of Rs. 359.1, share is trading at 12 times FY 2008 expected EPS of Rs.30 and 9.6 times FY 2008 expected EPS of Rs.37.5-. In view of excellent business prospects, we recommend to “BUY” the share at CMP.

----- With due apologies and full credits to Geojit