Buy Tractors India Ltd.
CMP:- 460
Target:- 625
TIL provides total infrastructure solutions rather than supplying only products. In its material handling equipment (MHE) division, TIL designs and manufactures port cranes, forklifts and reach stackers, which find uses in heavy construction activities in projects or for movement of materials. In its agency businesses (Caterpillar), the company sells earthmoving products to mining and construction industries. Moreover, it has huge potential of supplying spare parts and offering after sales service to the installed customer base.
Company has strategic alliances with leading manufacturers in the world such as Caterpillar, Manitowoc Crane Group (US), Famak S.A (Poland), and Paceco Corp (US). It also supplies mobile cranes and lorry loader to Indian defence sector.
Government thrust on infrastructure spending: Infrastructure development is a priority for the Government of India (GOI) to sustain GDP growth. GOI is doubling the port capacity at an investment of INR 60000 Crores over the next five years. Budget 2010-11 government allocated over Rs 173550 Crores for infrastructure and Rs 48000 Crores for rural development. We assume near 12 % spend is likely on equipment such as cranes, forklifts, and material handling systems, which translates into an opportunity for key players like TIL worth INR 7200 crores for next five years. We expect with 10% market share of MHE division will fetch additional 700 crores of revenues in next five years.
New products will give visibility: New product launches from the new plant will kick in, targeting the port, bulk material handling and roads segments. Moreover, the company is exploring the option of supplying components to its technical collaborators FY11 onwards; however we have not included new product revenues in our estimates.
TIL provides total infrastructure solutions rather than supplying only products. In its material handling equipment (MHE) division, TIL designs and manufactures port cranes, forklifts and reach stackers, which find uses in heavy construction activities in projects or for movement of materials. In its agency businesses (Caterpillar), the company sells earthmoving products to mining and construction industries. Moreover, it has huge potential of supplying spare parts and offering after sales service to the installed customer base.
Company has strategic alliances with leading manufacturers in the world such as Caterpillar, Manitowoc Crane Group (US), Famak S.A (Poland), and Paceco Corp (US). It also supplies mobile cranes and lorry loader to Indian defence sector.
Government thrust on infrastructure spending: Infrastructure development is a priority for the Government of India (GOI) to sustain GDP growth. GOI is doubling the port capacity at an investment of INR 60000 Crores over the next five years. Budget 2010-11 government allocated over Rs 173550 Crores for infrastructure and Rs 48000 Crores for rural development. We assume near 12 % spend is likely on equipment such as cranes, forklifts, and material handling systems, which translates into an opportunity for key players like TIL worth INR 7200 crores for next five years. We expect with 10% market share of MHE division will fetch additional 700 crores of revenues in next five years.
New products will give visibility: New product launches from the new plant will kick in, targeting the port, bulk material handling and roads segments. Moreover, the company is exploring the option of supplying components to its technical collaborators FY11 onwards; however we have not included new product revenues in our estimates.
TIL was established in 1944 and operates three business divisions: material handling solutions (MHS), construction and mining systems (CMS) and power solutions system (PSS). The company has a differentiated business model where it has the ability to provide total infrastructure solutions (supplying of spare parts and offering after sales services) rather than supplying only products which ensures stability in revenues. It has strategic alliances with leading manufacturers in the world such as Caterpillar, Manitowoc Crane Group (US), Famak S.A (Poland), and Paceco Corp (US).
Material handling solutions: In MHS, TIL manufactures cranes, forklifts and reach stackers, primarily used in the construction, ports, mines and defence. Recently the division has embarked on a robust expansion plan offering road construction solutions, port equipment.
MHS executed orders for the Indian Air-force and Bharat Earth Movers for supply of mobile cranes and lorry loaders. Material handling, manufactured by TIL, are primarily used in heavy construction activities and for movement of materials inside plants or container traffic movements. In FY10, revenues from MHS were at INR 167 Crores, accounting for near 20% of the standalone sales. TIL expects (FY11) to manufacture rubber tyred gantry cranes, electric level cranes, and begin manufacturing of hot mix asphalt plants, crushing and screening plant.
Construction and Mining solutions: In CMS, TIL sells equipment and spares for Caterpillar products in North and East India. These equipments are majorly used in the construction and mining industries. TIL is also exclusive dealer for Caterpillar in Bhutan, Nepal, Singapore and Burma. Earthmoving equipment such as excavator, backhoe loaders, dumpers, motor grades etc form 60% of CMS sales.
The balance 40% is through sale of spares, which typically starts in the second year of sales. In FY10, sales from this division were at INR 477 Crores, accounting 56% of the standalone sales.
Power solutions systems: In PSS, TIL sells generator sets in the range 180 KVA-2,250 KVA, using Caterpillar diesel engines. It also supplies gas-based and heavy fuel based generating sets from the Caterpillar stable. Apart from sale of gensets, it undertakes manufacture and commissioning of all relevant installations and spare part sales, thereby leveraging on the installed base of the generator sets sold. Recently, TIL has begun catering to business needs of the gas compressor station engines at automobile CNG filing stations. In FY10, revenue from PSS was at INR 208 Crores accounting 24% of the standalone sales.
Recent Updates: TIL’s board approved a proposal for transferring the construction & mining systems (CMS) and power solution systems (PSS) divisions (with effect of 2nd April 2010), both Caterpillar businesses, to a wholly-owned subsidiary (TIPL).
Report card
| Attribute | Value | Date |
|---|---|---|
| PE ratio | 10.13 | 24/05/10 |
| EPS (Rs) | 46.73 | Mar, 10 |
| Sales (Rs crore) | 277.65 | Mar, 10 |
| Face Value (Rs) | 10 | |
| Net profit margin (%) | 3.78 | Mar, 09 |
| Last dividend (%) | 60 | 14/05/10 |
| Return on average equity | 22.62 | Mar, 09 |
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