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Tube Investments (TI) - Qtr. Update - Dated - May 06, 2013




Axis Capital Limited


06 May 2013





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Tube Investment’s (TI) Q4 standalone PAT declined 64% YoY to Rs 210 mn due to weak consumer demand in cycles and lower off-take by automotive industry. Margin in the cycle division was impacted by Rs 130 mn due to one-offs like (1) winding up of operations in China, as a result of higher import duty on cycle component and (2) liquidation of certain models at lower price. With indigenization of cycle components complete, we expect profitability to normalize. Also, we believe the margins in other divisions have troughed, as visible in QoQ sequential improvement (the company has been able to pass on partial cost increases to consumers). General Insurance subsidiary continues to do well and is on course to deliver > Rs 1.2 bn PAT in FY15E. Maintain BUY with SOTP-based TP of Rs 258 (61% upside from CMP of Rs 160). General insurance business: Chola MS General Insurance Co. registered PAT of Rs 230 mn (Rs 50 mn in Q4FY12), which included Rs 170 mn of third party motor pool loss. It reported PAT of Rs 600 mn in FY13 (Rs 190 mn in FY12), including Rs 670 mn provided for third party motor pool loss. Gross written premium for the company increased 10% to ~Rs 17 bn. Regards, Kashyap Pujara (ED – Midcaps) Institutional Equity Research Axis Capital Limited Tel: +91 22 4325 1146 Farzan Madon (Asst VP – Midcaps) Institutional Equity Research Axis Capital Limited Tel: +91 22 4325 1131

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