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Below estimates but outlook remains positive; maintain Buy
* Despite strong growth in the replacement segment, revenue was flat at Rs15.7bn (est.: Rs17.1bn) due to weakness in OEM/industrial segments. We expect 10% revenue growth over FY19-21E on OEM demand pickup and stable growth in the replacement segment.
* EBITDA margins expanded 210bps yoy/50bps qoq to 15.5% (est.: 15%) backed by better mix and lower lead prices. Recent correction in lead prices, better mix and higher scale are expected to aid margins. We expect margins to improve by 130bps over FY19-21E
* Prune FY20/21E EPS by 7%/6% to Rs35.2/Rs39.4 on lower revenue assumptions in OEM/industrial segments. With this, revenues/earnings CAGR expected at 10%/18% over FY19-21E. Average ROE is expected at 17% over FY20-21E with Rs3.5bn FCF per year.
* The stock currently trades at a P/E of 18x/16x on FY20/21 estimates. We maintain our Buy rating with a revised TP of Rs710 (from Rs840 earlier), based on 18x FY21E EPS (20x FY21E EPS).
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