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EV SCALE-UP DRIVING GROWTH INFLECTION AND MEDIUM-TERM REVENUE ACCELERATION

The EV business has scaled meaningfully to contribute ~40–45% of FY25 revenues (~Rs.2,918 crore), marking a clear shift in the company’s growth profile. Greaves Cotton is well positioned in the mass, last-mile mobility segment, which offers strong volume visibility driven by favorable economics and rising EV adoption. Growth is expected to be led by distribution expansion, product depth, and Tier 2/3 penetration. Additionally, exposure to high-usage segments such as delivery and passenger mobility supports faster replacement cycles and demand visibility. While margins remain under pressure, operating leverage and cost efficiencies provide a pathway for improvement. The planned ~Rs.1,000 crore capital infusion supports further scale-up and execution. Over time, localization and vendor optimization are expected to support cost reduction and margin expansion. The EV segment remains the key driver of incremental revenue and earnings growth over the medium term.

CORE BUSINESS ANCHORS PROFITABILITY, CASH FLOW STABILITY, AND EARNINGS VISIBILITY

The legacy engineering and energy business contributes ~50% of revenues and remains the primary profit and cash flow anchor. A strong installed base supports recurring aftermarket revenues, providing stability and margin resilience. The segment has historically delivered steady growth with strong cash conversion, enabling consistent internal funding. The presence across diverse end-use applications further enhances demand resilience across cycles. With disciplined capex (~Rs.500–700 crore over five years), the business maintains capital efficiency. This stability provides downside protection while supporting investments in higher-growth segments. Strong cash flows also enable the company to maintain balance sheet strength during the transition phase. Overall, the core business continues to underpin earnings stability and return ratios.

GREAVES.NEXT ENHANCES STRATEGIC CLARITY, EXECUTION DISCIPLINE, AND LONG-TERM GROWTH VISIBILITY

The GREAVES.NEXT framework reorganizes the business into Energy, Mobility, and Industrial segments, improving visibility on growth drivers and performance. It enables clearer execution priorities and segment-level accountability, supporting more focused decision-making. The Industrial segment adds optional growth through components, OEM exposure, and exports. It also creates a pathway for diversification beyond traditional end-markets over time. A structured capital allocation approach—core funded internally and EV via external capital—enhances financial discipline. This separation improves capital efficiency and reduces strain on the parent balance sheet. Overall, the framework provides a clear roadmap for scalable and sustainable growth. Consistent execution should support better visibility on performance and long-term value creation.

OUTLOOK AND VALUATION

We expect Greaves Cotton Limited to deliver healthy revenue growth over FY2025–FY2028E, driven by scale-up in the electric mobility segment, steady performance in the core engineering business, and execution under the GREAVES.NEXT framework. The EV business is expected to contribute a higher share of incremental revenues, supported by distribution expansion and improving adoption in last-mile mobility, while the legacy business continues to provide stability and cash flows. We estimate EBITDA and PAT margins to gradually improve over the medium term, led by operating leverage in the EV segment, cost optimization, and a stable contribution from the core business. Our EPS estimates stand at Rs.5.1, Rs.5.7, and Rs.5.7 for FY2026E, FY2027E, and FY2028E, respectively. Assigning a P/E multiple of 36x on FY2028E EPS, we arrive at a target price of Rs.204, implying an upside of ~23% from the CMP of Rs.166, we initiate coverage on Greaves Cotton Limited with a BUY rating, with an investment horizon of 24–30 months.

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