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TICMPL likely to see more fund raise

TIINDIA’s 3QFY24 result was operationally weak as there was a miss across all business divisions. Amid near-term challenges, the next lag of growth is likely to be driven by new order wins, especially in the metal forms division and a recovery in underlying 2W volumes.

We reduce our FY24E/FY25E consolidated EPS by ~4% each to factor in near-term weakness in the standalone business. We now value its EV vertical (ex- SCV) at INR350 per share in the SoTP after assigning value to its e-HCV business. The stock trades at 64.3x/51.6x FY24E/FY25E consol. EPS. We reiterate our BUY rating and a TP of ~INR4,025 (premised on Mar’26 SoTP).

3Q margins subdued due to lower activity in underlying industries

TIINDIA’s revenue grew 11% YoY to INR19b (vs. est. INR20.4b), adversely impacted by lower-than-estimated growth in engineering business/metal form business and a sharp decline in the mobility business.

EBITDA rose 12% YoY to INR2.4b (vs. est. INR2.7b). EBITDA margin improved 10bp YoY to 12.6% (vs. est. 13.2%). The sequential decline in margins was attributed to operating deleverage.

9MFY24 revenue/EBITDA/adj. PAT grew 1%/6%/13% YoY.

Mobility business: Revenue declined 15% YoY to INR1.5b and PBIT margin stood at -5.6% (vs. -1.7%/1.4% in 2QFY24/3QFY23 and est. 1.2%).

Consol. business revenue grew 15% YoY to INR42b, but EBITDA/Adj. PAT declined 1%/ 6% YoY to INR4.7b/INR2.7b.

FCF in 3Q stood at INR660m (vs. INR1.1b in 2QFY24 vs. INR1.15b in 3QFY23).

Highlights from the management commentary

Metal formed- Tenders are coming back; however, the business is getting competitive. Margins seem to be under pressure in the near term. If the announcement of converting 40k wagons to Vande Bharat standard gets implemented, then it will boost demand and add to revenue.

Mobility- Taking steps to diversify into exports. However, it will take some time for customer approval as it needs to go through an entire process. Cost reduction efforts are being undertaken and business should start showing positive momentum in the next couple of quarters.

Capex for standalone business- Incurred capex of INR2.2b in 9MFY24, of which INR1.6b was for the engineering division. Guided for capex of INR3.5b in FY25. It is currently operating at utilization level of 85% and is expected to reach 95% by the end of this year.

TICMPL- The company plans to raise funds in the near term. It has incurred capex of INR3b in 9MFY24 and targets capex of INR4.6b in the next financial year for all businesses. In 9MFY24, the company incurred a capex of INR17.7b.

Valuation and view

TIINDIA offers diversified revenue streams, with strong growth in the core business (~18% S/A PAT CAGR over FY23E-26E), ramp-up in CG Power, and optionality of new businesses incubated under the TI-2 strategy.

The stock trades at 64.3x/51.6x FY24E/FY25E consolidated EPS. We reiterate a BUY rating and a TP of ~INR4,025 (premised on Mar’26E SOTP, based on 36x for the standalone business, valuing listed subsidiaries at 20% HoldCo discount and adding INR350/share for the 3 EV businesses).

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SEBI Registration number is INH000000412