Greaves Cotton Ltd - 501455

Name of Company	Greaves Cotton Ltd
BSE Code	501455
NSE Code	GREAVESCOT
ICICI Code
Established	1859
My Take	Like
Headquarters
Promoters	Thapar group (once used to own BILT, Crompton Greaves, JCT, The pioneer, etc) – BILT and Crompton are now with Gautham Thapar's Avantha group. Karan Thapar (brother of Gautham Thapar and grandson of Karan Chand Thapar) is the Chairman of this company.
Story	It's one of the largest makers of light diesel engines for the three wheelers and four wheelers in the world. Over the past several years, the company has been able to invest in technology and bring about a product, which is very efficient, very cost competitive at the right price point for the client. All this have translated into higher volumes for the company. So, basically, it's a play on the emerging hub-and-spoke mode. That is there in the urban landscape wherein for the intra city transport, we are using more of light transport like three wheelers and light four wheelers, while inter city transport more of the heavy commercial vehicle. So, this kind of emergence will definitely be positive for Greaves Cotton. Apart from Bajaj Auto and Bajaj Tempo, it is selling its engine to almost all other three wheeler manufactures. So, it's a strong player in that segment, it's a debt free company, high dividend payout and the return on equity is very high, more than 25%. So, we like this company. Soon the company will also start selling its engines to Tata Motors' new product that is in the 0.5 tonne space, which is a lighter version of the hugely successful Tata Ace model. So, we see good volumes for the company in the coming quarters. The company is quite attractively priced within the sector. Name is greaves Cotton because this was started by Greaves and Cotton
Sector	Engineering
Sub-sector	Manufacturing Agri, Construction, Auto equipment, esp diesel engines
Website	http://www.greavescotton.com/
Positives	Regular dividend payer (1.25% or more(mostly more) returns at current price). Always profitable company – good management (NPM's of 8% can be believed except in years such as FY09 when NPM was 4%. 51% promoter holding with no pledging. LIC, NIC, reliance asset management, templeton, GIC, NIA, etc hold more than 1%.
Negatives	1950 Cr market cap for a company with 1350 Cr FY10 revenue seems high, especially due to 8% NPM which means profit is 118 Cr. This means 16.5 times the earnings at Rs. 400. 52 week low is at 146 which would have meant a 3% dividend yield and a great price for well run company. No great growth expected as FY06 to FY10 revenues have moved from 940 Cr to 1350 Cr.
Peers
News
Price @ blogged	400 (24-Aug-10)