I believe the next 3-4 years will be pivotal for the company.
In the next 3-4 years, growth should remain 20-25% or more:
- They need production growth to avail of PLI benefits. The company hasn’t mentioned the exact quantum of PLI benefits but they have termed them as “Significant”. Further, these benefits are not yet reflected in the P&L. They will be reflected only in Q1 FY26.
- EVs (In general auto space) should do well in the rate-cut environment; EMIs get cheaper, and people buy cars.
- The fundamentals should further improve in this duration – Margins should expand as their EV revenue mix will expand compared to ICE revenue. Further, growth will create operating leverage benefits improving RoE and RoCE further.
- The company will continue to generate free cash flow during this duration.
- Last point from the price action view → Stock will surpass its Jan 21 high in some days/ months, this will eliminate the past overhang. Because, generally during rebounds, “trapped investors” sell when their price comes, which in turn makes stock price growth difficult.
Risk – PE multiple of 70-75; For such a FCF generating, predictable business, a PE of >50 is easily justified. But, I believe only a few companies can sustain such high PE over the long term.
Hence, if PE correction happens, this is a business to do a downward average in my personal opinion. Because this is a great business to hold forever at right valuations.
Stance – Invested and bullish
| Subscribe To Our Free Newsletter |
