Greaves Cotton Ltd – Kotak Securities

Greaves Cotton is one of the largest makers of light diesel engines in the world. Over the years, the company’s focus on R&D has resulted in an efficient product which is gaining acceptance with OEMs. GCL has been made the sole supplier of engines to Tata Motors’ 4W LCV “Penguin”, which is in the launch phase. The company’s prime client, Piaggio (PVPL), has been a focused player in light transportation and has seen its 3W volumes grow 29% in 9M FY10. We believe higher demand from rural sector and increasing preference of light vehicles for intra-city transportation should drive growth in the 3-4W (sub 1 ton) auto segment. The company’s infrastructure equipment division is expected to turnaround in FY11. We feel GCL is an ideal stock to play the development of light cargo transportation in the country. Valuations at 12x is not demanding. BUY