Technology

Banco Products (India) (Banco) is among the leading manufacturers of radiators
and gaskets in the country with five manufacturing units. In July 2010, the
company acquired 51% stake in Lake Cement (a cement manufacturer), a
diversification into unrelated business which led to sharp correction in the stock
price. In May, 2014, the company exited the cement business at ~52% premium
for US$17.7mn and is now expected to use the proceeds for acquisition in auto
component related business in Europe which will further strengthen its foothold in
global auto component market. Additionally, the commercial vehicle (CV) industry
which contributes ~80% to the companys domestic revenue is also witnessing
revival, which poses a huge growth potential for the company. On account of growth potential with revival in CV industry and potential
acquisition plans, we initiate coverage on the company with a Buy
recommendation with a target price of Rs172 on a target PE of 9.0x FY2016E
earnings.

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