CMP~90

MCap. Rs cr.: 489

P/E: 9.36

EPS: 9.49

BV: 46.98

Cebbco engages in manufacturing of vehicle bodies for commercial vehicles and wagons for railways. They also do refurbishment of railway wagons and engaged in power sector. The list of their products can be seen at http://www.cebbco.com/docs/products.htm
They are largest player in the fully built vehicle non-passenger sector with 40% share. Their clients include Tata Motors, Ashok Leyland, Minsitry of Defence, Eicher Motors, Man Force Motors. Apart from this there are clients who use them for private fleet like Reliance Industries.
The clients in power include L&T and BHEL.

Tata Capital holds around 11% shares and have a member on board.
New York life which held a substantial stake has exitted completely since the IPO.

They have 4 plants in Jabalpur, 1 in Indore and 1 in Jamshedpur.

Globally FBVs are sold but in India the trend has been that the chassis is sold. This trend is changing in India and the last budget changed tax of chassis to 14% whereas for FBV is 12%, this would be a major impetus for OEMs to convert to FBVs. Currently the demand is 20% for FBVs and remaining from unorganized. The CEBBCO investor presentation indicates that this would be 100% in next 5 years. Quiet a few plants are being set up by foreign plaers in India which is also a good sign.
The capacity is currently 22,000 FBVs which will be expanded to 32,500 in H2 FY13.

They have an order book of Rs. 1000 cr. which seems good.

The IPO proceeds were used to set up the plant for railway division, they got into this as the FBV business is cyclical. They have a trial order of 250 wagons from Braiwhite, a subsidiary of Railways and have delivered 200 wagons in Q1 FY12. The remaining will be fulfilled this quarter. There is an expectation of gettting an order of 250-500 wagons in H2 FY13 and bigger orders in the next few years.

The group is headed by Kailash Gupta and his son in law Ajay Gupta moved in 2005 and seems to be calling shots here. They have been dealers of Tata Motors CVs in MP for quiet a while.

CEBBCO stands to benefit from the TRIFAC policy of the state of Madhya Pradesh. The estimate is Rs. 230 cr for next 7 yrs and around 30 cr. for FY13. They also have stated a dividend poilcy of 20% payout from FY13.

The stock has run up quiet a bit. However it is expected to do a top line growth of 40% CAGR in next 2 yrs and profit of 60% CAGR and hence can be a good pick in falls. Currently trading at PE~10.

Key risks

Depends on commercial vehicles and Tata motors heavily. In Fy11 they had seen issues when Tata motors had suspended orders due to Euro pollution norms issues, this was a one-off event. The sales had fallen and the stock also had fallen to Rs. 30 levels. They have since then made efforts to reduce dependance on Tata Motors.

They earlier seem to have been part of JN group and seem to have moved out of the group (Don't have much info here). And if I undertand correctly one of the companies of JN group also is in the same business. Also there are related party transactions typical in small companies which might be an issue.

M&HCV slowdown expected in FY13. However the increasing preference towards FBVs is expected to take care of this.
Working capital requirement is typically high. Their long term loan is 30 cr. and short term loan 50 cr.

Not much change has happened since I wrote except there is an order from Stone india.

I think these folks should do well next couple of years. This qtr might be muted in comparison to Q1 since there was a 30 cr. order that was completed which will not come in this qtr. If the price drops it would be good to accumulate.

Good proxy for auto, logsitcs sectors.

If they maintain numbers there are many triggers which will be coming in like the capacity expansion, tax benefit from MP govt, maiden dvd at 20% which is already announced.