HDFC Securities has the following View on the Stock of Yuken India
Yuken India Limited (YIL) was set up in 1976 in technical and financial collaboration with Yuken Kogyo Company Limited, Japan (YKC) for the manufacture of Oil Hydraulic Equipment. YIL is listed on the BSE with 40% of the shares held by YKC and the rest by Financial Institutions, the Indian Promoters (MD Mr. Rangachar, his family and friends), and the Public.
Machine tools industry accounts for ~40% of company sales. Sales made are used as an end product that is added as a part of the final product (like CNC machines etc) and sold further. Large clients include Kenna Metal, Bharat Fritz Werner, Ace Manufacturing, HMT and Lokesh Machineries.
Steel industry accounts for ~25% of company sales. YIL product is sold as capital equipment (semi consumable) and for spare purposes. Also sold as part of Hydraulic systems. Big clients include Gallium Industries, Jindal Steel, Essar Steel and SAIL.
Automobile industry accounts for ~10-15% of company sales. YIL product is sold as capital equipment (semi consumable) and for spares purposes. Large clients include Maruti Suzuki and Honda.
Power accounts for ~20% of company sales. YIL product is sold as capital equipment, usually as part of hydraulic systems. Supplies to thermal, wind and mini-hydro power sectors. Major clients include BHEL, Govind and Enercon.
We believe YIL is valued cheap as it is currently trading at 8.5x its FY10 earnings and 7.0x its expected FY11 earnings. We recommend buying the stock at CMP of Rs. 232.90 and adding on dips in the range of Rs. 198 to Rs. 207 for sequential targets of Rs. 266 and Rs. 299 in the next 2-3 quarters.
