Incap

26:50

We visited Incap’s factories in Tumkur, India and examined the operations and production of the three factory units. Antti Viljakainen interviews Murthy Munipalli, Director of Operations India and Sales APAC.

12:17

We visited Incap’s factories in Tumkur, India and examined the operations and production of the three manufacturing units. In Antti Viljakainen’s interview, Incap India’s director of production and testing, Venkatesh T. K.

11:31

We visited Incap’s factories in Tumkur, India, and explored the operations and production of the three local units. CEO Otto Pukk was interviewed by analyst Antti Viljakainen.

This week we visited Incap’s factories in Tumkur, India. Yesterday and today, we familiarized ourselves with the production of all three factory units in Tumkur.

Overall, Incap's Q3 report was disappointing, especially due to a steeper earnings decline in Q3 than we expected. However, we raise our recommendation for Incap to Buy (was Accumulate) and cut the company's target price to EUR 11.00 in line with the revised estimates (was EUR 12.0). We believe the upside of the EV-based valuation, which has fallen to a low level, the approaching earnings growth turnaround we expect despite uncertainties, and the possibility of corporate acquisitions make the expected return on the stock very attractive in both the short and longer term.

We lowered the company's near-term estimates, reflecting the negative profit warning issued by the company earlier this week, though the profit warning risk, which had pressured the risk/reward ratio after the Q1 report, is now off the table. Earnings are expected to decline significantly in H2, primarily due to FX effects, but we believe the upside potential from a low EV-based valuation, the M&A option, and good medium-term earnings growth potential still create an attractive return potential for the share.