Thursday, April 06, 2006

Munjal Auto

The consistency of growth in sales and profit numbers of Munjal Auto is truly remarkable. The sales / sales growth over LY and profit / profit growth over LY is listed below -
2002 : Sales - 105.63 crs (49.4%); Profit - 11.97 crs (148.0%)
2003 : Sales - 126.61 crs (19.8%); Profit - 13.15 crs (9.80%)
2004: Sales - 159.13 crs (25.68%); Profit - 19.68 crs (49.6%)
2005: Sales - 246.10 crs (54.65%); Profit - 25.98 crs (32.01%)

I estimate the FY2006 numbers on the sales and profit front to close at -
2006: Sales - 375.00 crs (52.37%); Profit - 34.00 crs (30.86%)

Some other important stats about the company -

a) The fwdPE of the scrip is 14.49, which though is not the lowest in it league .. is however among the better one. (I ran a massive filter on some 250+ auto ancillary companies for a minimum of 100 crs sales, profits of atleast 20 crs a year, qtr profits of atleast 6 crs ..... Munjal Auto came a #4 after Pricol, Subros and Amtek India ... I have put the entire list in the comments section)

b) At a dividend of rupees 4.00 for a 10 rupee share, the yield comes to only 1.63%. However, it is estimated that the payout for this yr would gross closer to 5.50 rupees.

c) The NCAV of the scrip is negative 11.52 due to the use of debt, which I feel is never a bad strategy as long as there is enough money to service the debt.

Although Munjal Auto's future is closely linked to that of it's more illustrious customer, Hero Honda Motors Ltd. and to the motorcycle industry per-se - I find the future of the company in good hands. At rupees 245.00, the stock may be a bit higher than the price I might want it at but I am comfortable in looking at a small investment and jacking up if the price diminishes in the short run.

18 Comments:

Blogger Shankar said...

The auto ancillary stocks on the basis of P/E sorting (from low to high) are -
1. PRICOL
2. Subros
3. Amtek India
4. Munjal Auto Inds
5. Goetze (India)
6. Exide Inds.
7. M I C O
8. Rico Auto Inds
9. Automotive Axles
10. Bosch Chassis
11. Sundaram Clayton
12. Amtek Auto
13. Motherson Sumi

9:52 PM  
Blogger Shankar said...

Another perspective -

If I assume that Munjal Auto will give me a growth rate which is half of this yr's growth in sales and corresponding profit (there is a 0.98 correlation btw profit and sales) ... the FY2007 numbers should be around -
Sales : 468.75 crs
Profits : 41.73 crs

This brings the P/E to 11.87. For this, HHML should be able to display a growth of 9% (correl of 0.96) which is truly on the cards.

Warm Rgds
Shankar

10:02 PM  
Blogger Amol said...

Shankar,
I have put some comments on NCPL in your 'GNFC Ltd' Thread.
-Amol.

11:58 AM  
Anonymous Anonymous said...

markets are on the verge of a crash.......

3:53 PM  
Anonymous Anonymous said...

Dude, Infosys seems to be considering a stock bonus issue. In that case, it will make a great buy right after the split. Have you tracked Infy?

Rgds,
Sai

8:06 PM  
Anonymous Anonymous said...

Thanks for your Analysis Shankar.
Since you have done the fundamentals. I did some more technical analysis on this scrip, and came out with following study.

1) It is on the verge of breaking its 20 Day average close of 237.73. It closed at 238.10 on 7th April.

2) If this level is breached, the stock will plummet to find Support levels. Which lie at 232, 229, 224 and 216 (+/- 10%).

3) If this not breached, then we can see the scrip facing resistance at 252, 256, 260, 268 (+/- 10%), which can become targets for investors.

4) Hence, if the stock doesnt fall below its 20 day average, it will be a buy signal, with a Stop Loss at 232 (depends on individual's risk capacity).

What do you say for this analysis?

Cheers
Gaurav

6:06 AM  
Blogger Ravi Purohit said...

Hi Shankar,

Did you have a look at Subros Ltd. The company is the largest car air conditioning system manufacturer and supplier in India. I think it has around 40-50 per cent marker share. Primary customers are Maruti Udyog and Tata Motors. Suzuki and Denso corporation hold a 13 per cent stake each in Subros Ltd. Like u said trading at a very modest P/E, has a reasonable yield, and balance sheet is pretty strong too. the only problem has been growth...which has been difficult to comeby. I fail to understand that bit though....given the fact both Maruti and Tata Motors are doing well. Do take a look at it...it does offer some value at current levels.

--
Regards,
Ravi Purohit.

11:04 AM  
Anonymous ajai said...

Sir,

Today the markets witnessed a steep downfall.I believe you are the right most person to tell that whether we should move out of the stocks or we should stick to them.On your recommendation i have accumulated the following stocks:
1.IVRCL at 294
2.Indian hotels at 1365
3.Gateway dispatriks at 252
4.Infosys at 3211

and one more i have which u didn't suggested:
5. GE sHIPPINg at 264

sir it will be very kind of you if you can tell the long term prospects of these shares.And in case if you feel that one should move out below a certain stop loss then please do tell us your valued inputs.

Looking forward for your guidance.

regards,
Ajai.

11:06 AM  
Anonymous Anonymous said...

@Ajai,

Dont worry about the fall of the market if you are a long term investor. Accumulate the stocks at dip. Over a period of time, your stocks will pay you.

Btw, the markets had a rally of 9 trading sessions, and it was better that they get corrected. As per ICICI experts, since Sep last year, markets kave been witnessing rally of 8 days foloowed by 2 days of correction. So no concern there.

Most important, the market witnessed a fall, after the rumour that 11 FIIs have been banned by SEBI... markets picked up after SEBI denied this.

Cheers
Gaurav

2:52 PM  
Blogger Shankar said...

Hi Gaurav,

Technical analysis is not my game. Am down to the pits here.

Hi Ravi,

Meandering markets, eh? Two reasons why I didnt buy Subros earlier -
a) Im sure u've noticed the reduction in sales qtr-on-qtr
b) it doesnt ascribe to my 10-crs-a-quarter rule.

The Maruti-and-TataMotors-are-my-customers paradowx is appaling. No answers to this. (couldnt find the pdf on management discussion .. that should hv helped). Its one of those questions that shareholders love to ask at AGMs.

Warm Rgds
Shankar

7:07 PM  
Blogger Shankar said...

Hi Ajai,

OK, when did I recommend IVRCL, Indian hotels, Gateway dispatriks, Infosys, GE Shipping? I think you have confused me with someone else.

Chalo koi baat nai. On the stoploss part, keep 10% down for all these stocks except Infosys.

I'll agree with Gaurav on the equity market movement at 11k levels. The idea going forward will be to have "fundamentally good" stocks - stocks which are profitable, at low P/E, have decent volumes and good growth prospects.

Regards
Shankar

7:14 PM  
Blogger KS said...

Shankar,
Thats a good analysis of Munjal Auto. Although i dont track the auto sector (becoz i dont understand it :-) ) i am able to appreciate your fundamental analysis. Fundamentally, i try look at either low P/E stocks ( make note that many MFs are selling schemes in the contra these day) or turnaround stories. Let me know if you have come across any.

cheers,
-Kiran

9:16 PM  
Blogger Shankar said...

Hi KS,

Paramount Communications seems to be a good turnaround story. The sales have been improving by 100% Q-on-Q. The stock price has been hitting highs every week now. The fwdPE of the stock is 11.8.

Warm Rgds
Shankar

4:03 PM  
Blogger sunil kumar said...

Hi,
I come across a website with latest technical & fundamental research reports from many (sharekhan, motilal, MFs, Morgan Stanlay etc) at one place. The link is : http://www.dreamgains.com/reports.html. I hope all will get benefit from this.
regards,
Sunil Kumar

4:43 PM  
Blogger Ravi Purohit said...

Hi Shankar,

Finally some value being recognised by the market. Subros up 14% ;-)

--
Ravi.

3:15 PM  
Blogger Shankar said...

Congrats on Subros, Ravi

Warm Rgds
Shankar

11:46 PM  
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