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Showing posts with label AUTO ANCILLARY STOCKS. Show all posts
Showing posts with label AUTO ANCILLARY STOCKS. Show all posts

Friday, September 23, 2016

IGARASHI MOTORS INDIA LTD: ALL GEARED UP !!!

Scrip Code: 517380 IGARASHI
CMP:  Rs. 730.65; Market Cap: Rs. 2,236.40 Cr; 52 Week High/Low: Rs. 759.75/ Rs. 375.00.
Total Shares: 3,06,08,444 shares; Promoters : 2,62,76,684 shares – 85.85 %; Total Public holding : 43,31,760 shares – 14.15 %; Book Value: Rs. 96.19; Face Value: Rs. 10.00; EPS: Rs. 21.89; Dividend: 55.00 %; P/E: 33.35 times; Ind. P/E: 50.61; EV/EBITDA: 17.29 times.
Total Debt: Rs. 44.13 Cr; Enterprise Value: Rs. 2,170.61 Cr.

IGARASHI MOTORS INDIA LIMITED: Incorporated in 1946, and is based in Tamil Nadu, India. Igarashi Motors Ltd started by Eiji Igarashi who established a private company in Kawasaki, for the production and sales of D.C. motors for toys and model ships. It has been developing and manufacturing small D.C. motors, for more than fifty years. In India the company was established in the year 1993 in a joint venture with Crompton Greaves for development, production and sales of DC motors, DC motors with accessory, and assembly service like end cap-case-armature. The company has developing and manufacturing small DC motors for more than fifty years and has done pioneering work in product development, improvement and testing for the creation of new manufacturing technologies. The design-development-technical departments are in Japan, China and India dedicated to providing better technology and realizing the creation of highly efficient small DC motors. Igarashi Motors India Ltd came with a public issue of Rs. 2.77 Cr of Rs. 10 each at Rs. 10 each in 1994 to part finance its 100 % Export oriented Unit to manufacture permanent magnet DC micro motors, the total project cost was Rs. 10 Cr and was listed on 19 May 1995. Till date company has not given any bonus or splits in face value of its shares. Motors produced by Igarashi Motor Sales are designed in accordance with ISO 9002 regulations to ensure quality products with optimal functionality. Before, during, and after production, their motors are subject to intense quality controls and testing methods to ensure reliability & Design FMEA and Process FMEA are extensively used to secure efficiency and dependability. Igarashi products includes -DC Motors: Flat Type Motors, Round Type Motors, High Voltage Motors ; Gear Motors: Planetary Gear motors, Spur Gear motors, High Voltage Motors, Armatures. Igarashi Motors has developed an international presence as a means of providing quality product to companies throughout the world. With sales offices, manufacturing facilities and distribution centers worldwide. During 1997-98, the company has expanded capacity of Rotors by 1.5 million nos there by taking the capacity to 3.5 million nos and then to 6 million nos in 1998-99. The company was certified QS 9000 in November 1998 and the Quality System has been upgraded to conform to the latest edition of QS 9000 with effect from January 2000. During 2002-03 Crompton Greaves Limited have divested their holding in favour of Igarashi Electric Works. Since Igarashi Electric Works (HK) ltd have acquired 30,99,993 equity shares of CG Capital & Investments Ltd, the Board changed the name of the company to Igarashi Motors India Limited. Its subsidiaries worldwide includes: Heng Gang Yat Yue Industrial, Heng Gang Igarashi Electrical Works, Igarashi Motor Sales, LLC USA, Igarashi Motoren Germany, CG Igarashi Motors Ltd India, Zhubai Igarashi Electric Works China, Hanamaki Nippa Industrial Ltd, Igarashi Electric Works Ltd, Yat Yue Industrial Ltd, Igarashi Electric Works Ltd. IGARASHI MOTORS INDIA LTD is locally compared with Minda Corp Ltd, Majestic Auto Ltd, PPAP Automotive Ltd, Motherson Sumi Systems Ltd, REIL Electricals, Remsons Industries, Denso India Pvt Ltd, Talbros Automotive and Globally compared with NGK Spark Plug Corp of Tokyo, Sumitomo Electricals of Tokyo, Panasonic Corp, Nippon Seiki Corp, Riken Corp.

Investment Rationale:
Igarashi Motors India Limited incorporated in 1946, is engaged in the business of auto components for automobiles. The Company offers electric micro motors and motor components. The Company is engaged in the production and export of permanent magnet direct current (DC) motors for automotive sector specifically for passenger cars. The Company's DC motors include SQ-2846, SQ3264, SQ3657, SQ3365, SQ-3655, SQ-2848, SQ-3458, 3657 and 3665. The Company's products' primary application is Electronic Throttle Control (ETC). The Company has produced over 500 million DC motors for usage in actuator application/systems in passenger cars. The Company's holding company is Agile Electric Sub Assembly Private Limited. The Company's ultimate holding company is Igarashi Electric Works Limited. The company specializes in the design and manufacture of small, permanent magnet DC motors and gear motors. The Indian auto industry is one of the largest in the world with an annual production of 23.37 million vehicles in FY 2014-15, following a growth of 8.68 % over the last year. The automobile industry accounts for 7.1 % of the country's gross domestic product (GDP). The Two Wheelers segment with 81 % market share is the leader of the Indian Automobile market owing to a growing middle class and a young population. Moreover, the growing interest of the companies in exploring the rural markets further aided the growth of the sector. The overall Passenger Vehicle (PV) segment has 13 % market share. India is also a prominent auto exporter and has strong export growth expectations for the near future. In FY 2015-16, automobile exports grew by 15 % over the last year. In addition, several initiatives by the Government of India and the major automobile players in the Indian market are expected to make India a leader in the Two Wheeler (2W) and Four Wheeler (4W) market in the world by 2020. The industry produced a total 14.25 million vehicles including PVs, commercial vehicles (CVs), three wheelers (3W) and 2W in April-October 2015 as against 13.83 in April-October 2014, registering a marginal growth of 3.07 % year-on-year. The sales of PVs grew by 8.51 per cent in April-October 2015 over the same period last year. The overall CVs segment registered a growth of 8.02 % in April-October 2015 as compared to same period last year. Medium & Heavy Commercial Vehicles (M&HCVs) registered very strong growth of 32.3 % while sales of Light Commercial Vehicles (LCVs) reduced by 5.24 % during April-October 2015 year-on-year. In April-October 2015, overall automobile exports grew by 5.78 %. PVs, CVs, 3Ws and 2Ws registered growth of 6.34 %, 17.95 %, 18.59 % and 3.22 % respectively in April-October 2015 over April- October 2014. India’s automotive industry is one of the most competitive in the world. The Indian auto-components industry has experienced healthy growth over the last few years. Some of the factors attributable to this include: a buoyant end-user market, improved consumer sentiment and return of adequate liquidity in the financial system. The auto-components industry accounts for almost 7 % of India’s Gross Domestic Product (GDP) and employs as many as 19 million people, both directly and indirectly. A stable government framework, increased purchasing power, large domestic market, and an ever increasing development in infrastructure have made India a favorable destination for investment. The Indian automotive sector has the potential to generate up to US$ 300 billion in annual revenue by 2026, create 65 million additional jobs and contribute over 12 per cent to India’s Gross Domestic Product, as per the Automotive Mission Plan 2016-26 prepared jointly by the Society of Indian Automobile Manufacturers (SIAM) and government. It is expected that the global automotive industry vehicle volume to cross from the current 75mn vehicles per annum to cross 110 mn by 2022, the share of automotive production in Asia was 33 % in 2000 which went upto 50 % in 2012 and is likely to be upwards of 55 % by 2020. Vehicle sales in Europe are expected to remain stagnant between 15 to 18 million annually and the main growth is expected in Asia pacific and to an extent, in Americas. The fixed investments in automotive capacity in Asia pacific is estimated to be 60 % of the total global investment, out of the 110million vehicles estimated for 2022, approximately 90 % is expected to be pure Internal Combustion Engine (ICE) vehicles while the balance 10 % will be a combination of electric vehicles and hybrid electrical vehicles. The Government of India encourages foreign investment in the automobile sector and allows 100% FDI under the automatic route. Some of the major initiatives taken by the Government of India are: Government of India aims to make automobiles manufacturing the main driver of Make in India initiative, as it expects passenger vehicles market to triple to 9.4 million units by 2026, as highlighted in the Auto Mission Plan (AMP) 2016-26. In the Union budget of 2015-16, the Government has announced to provide credit of Rs. 8,54,000 Cr (US$ 127.5 billion) to farmers, which is expected to boost the tractors segment sales. The Government plans to promote eco-friendly cars in the country i.e. CNG based vehicle, hybrid vehicle, and electric vehicle and also made mandatory of 5 % ethanol blending in petrol. The government has formulated a Scheme for Faster Adoption and Manufacturing of Electric and Hybrid Vehicles in India, under the National Electric Mobility Mission 2020 to encourage the progressive induction of reliable, affordable and efficient electric and hybrid vehicles in the country. The Automobile Mission Plan (AMP) for the period 2006-2016, designed by the government is aimed at accelerating and sustaining growth in this sector. Also, the well-established Regulatory Framework under the Ministry of Shipping, Road Transport and Highways, plays a part in providing a boost to this sector. The government initiative and investments and the potential makes the auto mobile sector lucrative and makes the prospectus of the Igarashi Motors even brighter. It is expected that the growth to be driven by numerous factors like strong economic growth; continued population growth; expansion of the middle class; strong rainfall and an increasingly favourable regulatory environment makes Igarashi Motors best choice from this sector.

Outlook and Valuation:
Igarashi Electric Works, Ltd. since its establishment in 1952 has dedicated itself to the development, manufacture and sale of products specially designed to meet the needs of its customers. To maintain full satisfaction, the company has grown and established new manufacturing and sales organizations in USA, Germany, China, India, and Hong Kong, as well as maintaining its continued presence in Japan. The company has developing and manufacturing small DC motors for more than fifty years and has done pioneering work in product development, improvement and testing for the creation of new manufacturing technologies. Motors produced by Igarashi Motor Sales are designed in accordance with ISO 9002 regulations to ensure quality products with optimal functionality. Before, during, and after production, the motors are subject to intense quality controls and testing methods to ensure reliability. Design FMEA and Process FMEA are extensively used to secure efficiency and dependability. Igarashi offers a wide variety of motors in different sizes and shapes. One can select their small and high performance motor from flat type, round type or geared motors. Custom designs and value added components often lead to complete sub-assemblies and assemblies. Igarashi work with their network of suppliers to further facilitate the incorporation of their motor into their product by creating a complete assembly that can readily be adapted to production requirements. Discussions with Key customers indicate that the average number of electric motors per global vehicle will move up from 20 to 25 Electric motors per car to 35 to 40 Electric Motors per car in the next three to four years. Dynamics in development of electric motors for these actuators continue to remain strong. Electric motor performance parameters, specifically related to new technologies resulting in lower weight, smaller volume, lesser current fuel consumption and favourable overall cost. Due to stringency of fuel efficiency and emission norms, electric motors for aforementioned actuators is likely to go up steadily over the next years from the present level of 1 to 2 motors average per global vehicle to 3 to 4 motors average per global vehicle. The key applications, in this space continues to be Electronic Throttle Control valves in engines including air control valves, Exhaust gas recirculation valves, Waste gate actuators and Bypass valves in Turbo chargers & fluid control valves for thermal management applications. The market for these motors is estimated to grow at more than twice the rate of the vehicle growth. On financial side, Igarashi Motors Ltd achieved a turnover of Rs. 125.40 Cr for the 1st quarter of the FY 2016-17 as against Rs. 108.65 Cr in the corresponding quarter of the previous year, an increase of 15.41 %. During the quarter, net profit increased by 21.60 % to Rs. 18.99 Cr from Rs. 15.61 Cr in the corresponding quarter ending of previous year. During the quarter, EBIDTA stood at Rs. 34.47 Cr as against Rs. 30.26 Cr in the corresponding period of the previous year, up by 13.93 %. Profit before tax (PBT) stood at Rs. 28.84 Cr in Q1 FY17 against Rs. 23.98 Cr in the corresponding quarter of the previous year, up by 20.24 %. EPS of the company stood at Rs. 6.20 in Q1 FY17 against Rs. 5.10 in the corresponding quarter of the previous year. Net Sales and PAT of the company are expected to grow at a CAGR of 12 % and 17 % over 2015 to 2018E; respectively. Highest market capitalization among its peers, Igarashi has huge market capitalization of 2094 Crs. Domestic institution are gradually attracting towards the company. Igarashi has very less debt to equity ratio of 0.17 and good interest coverage ratio of 16.75. Continuous increasing positive cash flow from operating activities. Company has very less interest outgo which has further lowered down in last year. Company dividend pay-out has increased by 23.87%.  Igarashi has Operating profit margin of 19.78% for FY15-16. Igarashi has Net profit margin of 14.33% for FY15-16. Company has developed an international presence to provide its quality product and services worldwide. At the current market price of Rs. 730.65, the stock is trading at a PE of 29.81 x FY17E and 26.16 x FY18E respectively. The company can post Earnings per share (EPS) of Rs. 24.51 in FY17E and Rs. 27.92 in FY17E. It is expected that the company’s surplus scenario is likely to continue for the next three years keeping its growth story in the coming quarters also.

KEY FINANCIALSFY15FY16FY17EFY18E
SALES ( Crs) 385.07444.98507.28573.22
NET PROFIT (₹ Cr)48.9563.6475.0385.47
EPS () 15.9920.7924.5127.92
PE (x)45.0934.6929.4225.83
P/BV (x)8.807.506.135.22
EV/EBITDA (x)22.4417.3414.9213.17
ROE (%) 19.51 21.6220.8220.21
ROCE (%)39.2944.2942.0340.22

As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % on every purchase(Why Strict stop loss of 8 % ?) -  Click Here

*As the author of this blog I disclose that I do not hold  IGARASHI MOTORS INDIA LTD in my of the portfolios.

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Disclaimer
This is a personal blog and presents entirely personal views on stock market. Any statement made in this blog is merely an expression of my personal opinion. These informations are sourced from publicly available data. By using/reading this blog you agree to (i) not to take any investment decision or any other important decisions based on any information, opinion, suggestion, expressions or experience mentioned or presented in this blog (ii) Any investment decisions taken if any would be his/hers sole responsibility. (iii) the author of this blog is not responsible. 


As a Disclosures I Confirm that : 
I confirm that I shall not deal or trade in securities mentioned in this article within thirty days before and five days after the publication of this article. I also confirm that I will not deal or trade directly or indirectly in securities mentioned in this article in a manner contrary to the ideas put forth in the article. I have not received any financial compensation for writing this article.
 

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Saturday, September 3, 2016

INDIA NIPPON ELECTRICALS LTD : SLOW BUT STEADY !!

Scrip Code: 532240 INDNIPPON
CMP:  Rs. 390.50; Market Cap: Rs. 441.68 Cr; 52 Week High/Low: Rs. 435.00/ Rs. 315.00.
Total Shares: 1,13,10,712 shares; Promoters : 75,09,166 shares –66.36 %; Total Public holding : 38,01,546 shares –33.64 %; Book Value: Rs. 207.63; Face Value: Rs. 10.00; EPS: Rs. 23.82; Dividend: 90.00 %; P/E: 16.62 times; Ind. P/E: 55.23; EV/EBITDA: 9.86 times.
Total Debt: ZERO; Enterprise Value: Rs. 437.67 Cr.

INDIA NIPPON ELECTRICALS LIMITED: Incorporated in 1984, and converted into a joint venture in 1986 between Lucas Indian Service Ltd, a wholly-owned subsidiary of Lucas-TVS Ltd and Kokusan Denki Co. Ltd, Japan - a group company of Hitachi Japan. The company came out with an IPO on September 1986 offering 49,50,000 equity shares of Rs. 10 each. The company has not given any splits in face value of its shares. The company gave its first bonus in May 1994 in ratio of 1 bonus for every 2 held,  on December 1998 in ratio of 8 bonus for every 5 held, in October 2002 in ratio of 7 bonus for every 10 held and last bonus was announced in August 2011 in ratio 2 bonus for every five held. India Nippon Electricals Ltd is manufactures Electronic Ignition Systems for two-wheelers, three wheelers and portable engines. Over the years the company has enlarged its customer base and now supplies to most of the manufacturers of two-wheelers, three wheelers and gensets. INEL makes the entire range of 2/3 wheelers, digital and analog ignition products. The company mainly deals with the ignition units, coils, regulators, flywheel magnetos, capacitor discharge, etc. Its products include AC Generator, Capacitor Discharge Ignition & Transistor Ignition Units, Ignition coil Units, Integral Units (Combined CDI & Ignition Coil), Regulator / Rectifier Units. The company obtain certificates of recognition from BVQI for ISO 9001 in the year 1998, QS 9000 in the year 2001 and ISO 14001 in the year 2002. The company's manufacturing unit is at Hosur- Thali Road Uliveeranapalli Krishna giri District Tamil Nadu India, second one at Madukarai Road, Nettapakkam Commune Kariamanickam Village Pondicherry and third at Rewari Masani Village Rewari Haryana State India. It also has a wholly owned subsidiary with Lucas TVS Ltd and Kokusan Denki Company Limited, a member of Hitachi, Japan. And an investment arm IN Investments Ltd and helds all the 63,010 equity shares making it 100 % subsidiary of the company. INDIA NIPPON ELECTRICALS LTD is locally compared with Denso India Ltd, Minda Industries, Majestic Auto Ltd, Igarashi Motors, Remsons Industries, PPAP Automotive Ltd, Motherson Sumi Systems, REIL Electricals, Lumax Industries and globally compared with Delphi Automotive of UK, BorgWarner of USA, Federal Mogul Corp of USA, Denso Corp of Japan, Robert Bosch GmbH of Germany, SEM of Sweden, Mitsubishi Electric Corporation of Japan.      

Investment Rationale:
India Nippon Electricals Limited (INEL) was incorporated in 1984. The company is into manufacturing of electronic ignition systems, auto components and other related products for two wheelers, three- wheelers and portable gensets. Offers wide range of products INEL offers varied range of products to serve 2/3 wheelers, mopeds and portable engines effectively. Its products are used in different areas such as power generation, power management, ignition management, automotive electronics and test kits. The company manufactures rotors, stators, capacitor discharge ignition and transistor ignition units, ignition coil and control units, integral units such as combined capacitor discharge ignition and ignition coil units, regulators and rectifiers. Strong client base INEL is one of established players in the auto ancillary industry. It operates in both domestic and international markets. It has strong client base which includes clients like- TVS Motor, Hero Honda Motor, Honda Motorcycle and scooter, Bajaj Auto, Royal Enfield, LML, Lombardini India, Piaggio India, Honda SIEL Power Products, Birla Power Solutions, Kokusan Denki and others. INEL has successfully demonstrated to the two wheeler industry its ability to adapt to the changing business and technological needs of customers in the areas of quality and customer service. India’s automotive industry is one of the most competitive in the world. Leading auto maker expects Indian passenger car market to reach four million units by 2020, up from 1.97 million units in 2014-15. The Indian automotive sector has the potential to generate up to US$ 300 billion in annual revenue by 2026, create 65 million additional jobs and contribute over 12 per cent to India’s Gross Domestic Product, as per the Automotive Mission Plan 2016-26 prepared jointly by the Society of Indian Automobile Manufacturers (SIAM) and government. The Indian auto industry is one of the largest in the world with an annual production of 2.33 Cr vehicles in FY 2015-16, following a growth of 8.68 % over the last year. The Two Wheelers segment with 81 % market share is the leader of the Indian Automobile market owing to a growing middle class and a young population. Moreover, the growing interest of the companies in exploring the rural markets further aided the growth of the sector. The overall Passenger Vehicle (PV) segment has 13 % market share. India is also a prominent auto exporter and has strong export growth expectations for the near future. In FY 2015-16, automobile exports grew by 15 % over the last year. In addition, several initiatives by the Government of India and the major automobile players in the Indian market are expected to make India a leader in the Two Wheeler (2W) and Four Wheeler (4W) market in the world by 2020. The industry produced a total 1.42 Cr vehicles including PVs, commercial vehicles (CVs), three wheelers (3W) and 2W in April-October 2015 as against 13.83 in April-October 2014, registering a marginal growth of 3.07 % year-on-year. The sales of PVs grew by 8.51 % in April-October 2015 over the same period last year. The overall CVs segment registered a growth of 8.02 % in April-October 2015 as compared to same period last year. Medium & Heavy Commercial Vehicles (M&HCVs) registered very strong growth of 32.3 % while sales of Light Commercial Vehicles (LCVs) reduced by 5.24 % during April-October 2015 year-on-year. In April-October 2015, overall automobile exports grew by 5.78 %. PVs, CVs, 3Ws and 2Ws registered growth of 6.34 %, 17.95 %, 18.59 % and 3.22 % respectively in April-October 2015 over April- October 2014. During 2015-16, the two three wheeler industry grew 2 % and India Nippon Electrical sales posted a growth of 4 % over its previous year despite difficult market conditions. India Nippon achieved a 54 % growth in export business and the direct sales to aftermarket recorded a growth of around 36 % with the help of expanding the dealer network and product range. The company have secured business for EGR controller for small diesel engines; company will work closely with customer to meet BS IV emission norms. The company is jointly developing other technology oriented products like ECU for Electronic Fuel Injection (EFI), Integrated starter Generator (ISG) for two wheeler and off road engines with its technical partners. ISG & EFI are two critical new technologies that will be disruptive to the industry and with constant focus on R&D the engineers along with technical partners are building newer capabilities for the future. The company has planned major investment which will be fruitful in next two years. Great R&D facility and product line-up along with the strong clientele, India Nippon looks promising.  

Outlook and Valuation:
Incorporated in 1984, INEL was converted into a joint venture in 1986 between Lucas India Services Ltd ( a wholly owned subsidiary of Lucas- TVS Ltd) and Kokusan Denki Co. Ltd, Japan ( a group company of Hitachi Japan) to manufacture electronic ignition systems for two-wheelers, three wheelers and portable engines. In 1986, the company established its first manufacturing plant in Hosur at Tamil Nadu and started production to supply to TVS Motor Company for motor cycles. INEL offers wide range of products which include flywheel magnetos, capacitor discharge ignition units, ignition coils and others. Its manufacturing facilities are located in Hosur, Puducherry and Rewari. The company serves to domestic and international markets with a subsidiary viz- P T Automotive Systems Indonesia. The Indian auto component industry expects to grow by over four-fold to US$ 113 billion by 2020, as per the Automotive Component Manufacturers' Association (ACMA). The total passenger car production in the country will jump four times to reach 9 million cars in the next ten years.  Although a major chunk of this will come from the fast growing domestic market, exports are likely to form around 35 % of the total market by 2020. India would be among the top-five vehicle producing countries in the world by 2020. The 40 % of the auto component industry is dominated by body and structural products, 20 % by engines and exhaust, and 10 % each by suspension and braking parts, transmission and steering parts, electronics and electrical and interiors. By 2017, body and structural will account for 35 % of the auto component industry, engines and exhaust 20 %, suspension and braking parts, transmission and steering parts and electronics and electrical will account for 13 % each and interiors 9 %. India is turning out to be an attractive destination as a global outsourcing hub and manufacturing base for original equipment manufacturers (OEMs), especially after the global economic downturn. With the finalisation of the Automotive Mission Plan (AMP) India is expected to become a preferred destination for design and manufacture of automobile. The plan envisaged an investment of US$ 40 billion and provided a road map to help transform India into a global automobile player. The AMP proposed a 25-point plan that included making India a manufacturing and export hub for small cars, multi-utility vehicles, two and three-wheelers, tractors and components. The Government has taken many initiatives to promote foreign direct investment (FDI) in this industry like Automatic approval for foreign equity investment up to 100 % of manufacture of automobiles and components is permitted, the automobile industry is de-licensed, and Import of components is freely allowed. The Ministry of Heavy Industries and Public Enterprises has envisaged the Automotive Mission Plan 2006-2016 to promote growth in the sector. It targets to Increase turnover to US$ 122 billion–US$ 159 billion by 2016 from US$ 34 billion in 2006, increase export revenue to US$ 35 billion by 2016 Provide employment to additional 25 million people by 2016. India Nippon Electricals ltd being a leader in manufacturing of Electronic Ignition Systems for two-wheelers, three wheelers and portable engines, will surely be benefitted by the increased investments in auto sector and by increase export potentials. On the financial side INEL posted good numbers. Its June 2016 net Revenue came in at Rs. 84 Cr as against Rs. 78.33 Cr YoY. It posted total expenses of Rs. 76.83 Cr as against Rs. 71.77 Cr YoY. The company posted Net Profit of Rs. 6.12 Cr as against Rs. 6.11 YoY. India Nippon is a very small company with good financials and has strong cash flow generating capacity; the company has been able to keep its debt to equity lower and also been able to expand through internal accruals. India Nippon Electricals ltd is debt free company and can remain debt free due to its huge cash flow. At the current market price of Rs. 90.50, the stock is trading at a PE of 14.04 x FY17E and 13.01 x FY18E respectively. The company can post Earnings per share (EPS) of Rs. 27.75 in FY17E and Rs. 30.00 in FY18E. It is expected that the company’s surplus scenario is likely to continue for the next three years keeping its growth story in the coming quarters also . 

KEY FINANCIALSFY15FY16 FY17EFY18E
SALES ( Crs) 327.73339.65368.90400.25
NET PROFIT (₹ Cr)22.6626.9331.3534.00
EPS () 20.0523.8327.7530.00
PE (x)17.5714.4613.2512.25
P/BV (x)1.791.621.481.80
EV/EBITDA (x)8.437.146.055.70
ROE (%) 9.30 10.2211.1911.62
ROCE (%)17.7221.4320.0820.50

As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % on every purchase(Why Strict stop loss of 8 % ?) -  Click Here

*As the author of this blog I disclose that I do not hold INDIA NIPPON ELECTRICALS LTD in my any of the portfolios.

**Dear Reader Friends, if you enjoyed this article then please do share it with your friends & colleagues through Facebook and Twitter, also do drop in your valubale thoughts in comment box...
So, grab a fresh hot cup of coffee, turn on your net & browse on to www.bhavikkshah.blogspot.in & take out few minutes to get to know the most interesting world of investment... Till then HAPPY INVESTING, don't forget to Share !! 

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-------------------------------------------------------------------------------------------
Disclaimer
This is a personal blog and presents entirely personal views on stock market. Any statement made in this blog is merely an expression of my personal opinion. These informations are sourced from publicly available data. By using/reading this blog you agree to (i) not to take any investment decision or any other important decisions based on any information, opinion, suggestion, expressions or experience mentioned or presented in this blog (ii) Any investment decisions taken if any would be his/hers sole responsibility. (iii) the author of this blog is not responsible. 


As a Disclosures I Confirm that : 
I confirm that I shall not deal or trade in securities mentioned in this article within thirty days before and five days after the publication of this article. I also confirm that I will not deal or trade directly or indirectly in securities mentioned in this article in a manner contrary to the ideas put forth in the article. I have not received any financial compensation for writing this article.
 

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READ HERE TO KNOW MORE ON LONG TERM INVESTING - CLICK HERE

VIEW THE POWER POINT PRESENTATION ON

Tuesday, December 23, 2014

LUMAX AUTO TECHNOLOGIES LTD: SHIFTING ITS GEARS !!!


Scrip Code: 532796 LUMAXTECH
CMP:  Rs. 288.40; Market Cap: Rs. 392.32 Cr; 52 Week High/Low: Rs. 322.75 / Rs. 90.90.
Total Shares: 1,35,57,327 shares; Promoters : 75,89,146 shares – 55.67 %; Total Public holding : 59,68,181 shares – 44.02 %; Book Value: Rs. 75.83; Face Value: Rs. 10.00; EPS: Rs. 24.84; Dividend: 15.00 %; P/E: 11.61 times; Ind. P/E: 14.94; EV/EBITDA: 5.83.
Total Debt: Rs. 38.79 Cr; Enterprise Value: Rs. 417.95 Cr.

LUMAX AUTO TECHNOLOGIES LIMITED: Lumax Auto Technologies Limited was founded in 1981 and is based in Pune, India. The company was formerly known as Dhanesh Auto Electricals Limited and changed its name to Lumax Auto Technologies Limited in 2006. It manufactures and sells automotive parts for two wheeler and three wheeler industry in India. Lumax Auto Technologies Ltd came with an IPO in December 2006 offering 30.12 lakh equity shares of Rs. 10 each for Rs. 75 per share raising Rs. 22.60 Cr. The object of offer for sale was to part finance the project’s cost of Rs. 50.2 crore and for other general corporate purposes. The company primarily offers two wheeler chassis; exhaust systems and mufflers, and silencers; petrol tanks; sheet metal and tubular welded products, such as handle bar assemblies, side stands, main stands, footrest assemblies, fork assemblies, and number plates; gear shift levers; parking brakes; adjustor motors; and PCBs, as well as auto lightings. It is also involved in the trading of automotive parts. Lumax Auto Technologies Ltd has 6 manufacturing facilities in India, which are strategically located in the automotive industrial belt in Maharashtra. It has also has a setup in Himachal Pradesh. Lumax Auto’s other manufacturing units are located at Bhosai, Chinchawad, Chakan, Pantnagar in Uttaranchal and Waluj in Maharashtra. Company’s subsidiaries include Lumax DK Auto Industries Limited. LDK, The Gear Shifter division (including research and development facilities) of LDK has been demerged from the LDK and transferred to LMAT w.e.f. October 01, 2013. Recently the company has sold some stake of LMAT to Mannoh Industrial Co, Ltd, Japan. In order to strengthen its foothold in the seat frame business, the Company has entered into a Joint Venture Agreement with Gill-Austem LLC as new JV Company - Lumax Gill-Austem Auto Technologies Private Limited (LGAT) was incorporated during the year. Another JV, Lumax Cornagiia Auto Tech (LCAT) is supplying Air Intake System (AIS) to leading automobile manufactures in India viz. TATA, FIAT, VOLKSWAGEN, SKODA & General Motors. Lumax Auto Technologies Limited is locally compared with Amtek Auto Ltd, Balkrishna Industries, Bharat Forge LTd, Munjal Auto Ind Ltd, Suprajit Engineering Ltd, Motherson Sumi Systems, Swaraj Engines Ltd, Richo Auto and globally compared with Bosch Ltd of USA, Cub Elecparts Inc of Taiwan, Depo Auto Parts Industrial Co. Ltd of Taiwan, Toyota Industries Corporation of Japan, ARB Corp Ltd of Australia, Stanley Elecctric Co of Japan, Sumitomo Electric Ind Ltd from Japan, Sangsin Brake Co. ltd of South Korea, Denso Co of Japan, Metair Investments Ltd Johannesburg, AD Plastik d.d of Africa, DaNang Rubber JSC of Middle East, Phuoc Hoa Rubber JSC , Saph,  Hyundai Wai Corp of Korea, Hi-lex Corp of Japan.

Investment Rationale:
Lumax Auto Technologies Ltd is a part of the DK Jain Group of companies which has carved its strong position in automotive parts and is the market leader in Design, Testing and Manufacturing of Parking Brakes & Gear Shift with a strong presence in both passenger cars as well as in the commercial vehicle segments. In order to fully exploit the opportunity in exports market and to give speed to its Gear Shift lever business, Lumax Auto Technologies incorporated its 100 % wholly owned subsidiary, Lumax Mannoh Allied Technologies Limited (LMAT) on July 22, 2013. Lumax is the leader in automotive lighting systems and has a technical and financial collaboration with Stanley Electric Co (Stanley) of Japan. Lumax, primarily, was in the business of automotive lighting systems which now accounts only 30 % of its standalone revenues and 19 % of consolidated revenues. The company is market leader in Designing, Testing and Manufacturing of Parking Brakes & Gear Shift levers in India since past 10 years with an overall domestic market share of more than 60 % with a strong presence in both passenger cars & commercial vehicle segments. Also the company is a major supplier of chasis, exhaust systems and petrol tanks for two wheelers. Further, Lumax Auto has now diversified into non-automotive segments such as infrastructural lighting. The company has ten modern manufacturing plants in India. Lumax Auto has large and reputed customers which include Bajaj Auto, Honda Motorcycle & Scooters India (HMSI), Piaggio, Lumax Industries, Maruti Suzuki, Tata Motors, Eicher Motors, Force Motors, and Fiat etc. in the commuter segment. Company’s five plants are located in Pune, two plants in Aurangabad, in Maharashtra, one in Manesar Gurgaon, in Haryana, one plant in Ambala in Himachal Pradesh and one in Narsapura, Karnataka. All these facilities are strategically located in the automotive industrial belt. The manufacturing facility at Narsapur, Hubli, Karnataka has commenced supplying plastic moulded parts to Honda Motorcycle & Scooters India (HMSI) last year which helped them to post flat growth in FY14 despite weak automotive sales during the year. With HMSI growing rapidly and capturing significant market share the growth of Lumax is likely to remain intact in the coming years. Lumax has various tie-ups like for its exhaust systems the company has a tieup with Cornaglia group of Italy which is a major supplier to Fiat. For its parking brakes and gear shift levers business, LATL through its subsidiary Lumax DK Auto Industries has formed a JV with M/s Mannoh Industrial Co Ltd, Japan to manufacture complete gear shift lever systems for Manual, AMT & CVT transmissions in India. These tieups ensure best of the technologies for LATLs products. The domestic automobile industry has increased at a CAGR of 10.6 % from 2003-2008. The vast domestic market is attracting more number of foreign automobile manufacturers such as Ford, General Motors, Honda and Toyota as they look for alternative markets to counter the sluggish growth in US market and to counter the overcapacity in other global markets. Global manufacturers such as Suzuki and Hyundai have adopted India as their global production base for small cars. The Indian auto component industry has been growing at a CAGR 16 % p.a. for past seven years and is expected to have 3 % share in global market by 2015-16. Exports of auto components grew at the rate of 30 % during the last five years. As per estimates provided by Automobile Components Manufacturers Association of India (ACMA), auto component exports are expected to reach US$ 20-22 billion by 2015-16. The entry of foreign vehicle manufacturers in India & with the growing cost pressures in the global automotive market gives India a huge exports potential. India has low penetration of car per 1000 person; India has 7-8 cars per 1000 person and India will have a growing middle class from 5 Cr to 55 Cr by 2025 and so the prospects of the Auto Industry in India looks good and eventually with better infrastructure development which are planned out to be around $50,000 Cr in the next 5-6 years will also be the key growth drivers for the auto component industry in India.

Outlook and Valuation:

Lumax Auto Technologies (LATL) is a supplier of key components to the two wheeler and the passenger car industries. It has created its strong position in automotive parts like Sheet Metal parts, Fabricated Assemblies, Tubular Parts for two wheeler and three wheeler industry. Its key customers include Bajaj Auto, Piaggio, Honda Motorcycles and Scooters, Maruti Suzuki, Toyota and Tata Motors. Strong tie-ups with these OEMs will entail large business opportunities in the next few years. For Lumax Auto Technologies its Head lamp contributes 15 % to its standalone revenues; Tail Lamp contributes 3.69 % to its standalone revenues; Frame Chassis contributes 9.95 % to its standalone revenues; Adjustor Motor contributes 6.15 % to its standalone revenues; Gear Shift Assembly/Parking Brake/Nob contributes 32.65 % to its standalone revenues; Air Intake Systems (AIS) contributes 3.32 % to its standalone revenue. The company had shown poor growth in FY14 due to slowdown in Automotive Industry.  But it is expected that there could be a strong revival in automotive industry on the back of overall macro-economic recovery, cut in fuel prices and peak out in interest rates. The auto industry showed decent performance in YTD FY15 and expect it will continue in coming years on the back of revival in economy. Lumax Auto Technologies can have a top line increase by 13 % in FY15e and 15 % in FY16e on the back of strong volume growth driven by new launches and favourable economic conditions. With strong volume growth expectations in automotive industry the next couple of years, it can have a robust margin expansion. On performance side its Total sales for the H1FY15 rose by 13.18 % to Rs. 420 Cr from Rs. 370 Cr in H1FY14. During H1FY15, the consolidated net profit jumped to Rs. 32 Cr against Rs. 14.5 Cr in the corresponding quarter of previous year, an increase of 121 %. EBITDA for the H1FY15 was Rs. 34.54 Cr as against Rs. 27.8 Cr in H1FY14, growth of 24.24 %. EPS of the company stood at Rs. 23.49 a share during the period, registering at 120.8 % increase over previous year period. However, during H1FY15, there was an exceptional item of Rs. 21.36 Cr in Q1FY15 as profit on sale of shares in Lumax Mannoh Allied Technologies Limited (LMAT) to Mannoh Industrial Co, Ltd, Japan in terms of Joint Venture and Share Purchase and Shareholders' agreement. With comfortable D/E of 0.2x and robust RoCE of 17 %+, the stock has to catch up in terms of valuations of its auto ancillary peers which have seen strong rally in the recent past. It is expected that with the company’s surplus scenario is likely to continue for the next three years & will keep its growth story intact for the coming quarters also. 

KEY FINANCIALSFY13FY14FY15EFY16E
SALES ( Crs)766.30762.80861.90991.20
NET PROFIT (₹ Cr)41.1130.2034.8048.00
EPS ()30.1022.2025.5035.20
PE (x)9.3012.6010.907.90
P/BV (x)1.801.701.501.30
EV/EBITDA (x)4.004.205.904.30
ROE (%)19.4013.4013.8016.40
ROCE (%)23.9016.8017.4020.80

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