Company -Sundram Fasteners Limited (19-11-2010)CMP - 66
Target - 85
Time Frame - 6 month
Up Sde Potential - 25%
Flagship company of the US $ 5 billion TVS Group, Sundram Fasteners manufactures automotive and engineering components.
Its product basket comprises of high-tensile fasteners, powder metal components, cold extruded parts, hot forged components, radiator caps,automotive pumps, gear shifters, gears and couplings, hubs and shafts,tappets and iron powder.
The company has manufacturing presence spread across 5 countries including India, China, UK, Malaysia and Germany. In India, 8 facilities are located in Tamil Nadu while Andhra Pradesh, Pondicherry and Uttarakhand have one facility each. All of these operations are ISO 9000, IS 14001 & TS 16949 certified. The Company also has sales and warehousing operations in US.
The company serves all major OEMs, including Fiat, Ford, Maruti Suzuki, Mitsubishi Motors, Ashok Leyland, Toyota Kirloskar, M&M, MAN and Hyundai.
As on 30th September 2010, the company has 21.01 crore outstanding equity shares of Re 1 each, held as under:
Shareholding (%)
Promoter 49.53%
FIIs 0.41%
DIIs 19.16%
Others 30.90%
The Board has declared an interim divided of Rs. 0.55 per share (55%) for FY11 and the share has gone ex-dividend from 16th November 2010.
For FY10, on a standalone basis, the company reported a turnover of Rs. 1,334 crore and EBITDA and EBITDA margin of Rs.170 crore and 12.8% respectively. Almost 25% of standalone sales are on account of exports. FY10 standalone net profit was Rs. 75 crore, with net margin
of 5.6%.
During H1FY11, the company's sales were higher at Rs. 870 crore and the share of exports in sales mix also widened to 26.3%, implying that the company's strategy of introducing new products in the overseas markets has paid-off well, despite the lull period observed in global
auto industry.
In H1 FY11, the EBITDA margin improved by 50 basis points at 13.3%,when EBITDA was Rs. 116 crore. This rise in margins was passed down till the bottom, as net profit for the first half of the year was Rs.53.4 crore with net margin increasing by 50 basis points to 6.1% for H1FY11. Standalone EPS for H1FY11 was Rs. 2.54.
During six months ended 30th September 2010, all the subsidiaries performed better with sales (before adjusting for inter-corporate transfers) increasing 31% to 366 crore vis-�-vis Rs. 279 crore in the corresponding six months last year. All the subsidiaries, combined,also reported a sharp turnaround in H1FY11, where PBT of Rs. 6.2 crore was reported as against net loss of Rs. 23.3 crore, YoY.
Thus, the company is expected to report significantly higher performance in FY11. On a consolidated basis, it is expected to clock a turnover of Rs. 2,100 crore and PAT of Rs. 115 crore, resulting in EPS of over Rs. 5. This translates in a PE multiple of 13 times based on current year earnings.
As on 30th September 2010, the company�s networth (standalone) was Rs.534 crore, while outstanding debt stood at 690 crore.
The domestic commercial vehicle and passenger vehicles market, which accounts for 30% and 15% of the company's sales, respectively, offers higher revenue growth potential. Also, the company has been evolving strategies to continuously improve its market share. Moreover, the TVS Group is getting vastly re-rated by the market. These factors can act as big triggers for the stock price, in the future.
Share at 66, qualifies a safe investment bet, with potential to touch 85 in the next 6 months
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Disclaimer:-This report has been prepared solely for information purposes. Neither the author nor his firm accepts any liability arising out of use of the above information/ article.
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