What makes investing exciting is that there are multiple ways of making money and there are multiple lenses looking at the same industry. Investor’ investment thesis will depend on through what ‘lens’ investor is critically observing the industry and the best part is – multiple investment theses can be correct as investing is not a zero sum game. Unfortunately this point is lost in many discussions
One of the lens to critically analyse auto ancillary business is Gross Margin profile which many of my colleagues on VP use and I absolutely think it is correct
Although my lens does not consider Gross Margin as the most important factor. The reason for that is the key KPI in auto ancillary business is QCDD – Quality, cost, development and the delivery. In my view gross margin does not capture the ‘delivery’ part of QCDD but EBIDTA margins capture that and therefore rather than starting thesis from Gross Margin, I would take QCDD as the starting point
Suprajit engineering with its presence of plants across – americas, europe, india and china scores very high marks as a partner in a global supply chain in the cable business. And according to my judgement Global presence makes integration in global supply chain lot better than just export heavy global business
This global expansion Suprajit achieved by being the King of low gross margin business like mechanical cables and buying their competitors cheaply across the world. In my judgment this will not be possible for the high gross margin business because that business will always sell for top dollar
Views welcome!
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