In his article in ET, Rajesh Mascarenhas has pointed out that domestic mutual funds have bought shares of lesser-known companies such as Atul Auto, Deccan Cements, Mayur Uniquoters, Rane Holdings, Shakti Pumps and TRF, which are tracked by very few analysts. He has spoken to leading experts to understand the reasons for the same.
Atul Auto CMP: Rs 554.60
Birla Mutual Fund bought 5 lakh shares
Reason: Atul Auto, a three-wheeler vehicle maker in the cargo segment, has been re-rated since September 2013. The stock, which has risen over 267% so far this year, is trading at 31 times one-year trailing earnings. Despite the surge, Atul Auto shares still have some steam left in them thanks to the better return ratios than some of its large-cap peers, said analysts. “If its entry into metros and export markets proves successful, it could jump into the next growth phase much ahead of the industry,” Rohan Korde, analyst, Anand Rathi is quoted as saying.
Mayur Uniquoters CMP: Rs 430
DSP BlackRock Mutual Fund bought 2.50 lakh shares
Reason: A manufacturer of raw materials used in automobile seat covers, footwear, furnishing and upholstery, Mayur Uniquoters has gained 154% since January. The stock is trading at a price-to-earnings multiple of 16.5 times 2016-17 estimated earnings and 21.7 times 2015-16 estimated earnings. “Earnings CAGR (compounded annual growth rate) of over 25% over the next three years with a healthy return ratio adds to our confidence in the company” Sudeep Anand, analyst, IDBI Capital was quoted as saying.
Shakti Pumps (India) CMP: Rs 205.10
Franklin Templeton Mutual bought 3.35 lakh shares
Reason: It is one of the largest players in India’s fragmented Rs 2,300-crore agriculture pumps market. “While exports should grow at a decent clip, we expect domestic revenue growth to pick up driven by the anticipated shift in market share,” Abhinav Sharma of HDFC Securities was quoted as saying. He added that “At 13.7 times trailing 12 months EPS, we believe the stock is reasonably valued, given the huge opportunity available.”
Deccan Cements CMP: Rs 369.30
UTI Mutual Fund bought 1.5 lakh shares
Reason: The share has risen about 130% so far in 2014 on hopes the creation of the new state of Telangana will lead to new infrastructure projects, boosting demand for cement. The Hyderabad-based company has reduced its debt in the last four years. Its debtto-equity ratio has dropped from 1.93 times in 2009-10 to 0.89 times in 2013-14. A healthy balance sheet will boost Deccan Cements’ growth in a robust economic environment, Ashika Stock Broking was quoted as saying.
Rane Holding CMP: Rs 677.50
Sundaram Mutual Fund bought 1.86 lakh shares
Reason: A holding entity of Rane Group, which makes auto components, the company owns four subsidiary companies, including Rane Madras, Rane Brake and Rane Engine Valve, three joint venture companies and two associate companies. After a couple of patchy years, the group is looking to turn around. Analysts said the stock is not cheap at 42 times one-year trailing earnings but growth rates are steady. The company’s sales have grown at about 23% CAGR over the last fi ve years. Profits have risen 24% CAGR during the same period.
TRF CMP: Rs 387.80
Sundaram Mutual Fund bought 3.5 lakh shares
Reason: A Tata group company that makes machines for construction & agriculture industries, the company did not have any foreign institutional investors as on September 30. TRF reported a consolidated net loss of Rs 28 crore for the year ended March due to decline in project orders. Investors and analysts feel the company would be a turnaround story once the economy recovers and orders start fl owing in.