First, you must note that auto ancillary stocks are very popular nowadays amongst savvy investors. Amar Ambani of IIFL had declared this when he advised investors to buy LG Balkrishnan, a supplier of parts to two-wheeler companies, instead of the stocks of the two-wheeler and auto companies.
Amar Ambani followed this up with his “Express Stock Ideas” where he recommended an investment in Lumax Auto Technologies & TVS Srichakra. Now, Amar Ambani has gone all-out by recommending three auto component stocks, Banco Products, MM Fogings & Phoenix Lamps.
We can also see that stocks like Amara Raja Batteries and Exide Industries are also doing well.
Sushil Finance has now joined the fray with its latest stock pick Minda Industries. The stock surged 20% today on the news that Sushil Finance has put the spotlight on it.
Saurabh Jain of Sushil Finance points out that Minda Industries Ltd has released robust Q1 FY15 results. On a consolidated basis, Minda’s turnover increased approx. 27.0 percent YoY from Rs.384 Cr in Q1 FY14 to Rs. 487 Cr in Q1 FY15. The EBITDA grew approx. 60.0 percent YoY from Rs.25 Cr in Q1 FY14 to Rs.40 Cr in Q1 FY15. The profit after tax stood at approx. Rs.15 Cr with a net margin of nearly 3.1 percent and earnings per share of Rs.9.4.
Saurabh Jain also points out that all the three divisions, namely, the ‘Switches’ division, the ‘Lighting’ division and the ‘Horns’ division have done well. He adds that during the previous fiscal, Minda had forayed into manufacturing of ‘Fuel-caps’ for Maruti, which could be a very promising product in the long-run and they might be adding capacities to cater to other OEMs as well.
On the future outlook and valuations, Saurabh Jain says that FY15 would be a turnaround year for the company as indicated in the Q1 performance (which is seasonally a weak quarter). During the current fiscal, not only the recently expanded facilities would start functioning, the improving capacity utilization levels and profitability would result into a substantial jump in the profits of the company.
The stock is a good buy at the present valuations of 9.4x its FY16 earnings, Saurabh Jain advises.