BSE: 532796 | NSE: LUMAXTECH
It is usually rare to find a good company in the auto-ancillary business. The reason is that they are capital intensive and usually the margins are low and hence they provide low return on capital. However, there are always some companies which do much better than the indutry. Lumax Auto Tech seems to be one such company. The company has had a an excellent growth in past along with good profitability and strong balance sheet.
The company manufactures “automotive parts like sheet metal parts, fabricated assemblies, tubular parts, for two wheeler and three wheeler industry.” That includes parts such as chassis, silencers, petrol tanks and handle bars for motorcycles and scooters. They also manufacture head and tail lamps.
The company has a market cap of 200 Crores and is trading at a PE multiple of just 4.4 times. Company has a consistent dividend track record, and is providing a dividend yield of 4%. Price is almost equal to its book value.
However, what excites us even more is the company”s beautiful balance sheet. The company is debt free (and mostly financed form trade payables); the inventory turnover ratio has doubled from 15 to 33 times in 5 years; while the outstanding debtors have been maintained at ~50 days. The growth and return ratios spielautomaten online are also quite good.
The company came up with an IPO in 2007 at Rs. 75/- per share. At that time, the company had 7 functional plants, sales of ~200 Crores and net profit of 6 Crores. Now the company has 12 plants (plus one in progress), sales of ~750 Crores and net profit of 45 Crores.
As the auto sector is going through a major slowdown, not many people are expecting growth in the company. However, if one looks at the recent Honda announcement, there is a high chance that the company may deliver decent growth for next 2-3 years.
- There have been many insider trades recently and the promoters are increasing their stake – check recent announcements.
- Revival of auto-sector.
- The auto sector slow-down can continue for some time.
- Imports from China.
- Company currently enjoys the benefits of tax-free zone and thus the effective tax rate is 24%. However, going forward, the effective tax rates should come to 33% as the tax benefits expire with in an year or two. Thus the forward PE is at around 6 times.
- Company made a preferential allotment of 20 lac shares in 2011 to acquire the shares of a group company, Lumax Industries, worth 20 crores. Such preferential allotments can take place in future too.
Overall, at current valuations, the stock appears cheap and the risk reward ratio looks favourable.
Our long discussed stock, Poly Medicure, has got mentioned in the recent Vadra issue. Though it seems the company is not directly involved in the transactions but still it throws up some question marks and the premium valuations may get impacted.
Company”s recent newsletter.
We had earlier mentioned about Lumax Auto Technolgies in the developing ideas for 2013. We invite the views of our readers through comments.