Industry outlook: Sundram fasteners is mainly associated with the Automotive industry. The Indian automobile industry is expecting a 10-12 percent rise in sales in fiscal 2012-13 from 17376624 units sold in 2011-12 on better macro-economic conditions, an industry body said. As per the statistics provided by SIAM, the passenger vehicle sales was boosted by 4.6 percent in 2011-12 over the previous financial years i.e. 2010-11. Sales of passenger car segment clocked a 2.19 parcent rise at 2016115 units from 1972845 units sold in 2010-11. Export of car was also increased by 25% in the last financial year.
Company outlook: The company outlook is quite bright as Sundram fastener is a major player in this segment.
1. It has used the year 2011-12 for doing expansion and different other activities to meet the increasing demand. The company invested substantial amount towards creating capacity for new products and expansion of capacities for existing product.
2. During the year, the Company has invested EUR 33,332 (Rs 22.22 lakhs) in Windbolt GmbH, Hohenstein-Ernstthal, Germany for manufacture of special bolts for wind energy applications under 50:50 Joint Venture arrangement with Mr. Wolfgang Walter Naumann. The share of interest in Joint Venture has been accounted in consolidated accounts by using the proportionate consolidation method as per Accounting Standard (AS) 27.
3. The Company has set up facilities at Mittamandagapet in Tamil Nadu for the manufacture of fasteners for use in Wind Energy Generators. This will help the power companies to procure the fasteners locally instead of importing it.
4. There is clear emphasis on R&D, which will help the company to maintain competitive advantage from technical front.
5. There is clear emphasis on quality. The company is following “Total Productive Maintenance” (TPM). The company has retained the accreditation of its quality system being in line with ISO 9001-2000.
6. US economy is seemed to be reviving. And GM being the major customer of Sundram Fastener, the export demand is anticipated to be increased. Exports from all the major units showed sizable growth enabling the Company to post record sales of at Rs 646 crores as against Rs 479 crores in the previous year, an increase of 35%. Export sales were around 30% of the overall sales revenues.
7. Subsidiaries other than the German subsidiary have shown an increase in revenue and growth. The germa subsidiary has been adversely impacted owing to German financial crisis. Though the consolidated revenue(from subsidiaries) has been increased, there is a net loss of 10.69 crores.
8. The Company proposes to expand capacities further in the manufacture of all its products-lines. The Company also proposes to add secondary capacities to develop new products for its customers. The total capital expenditure commitments during 2012-13 are likely to be around Rs 150 crores, subject to market conditions and internal accruals.
9. Steel is one of the major raw material for Sundram Fasteners. The steel price has been steadily increased in the last few years. Last year, the petroleum based products and power have also seen increase in cost. Rising cost of all these together will put a pressure on the bottomline.
Overall the company is well poised to take benefit of automobile growth. We believe that expansion of capacities and diversification has been blended properly to continue its growth momentum and mitigate any potential market risk.
Financial : For the financial year, 20111-12, the company has posted a growth rate of 18% i.e. 2300 crores against 1944 crores in 2010-11 in topline. However, the bottomline has been impacted owing to high interest rate and higher input cost. The bottomline has seen a growth of 7% i.e. 112 crores against 105 crores in 2010-11. With our estimate considering a moderate growth of 10% in revenue the EPS of the company will be increased to 6.75. The 2013 forward PE of the company will be around 6.59, which says that the stock is currently heavily discounted.
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Mar'13€
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Mar '12
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Mar '11
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Mar '10
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Mar '09
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Mar '08
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|
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12 mths
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12 mths
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12 mths
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12 mths
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12 mths
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Total Income
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2424.96
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2,204.51
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1,833.12
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1,351.56
|
1,203.51
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1,233.12
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Total Expenses
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2260.41
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1,891.35
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1,610.46
|
1,168.32
|
1,098.57
|
1,068.45
|
PBDIT
|
385
|
313.16
|
222.66
|
183.24
|
104.94
|
164.67
|
Interest
|
112.24
|
92.2
|
23.9
|
27.91
|
40.34
|
27.98
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PBDT
|
327.26
|
220.96
|
198.76
|
155.33
|
64.6
|
136.69
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Depreciation
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74.42
|
63.61
|
54.54
|
47.48
|
42.23
|
34.23
|
Profit Before Tax
|
198.34
|
157.35
|
144.22
|
107.85
|
22.37
|
102.46
|
Tax
|
56.56
|
44.87
|
39.07
|
32.42
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6.87
|
35.09
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Reported Net Profit
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141.78
|
112.6
|
105.18
|
75.43
|
15.49
|
67.38
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Shares in issue (lakhs)
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2,101.28
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2,101.28
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2,101.28
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2,101.28
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2,101.28
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2,101.28
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Earning Per Share (Rs)
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6.75
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5.36
|
5.01
|
3.59
|
0.74
|
3.21
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Considering the above points, the stock is recommended for long term buy.
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