Talbros Automotive Components Limited - Bright Future Ahead

Happy samvat 2071 for all our readers and well wishers. This month we are presenting you a stock from one of the most reviving sectors in India - Auto sector. With the possibility of interest rate cut is eminent, it would be good to add a stock from a sector which has a direct positive impact. Our new pick, Talbros Automotive Components Limited has around 60 years of experience in Auto Component manufacturing and has been established as a well placed player with a label of  India's largest gasket manufacturer. 




Convincing Factors to Invest

Fundamental are so Strong
Over the years Talbros Automotive Components Limited became a diversified auto component player with presence across two wheelers, passenger, commercial vehicles and farm equipments. They have 5 international technology tie-ups including 3 joint ventures for best in class products. Their diversified portfolio includes the mmanufacturing of Gaskets, Forgings, Suspension Systems, Anti-vibration Products & Hoses. They have a hedged customer base, ie 40 % revenue from top 5 customers


Promoters are so Confident
How a retail investor can measure the confidence of Promoters?? Is it by few press conference by the Promoters??. Or by releasing new advertisement??. Or by consistent dividend payment??. To be precise, all these are sub factors and the real factor is how promoters are managing their share holdings. For the past 8 years, even during recession, promoters of this company has been on the buying side. Even on this month they have bought an astonishing 1.35lakhs shares through market and off-market trade. This shows how confident are the promoters about the future of the company. 


Dividend Payment is not Bad
Even though Indian industry was going through a tough situation for the last few years, the promoters had rewarded the minority sakeholders with consistent dividend payout. In fact they have the history of consistent dividend payout for the past 50 years.


Future looks so Bright
Joint Venture with Magneti Marelli: Magneti Marelli is an Italian company which deals with development and manufacturing of systems, modules and high-technology components for the automotive industry. A subsidiary of Fiat Group, it has 38,000 employees and a turnover of 23 billion euro in 2013. This association has helped Talbros from being “Build to Print” Stamping company to “Design & manufacture” all chassis components for passenger car segment.


Joint Venture with Nippon Leakless:  Established in 1979, NP Leakless has progressed from a producer of simple gaskets to its present capability of an Original Equipment Manufacturer (OEM) / Original Equipment Service Parts (OES) for several huge automobile and motorcycle corporations such as Honda Malaysia, Perodua (Malaysia's second national automobile), as well as, Hicom Honda, Hicom Yamaha, Hicom Suzuki, and Modenas (Malaysian national motorcycle). This association has helped Talbros to caputre the growing demands in India's two wheeler market.

Joint VEnture with Marugo Rubber: Talbros Marugo Rubber (50:50JV) has design and manufacturing capability for Suspension Bushing.

Also below are the products Talbros is planning to manufacture from coming financial years which will add boost to bottom line. 

FY13-14 revenue of the company is close to Rs.300 crores and the last year profit was around Rs.15 crores. The stock is  currently trading at a P/E multiple of 9 and the market capitalization of just around Rs.127 crores. We are expecting FY15 and FY16 will see a handsome revenue growth to Rs.400 and Rs.500 crores.  

On Negative Side
The only worry for us is the debt level of the company which stands at around Rs.100 Crores as of now. But if the company is able to sustain the growth, we feel that within 2 -3 years Talbros would be able to drastically reduce the debt ratio.

Conclusion
When most of the market experts are putting a bet on Auto sector, we feel that Talbros Automotive Components Limited can reep the benefits as a front runner. Investors can start accumulating the stock at the current rate of Rs.102. We dont see any major down side on the stock and any mild corrections should be used to add more to your kitty. To conclude, we are highly betting on the faith and confidence of promoters of this stock along with revival of Indian economy.

Happy Investing!!!

Regards
MR

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22 comments:

  1. Hi MR,

    The company has stopped the Chennai plant. Do you know the reason behind it? Is it to reduce the debt?

    ReplyDelete
    Replies
    1. Its very important for any management to stay abreast with the the customers demand. The management has clearly stated the reasons for the closure in the press release for Q1FY15. Company is hungry to grow, hence reducing debt might not be a priority for now. If you read between the lines of MD, will get a feel of confidence and knows what he wants to achieve.We feel stopping of the plant will be good for the company as it will be a cost saver in the long run. We are cautiously waiting for the next moves by the mgmt. Either a sell off of the unit or how the unit will be utilized going forward. The current quarter might not be good,as we might see some one-time exceptional costs due to the closure. Any dip is a buying opportunity for the long term investors.

      Delete
  2. Hi MR, Can u pl share your views on R Systems Int.. As per my study i have found these good points about the company..

    1) Pe of 11.40 as against industry pe of 21.38

    2) Virtually debt free company

    3) Healthy dividend payout of 68.25%

    4) Compounded Sales Growth of 27.06% over last 3 years

    5) Compounded Profit Growth of 47.99% over last 3 years

    6) Good Return on equity of 14.85%



    So is it a right time to buy this stock?

    Pl share your views.. Thanks in advance..

    ReplyDelete
    Replies
    1. Hello Sumit, you have already done a quite a analysis. Fundamentally its a yes. We can surely expect normal returns without any doubt. However our aim is to pick stocks which are undervalued now, and can be overvalued in the future !!

      Since the positives are known, lets try to get the negatives.
      IT sector as a pack is crowded. The last 2 years for IT has been very good. It will continue for some more years.
      Coming to R systems, a good chunk, 32% is with bhavook tripathi. He is a well known investor. But big chunk with one person, always comes with an element of risk is there.
      Last quarter results, excluding exceptional items, bottom line will be flat to negative. Will the trend continue ??
      Recently Son of baldev singh(President and senior executive director), has been selling. Don't know the motive.
      We were not following R systems . On the first look with no in depth analysis, we are not excited, but can give normal returns if not extraordinary.

      Regards,
      MR

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  3. Please check Pricol and Rane Brake line also. Looks attractive considering their growth in the upcoming years. Please share your views.

    ReplyDelete
    Replies
    1. We dont track pricol..Rane Brake is a buy..Always buy in SIP mode

      Delete
  4. Please guide me , I Have 2IPCACA LABORATORY @ 700/=. It is downgraded and going down . So should I hold it or sell and shift my funds to CAMSON BIO TECH for short term.Thanks.

    ReplyDelete
    Replies
    1. Hope you are asking about IPCA. We are not following IPCA. General advise is don't own a stock if you don't understand the business dynamics. Hold long if you have conviction. Now we don't know why you bought IPCA @700 . Try to get answers for that, and ask yourself are the reasons still valid. We hope you will know what needs to be done.

      Camson is fundamentally good, and short term we are bullish.

      Regards,
      MR

      Delete
  5. Sir Whats Your View on Astra Microwave Products Ltd.? Is it a good stock to hold for Long term? Your comments will be really appreciated and Thanx in advance.........

    ReplyDelete
    Replies
    1. The sector is in limelight. company is performing good. Promoters are selling aggressively , dont know what they are thinking. As we see, there is no second gen management to continue the business and there might be an ownership change in the future. Can give good returns , if that happens. Even otherwise growth is expected , hence its a hold.

      Regards,
      MR

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  6. whats your view on latest results??

    ReplyDelete
    Replies
    1. Above our estimates !! We were expecting some one off settlements due to closure of the chennai unit.Its a hold.

      Regards,
      MR

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    2. What is the land parcel size of the chennai unit? Can you provide a rough estimate of what valuation they can get?

      Thanks

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    3. As per their filing with SEBI at the time of listing, it says they have a 1.67acres freehold land. Check the same under property section @ http://www.sebi.gov.in/dp/tacldraft.pdf . We are not sure about the valuation,trying to find the approx. value from our friends in chennai.

      Regards,
      MR

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    4. This is indeed great to know, thanks...Looks like debt can go straight away

      Thank you so much.

      Delete
    5. Yes. But do not invest based on the guess that debt will be paid from this. Thats just as option they have. We are still waiting for the the company to answer this !!

      Regards,
      MR

      Delete
  7. I have holdings in Patels Airtemp and lloys electric.What are your views on their results??
    Why there is panic selling in lloyd? Shall i book profits in patels airtemp and enter again at lower levels?
    Need your comments.. Thanks in advance..

    ReplyDelete
    Replies
    1. Both the companies results are by no way bad. Long term story is intact.

      Do you think retail investors can bring the prices down like that(even if they are in panic).Now short term traders are like poison. Once it gets drained out, lloyd should find its direction.

      We cannot advice if one can book profits or not. We can only tell, the company is on the right track.

      Regards,
      MR

      Delete
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    ReplyDelete
  9. Dear MR,

    First of all congrats for your great work for retail investors. I have recently started to track your website.
    Can i buy talbros at CMP for long term.?
    Thanks

    ReplyDelete
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