Tag - OEM

09 Jun

Growth opportunities ahead across all segments – Bharat Forge

Update on Indian Equity Market:

On Wednesday, markets ended lower with Nifty closing 105 points to close at 15,635. PowerGrid (3.9%), SBILIFE (1.8%), and NTPC (1.6%) were the top gainers on the index while TATA MOTORS (-2.6%), ADANIPORTS (-2.4%), SHREECEM (-2.0%) were the top losers for the day. Among the sectoral indices,  MEDIA (-2.1%),  REALTY (-1.7%), and AUTO (-1.3%) were the top losers, and there were no Sectoral gainers.

 

Excerpts of an interview with Mr. Baba Kalyani, CMD of Bharat Forge on CNBCTV18 dated 7th June 2021 :

 

  • Greenshoots have been seen in recovery over Q4FY21 despite lockdown, the industry is coming back to pre-covid levels but the management expects another quarter for things to fully recover.
  • Oxygen shortage affected steel supply due to the 2nd COVID wave in Q4, but significant recovery has been seen. The semiconductor supply shortage is still an issue but there’s no reduction in demand for chassis and powertrains.
  • Exports have seen tremendous growth across all segments over FY19 levels, and the company is benefiting from shifting from traditional supply chains in East Asia to India and the rest of the world.
  • There is a huge Commodity Upcycle, especially in metals. However, the company is poised to directly pass on the hikes to its customers.
  • The Company is expanding its capacities in the renewables sector, in order to reduce its reliance on Oil and Gas and focus on sustainable growth ahead.

 

Asset Multiplier Comments:

  • Bharat Forge like most Industrial manufacturing has already seen the worst of its days due to the pandemic, and recovery seems to be well on track.
  • Increased Government Expenditure, Focus on Atmanirbhar Bharat will help the company’s topline across all verticals in years ahead.

 

Consensus Estimates (Source: market screener website): 

  • The closing price of Bharat Forge was ₹757/- as of 09-June-2021.  It traded at 42x/ 30x the consensus EPS estimate of ₹ 18/ 25/-  for FY22E/23E respectively.
  • The consensus price target is ₹ 800/- which trades at 32x the EPS estimate for FY23E of ₹ 25/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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13 Jul

Corporate rejig plan will take care of long-term requirements – Motherson Sumi

Update on the Indian Equity Market:
On Friday, Nifty ended -0.4% lower at 10,768. The top gainers for Nifty 50 were Reliance (+3.1%),
HUL (+2.5%), and Sun Pharma (+2.3%) while the losing stocks were Axis Bank (-3.2%), GAIL (-2.8%)
and ICICI Bank (-2.8%). Sectoral gainers for the day were Pharma (+0.9%), Realty (+0.7%) and FMCG
(+0.5%) while the losers were PSU Bank (-2.7%), Pvt Bank (-2.4%) and Bank (-2.2%).

Edited excerpts of an interview with Mr GN Guaba, CFO, Motherson Sumi Systems Ltd (MSSL); dated 07th July 2020 from Economic Times:

  • The Motherson Group last week announced a major rejig in its corporate structure, deciding to demerge its domestic wiring business into a separate listed entity.
  • As per the scheme, MSSL will first demerge the domestic wiring harness business and will get it listed separately. The second stage of the restructuring involves merging the principal holding company Samvardhana Motherson International Ltd (SAMIL) into the MSSL.
  • From the shareholders perspective, for every one share held by them of the MSSL pre-demerger, they will be allotted one new share of the demerged entity.
  • The proposed reorganisation will simplify the Group structure and protect the interest of all shareholders. It will give a fillip to the company’s M&A strategy.
  • MSSL’s partner Sumitomo had been for long keen to have a shareholding in the business which is purely focussed on Indian customers. MSSL was also looking to simplify the structure for the last eight years. They had looked at various alternatives, but could not pursue it on account of changing laws and regulations. 
  • On January 30 2020, the Company decided to have two separate listed companies as they thought this was the best way to protect the interest of all stakeholders including the minority shareholders.  
  • The contribution from the wiring harness business was at Rs 39 billion in FY20 and Rs 44.8 billion in FY19. The business constitutes 5-6 % of the total turnover.
  • MSSL is a leading manufacturer, supplying wiring harness to almost every OEM, including in all categories, CVs, bikes, trucks, passenger cars, etc. They are not chasing market share, since that proposition may compromise the bottom line. Sumitomo’s technical assistance and strategic guidance auger well for the wiring harness business in future. The idea is to clearly focus on the growing trends in the domestic market.
  • MSSL sees this restructuring to be EPS accretive in the first year of the merger’s scheme itself which is FY22E. From the semi-merger point of view, the substantial part of valuation is derived from MSSL itself; this ensures that they have protected the interests of the minority shareholders. This would be as a win-win situation for all.
  • The rejig process is likely to take 12 months or so. Based on the feedback from the Company’s bankers, restructuring will be completed by June 2021; the listing and trading of both the demerged entity as well as the SAMIL are likely to take place from July 2021.
  • The proposed restructuring scheme is a big step taken by MSSL Group. Thus, it will take care of their future long-term requirements.

Consensus Estimate: (Source: market screener website)

  • The closing price of Motherson Sumi System Ltd was ₹ 96/- as of 10-July-2020. It is trading at 41x/17x the consensus EPS estimate of ₹ 2.4/5.7 for FY21E/FY22E respectively.
  • The consensus target price of ₹ 111/- implies a PE multiple of 19.5x on FY22E EPS of ₹ 5.7/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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27 Mar

COVID-19 impact: Have requested RBI that moratorium sought by consumers should be given, says M&M Fin Services

Update on the Indian Equity Market:

On Thursday, NIFTY continued gains for the 3rd day and ended at 8,641 (+3.9%). Among the sectoral indices, Pvt Bank gained the most while no sector index ended negatively. Pvt bank (+8.3%), Realty (+7.3%) and BANK (+6.4%) were the top gainers. Out of the NIFTY50 stocks, IndusInd bank (+46.0%), L&T (+10.0%) and Bajaj Finance (+9.3%) rallied the most, while GAIL (-3.3%), HCL Tech (-2.6%) and Sun Pharma (-2.5%) were the worst performers for the day.

Edited excerpts of an interview with Mr Ramesh Iyer, Vice Chairman & Managing Director of Mahindra & Mahindra Financial Services Ltd; dated 25th March 2020. The interview aired on CNBC-TV18.

  • Original equipment manufacturers (OEMs) have shut down production due to COVID-19, which obviously have an impact on vehicle financiers.
  • For OEMs at the beginning of 4Q FY20, the volumes started to shrink because everybody was preparing for BS-VI transition and therefore the inventory levels started to come down. Now with the COVID-19 scare – even the little possible sales that were likely to happen have come to an end, according to him.
  • He added the month of January-February was average; March has been absolute no-number kind of a month, so he thinks that it would be a low single-digit growth in loan book or for some it may not even be that.
  • The Company has told the RBI about consumers asking them for a moratorium and has requested RBI to provide the same.
  • They have also told RBI that these are the times where maybe the non-performing assets (NPAs) norms itself will have to be rewritten to say it is not 90-days delinquent but 180-days kind of a delinquent and it is more to protect the good customers who have been paying so far.
  • There is uncertainty about tomorrow. So people had started becoming cautious but even more important is that the overall activities have started to reduce and therefore people’s earnings will start to reduce but these are times where instead of worrying about what is going to happen to the growth and things like that – the Company will be looking at ‘how do they help out the consumers’.
  • The current situation is still not as impactful in the rural market as seen in urban according to him. People will have to figure out after things get normal. They will start relooking at what else to do, how else to do. So the real impact will be known only three months down the line.
  • If consumers need some kind of temporary short-term loan after things get to some normal then the Company will look at what could be that short-term small-ticket loans to the existing consumers whom they may want to support and partner them to come out of this situation as things start to improve.

Consensus Estimate: (Source: market screener, investing.com websites)

  • The closing price of M&M Financial Services Ltd was Rs 169/- as of 26-March-2020. It traded at 0.9x / 0.8x/ 0.7x the consensus book value estimate of Rs 190/ 211/ 238 for FY20E/ FY21E/ FY22E respectively.
  • The consensus target price of Rs 394/- implies a PB multiple of 1.7x on the FY22E book value of Rs 238/-
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