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