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2nd largest Auto component maker in India
Ranked 124 in Fortune 500 India 2019

Mar 2019 - Operating Profits = Rs. 1090 Cr
TTM - Operating Profits = Rs. 1040 Cr
TTM NOPAT = 1005 Cr

Market Cap = Rs. 1810 Cr

Trading at <2x Operating Profits. Company going to be bankrupt?

Has the business changed? NO!

OPM = 9% approx in last few Quarters
Revenues taken a hit because of the economy. Cyclical. Totally fine.

EPS drop?
1. Interest cost increase by 10 Cr. (Ind AS, higher borrowing)
2. Depreciation increase by 53 Cr. (Ind AS, new capacity)

New capacities in FY21!

Going forward, they will not be paying tax on the higher depreciation amount resulting in FCF --> use to pay off debt.

Debt = 2550 Cr.
Cash Equivalents = 500 Cr.
Net Debt = 2050 Cr.
TTM EBITDA = 1040 Cr.
Net Debt/EBITDA ~ 2x

What am I missing?

Reliance Mutual Fund recently bought a stake!

Good delivery volumes in the last few days.

Promoter Holding = 85%
FII = 4.9%
DII - 7.6%
Retail = 2.5%

As on date, Free Float = 15% * 1810 = 272 Cr. only!

Low free float stock goes up and down in elevators (instead of stairs?) which is presenting a no-brainer opportunity now?

OPM decent at 9%, RoCE healthy at 14%

Not a great company. Good company at great price?

1. Cyclical (close to sector bottom, I am fine)
2. Dependent on Europe and Lighting (60%) (monitor profitability)
3. Capex beyond their limits (see Mgmt decisions & evaluate)

Cyclical low EPS of Rs. 21
10% high growth in next 5 years (capex coming on line in FY 21)
30% Margin of Safety
15% Expected Return

Fair Value = 175
CMP = 135

Thank you @Gautampolisetty !

Replies - Sintex, Clutch Auto, Amtek Auto, 50% further fall

5 % of portfolio if I average it at 100. Goes to zero. I lose 5%.

20 Rs EPS and 20x Exit PE (can even do 30 Rs) = 400

RR = 3x / 15%

I would love to have 5x. So I am okay with 50% fall from here.

Price can trade at 1x Operating Profit too. Which will be a 50% fall from here.

Around 60 - 75 Rs.

Bear Case EPS = 10 Rs. and 6x PE.
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