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Sunday, November 19, 2017

Hidden Gem Stock - Sterling Tools - ROI @ 113% in 14 Months

Dear Reader,

We are pleased to inform you that our Hidden Gem stock of August 2016 - Sterling Tools Ltd (BSE Code: 530759, NSE Code: STERTOOLS) which was released on 18th Sept'16 is giving as on date returns of 113% to our Hidden Gems members. Our team suggested Buy on Sterling Tools Ltd at price of Rs. 149.27 (stock split adjusted price, actual recommended price was Rs. 746.35) on 18 Sept 2016 with a target price of Rs. 280 (stock split adjusted target price, actual target price was Rs. 1400). We are glad to inform our readers that stock has already achieved its target price in May this year and we suggested our members to continue to hold the stock.

Sterling Tools has made its 52 week high of Rs. 341.60 last week and closed at Rs. 317.20 on Friday giving as on date returns of 113% to our Hidden Gems members in period of 14 months.


In Sept'17 quarter, net profit of Sterling Tools rose 61.72% to Rs 14.70 crore against Rs 9.09 crore during the previous quarter ended September 2016. Sales rose 21.31% to Rs 115.79 crore in the quarter ended September 2017 as against Rs 95.45 crore during the previous quarter ended September 2016.


Below is the summary of Sterling Tools Ltd shared by our team under Hidden Gem stock of Aug'16 released on 18th September 2016.

Note: This report is shared only for the purpose of information and not an investment advice. Kindly carry out your own due diligence in case of investment in Sterling Tools.

1. Company Background:

Sterling Tools Ltd was established in 1979 and is engaged in the manufacturing and marketing of high tensile cold forged fasteners. Over the years, the company has become one of the leading OEM suppliers in India with a client base that spans leading automotive companies in India, Europe and USA.
With the expertise of over two decades, company’s manufacturing facility today includes state-of-the-art annealing, cold forging, inline rolling, heat treatment, finishing/coating, CNC turning, centre less grinding, circular thread rolling and other secondary operations. In addition, Sterling Tools also introduced a complete range of multi station headers with automatic motorised adjustment systems that facilitate smooth and fast job changes

Sterling Tools caters to all segments of the automobile industry. Two wheelers and commercial vehicle account for the largest chunk of its sales, followed by passenger vehicles and farm equipment vehicles, replacement market contribution is around 12% while export account for 3% of total sales.

Sterling Tools is the largest supplier of high tensile fasteners to Honda Motorcycle and the second largest supplier to Maruti Suzuki India and Tata Motors. The company’s other customers include Ashok Leyland, Daimler, Fiat, Hero Motocorp, Mahindra & Mahindra, Volvo, Eicher, TAFE and General Motors.

Company’s product portfolio includes special fasteners, standard fasteners, surface treatment and coatings, chassis fasteners and engine fasteners. Its product range includes over 2,000 types of fasteners ranging from 5mm to 24mm in diameter.

The company has three manufacturing plants in Faridabad, Ballabhgarh and Haryana with a total capacity of 41,600 MT and has over 1,000 employees.

The Company has one Joint Venture Company named Sterling Fabory India Pvt. Ltd.- a Joint Venture on 50:50 basis with a Netherland based Company named Fabory Masters in Fasteners Group B.V.

Product Range:

Sterling Tools product range encompasses a wide variety of fasteners as mentioned below:

Special Fasteners: Special fasteners are manufactured to suit unique customer specifications. Available in a variety of surface protection coatings, these fasteners are proof of the fact that the company’s provide complete customizable solutions.

Standard Fasteners: Range of standard fasteners include socket head cap screws, hexagonal head bolts, studs, hexagon nuts and weld nuts. The dual benefits of better fatigue resistance and superior strength have made these fasteners a popular choice

Chassis Fasteners: Range of chassis fasteners include hub/wheel bolts, hub nuts, wheel studs, suspension bolts, propeller shaft bolts/nuts, centre bolts, track shoe bolts/nuts, rivets and two wheeler spindles/wheel axles. These are widely used in the undercarriage of automobiles and heavy earth moving equipments.

Engine Fasteners: Engine fasteners include cylinder head bolts/screws, fly wheel nuts/bolts, connecting rod bolts/nuts, balance weight bolts and main bearing cap bolts. These are widely used in internal combustion engines.

Manufacturing – Engineering & Testing Facilities:

Company’s manufacturing facilities are all TS 16949 and ISO 14001 certified. Some of the key features of company’s manufacturing process includes Induction hardening of critical fasteners, use of sophisticated in-line hardening and tempering furnaces with auto-load, pre-wash and post-washers, and the manufacture of special fasteners with very close tolerance.

Sterling Tools engineering department is led by a team of highly experienced leaders. Equipped with the latest in CAD and simulation softwares and armed with the knowledge of an extensive library, company’s engineering team is extremely competent, especially in the manufacture of precision parts. Manufacturing feedback for improving the overall machine effectiveness (O.E.E), APQP (Advanced Product Quality Planning) through cross functional teams and in-house testing facilities like the SCHATZ torque testing machine helps company to understand and meet client needs consistently.

In order to ensure consistent quality of the final product, the company has harnessed the power of several high accuracy specialised instruments. These include the Contour graph, Metrology-fisher scope, Tri-roll guages for thread checking, Torque wrench, Vicker hardness tester, Eddy current tester, Spectrometer, Microscope (with image analyser), Universal tensile machine and the Charpy tester. By identifying potential problems and flaws early, company ensures that its fasteners reduce operating and replacement costs and ensure greater operating safety.

2. Recent Developments: (as on 18th Sept'16)

Sterling Tools is engaged in manufacturing of high tensile cold forged fasteners used in automobiles. Thus the performance of the company is mainly dependent on the growth of automobile sector.

As per Society of Indian Automobile Manufacturers (SIAM), the Indian Automotive Industry is one of the largest automotive markets in the world. The automotive industry is an engine of growth for the Indian economy, with manufacturing for domestic market as well as for export market.

The Industry accounts for 7.1 per cent of the country’s Gross Domestic Product (GDP). The Two Wheelers segment with 81 per cent market share is the leader of the Indian Automobile market owing to a growing middle class and a young population. Moreover, the growing interest of the companies in exploring the rural markets further aided the growth of the sector. The overall Passenger Vehicle (PV) segment has 13 per cent market share.

Over the years, the auto components/auto ancillary industry has adopted well to the changes in the policy and regulatory environment and the needs of its customers. Globally, the Auto Ancillary Industry is expected to grow at a steady pace due to the rising demand from automobile sector and huge growth potential of the manufacturing sector worldwide.

SIAM has forecast a positive outlook for sales across all vehicle categories for 2016-17:

According to SIAM, passenger vehicle sales are projected to grow between 6-8 percent, M&HCVs at 12-15 percent, Intermediate CVs at 7-9 percent and SCVs at 0 percent. In the two-wheeler segment, motorcycle sales are forecast to grow between 0-3 percent and scooters between 17-19 percent.

Driving this growth will be the overall GDP of the country that is pitted to grow at a faster 7.9 percent during FY’17 while industry GDP would grow at 7.6 percent, a spin-off on account of the improvement in domestic demand, with support from public spending and the impact of policy reforms that would begin to show results. 

With normal monsoon during the year, agricultural GDP is expected to experience a faster growth pace at 4 percent on a low base placing more disposable income in the hands of the rural populace and a consequent pick-up in sales of LCVs, three-wheelers and motorcycles dependent on the rural markets.

As per a Nielsen report, the general sentiment is improving and India leads in the consumer confidence index with 131 points. An improvement in the investment climate with FDI inflows of $39.3 billion during January-December 2015, compared to $29 billion in January-December 2014 coupled with the impetus given to public transport.

Passenger Vehicles sales to see an uptick:  Against this improved background, passenger vehicle sales are pitted to get a leg-up in FY’17. The 7th Pay Commission announcement of wage hikes would provide a boost to consumer spending which in turn is expected to positively impact passenger vehicles sales. This is also expected to propel the replacement of cars bought five years ago.

New model launches and competitive pricing in the crossover and compact UV segments would give a further fillip to utility vehicle sales.

Continued growth for M&HCVs, LCV sales to speed up: LCV demand is also expected to pick up due to improved consumption demand and ease of financing. This would be led by recovery in urban spending, lower commodity and oil prices, pay commission wage hikes, lower inflation and interest rates to stimulate demand, a normal monsoon that would drive strong agricultural freight demand during the Kharif harvest season.

Sales are also expected to be advanced in Q4 FY17 due to the pan-India BS-IV implementation from April 1, 2017. As consumption expenditure picks up and availability of redistribution freight improves, non-performing assets are expected to decline easing the financing scenario by the first half of FY’17. All this would enable M&HCV sales to notch double-digit growth.

The bus segment is expected to grow on the back of demand for staff and school buses as also for buses for the tourism sector. STU sales are also expected to pick up further catering to delayed replacement of over-aged vehicles. JNNURM II orders for about 2,000-2,500 buses are expected to be completed during this fiscal.

Motorcycle sales, which faced a decline during FY’16, are envisioned to see mild recovery due to higher urban incomes as the domestic economy recovers. Further, the advent of a normal monsoon will give a fillip to commuter bike sales in rural India. This will considerably boost demand for mass market commuter bikes, sales of which have considerably reduced in the past 18 months. The well-performing scooter sector will continue its accelerating sales act, riding on new model launches and aggressive manufacturing capacity expansion as well as dealership expansion in semi-urban and rural areas.

Three-wheeler sales are also estimated to recover with rising urbanisation and migration to cities boosting intra-city transportation. Three-wheeler manufacturers are pushing further into rural areas as small CVs try to encroach on traditional three- heeler markets.

3. Financial Performance:

Sterling Tools standalone net profit rises 54.62% in the June 2016 quarter

Net profit of Sterling Tools rose 54.62% to Rs 9.37 crore in the quarter ended June 2016 as against Rs 6.06 crore during the previous quarter ended June 2015. Sales rose 14.33% to Rs 94.30 crore in the quarter ended June 2016 as against Rs 82.48 crore during the previous quarter ended June 2015.

Sterling Tools standalone net profit declines 1.48% in the March 2016 quarter

Net profit of Sterling Tools declined 1.48% to Rs 7.33 crore in the quarter ended March 2016 as against Rs 7.44 crore during the previous quarter ended March 2015. Sales rose 9.32% to Rs 101.34 crore in the quarter ended March 2016 as against Rs 92.91 crore during the previous quarter ended March 2015.

For the full year, net profit rose 33.93% to Rs 28.42 crore in the year ended March 2016 as against Rs 21.22 crore during the previous year ended March 2015. Sales rose 9.54% to Rs 364.34 crore in the year ended March 2016 as against Rs 332.62 crore during the previous year ended March 2015.
We expect the company to deliver robust revenue growth in coming quarters with rising sales of 2 wheelers and commercial vehicles in India.

Company is well positioned to achieve strong sales with increase in profitability considering healthy operating margin due to better product mix, higher capacity utilization and decline in interest expenses.

4. Peer Group Comparison: (as on 18th Sept'16)

Sterling Tools is trading at trailing PE multiple of 16.1 and looks attractive while comparing with valuation of peer group companies. Sundram Fasteners (larger peer with market capital of Rs. 6563 crores) is quoting at PE multiple of 26.9 on standalone basis. Moreover, Sterling Tools has better financial ratios as compared to Sundram Fasteners. Market capital to sales ratio of Sterling Tools is 1.4, whereas the same for Sundram Fasteners is 2.1

5. Key Concerns & Risks:

i) Any increase in input costs (i.e steel, iron etc) can negatively impact the operating margins of the company.

ii) As the company’s business is directly linked to automobile sector, downturn in automobile sector can affect business growth and profitability. 

6. Saral Gyan Recommendation: (as on 18th Sept'16)

i) The Indian auto ancillary industry is well poised to achieve strong growth in the coming years considering the overall improvement in demand in the domestic and export markets with Indian automobile OEMs expanding presence in new geographical regions. Higher urban spending, lower commodity and oil prices, pay commission wage hikes, lower inflation and interest rates , better monsoon (which will stimulate rural demand) will lead to an overall improvement in 2 wheelers and passenger vehicles volumes in India.


ii) Sterling Tools is one of the top 3 manufactures of fasteners in India and become a major supplier to the leaders in the automobile industry. The company caters to varied and customized demand of clients. It is a largest supplier of HT (high tensile) fasteners to Honda and second-largest supplier to Maruti Suzuki and Tata Motors. Company’s other customers include Ashok Leyland, Daimler, FIAT, Hero Motocorp, Mahindra & Mahindra, Volvo, Eicher, TAFE and General Motors.

iii) Sterling Tools is a major supplier to Honda with almost 25% of revenues from the company. Honda motors has doubled its market share to 27% in the last four years and continue to gain further ground in the two wheeler market in India. Honda has already launched 5 new products in 2016 and expects to register strong growth with upward sales trend during the year. We believe Sterling Tools revenue will increase in line with increasing sales of Honda two wheelers. Moreover, as company supplies to Ashok Leyland and Tata Motors as well, it will be the direct beneficiary with expected double digit growth in M&HCV segment going forward.

iv) Sterling Tools has now become a specialty manufacturer of engine & special fasteners and supplier of special fasteners to leading auto companies worldwide. The company has transformed itself from a manufacturer to a value chain partner on account of continuous up gradation and enhancement of process capabilities.

v) Company has registered sales CAGR of 9.35% and profit CAGR of 41.03% with ROE of 19.76%. Debt to Equity ratio is improved from 1.14% to 0.5% in last 5 years resulting in higher net profit margins. Working capital cycle has reduced from 84 days in FY12 to 50 Days in FY16. We expect company to continue reporting improvement in its ROE and ROCE with improvement in profitability with strong sales and better working capital management.
vi) To push replacement market sales, the company is focusing on increasing dealerships for its products. Currently, the company has more than 60 dealers and continuously increasing its penetration to new geographies across country to reach out to more no. the customers to further strengthen its position in replacement market.

vii) As of Jun’16, promoter’s shareholding in the company is at 70.15% without any change in holding since last 2 years. However, promoters have increased their stake by 0.96% in last 5 years, from 69.19% in Sep’11 to 70.15% in Jun’14. The company has not pledged any shares, Institution shareholding in the company is negligible at 0.42%.

viii) Management has rewarded shareholders by paying regular dividend since last 9 years. The company has paid total dividend of Rs. 15 for FY15-16 and dividend yield at current share price is 2%. Dividend is increased from Rs. 5 to Rs. 15 during last 5 years with healthy dividend payout of 26%.
ix) As per our estimates, Sterling Tools can deliver PAT of 43.60 crores for full financial year 2017-18, annualized EPS of Rs 63.74 with forward P/E ratio of 11.7X for FY17-18. Company’s valuation looks attractive considering strong balance sheet with improving financials, better return ratios and robust growth outlook of fastener industry with significant pick up expected in automobiles production in the country.

x) On equity of Rs. 6.84 crore, the estimated annualized EPS for FY17-18 works out to Rs. 63.74 and the Book Value per share is Rs. 208.67. At current market price of Rs. 746.35, stock price to book value is 3.58.

Considering positive outlook for fastener industry, company’s focus on expanding its reach to drive growth in replacement market, expected improvement in operating margins due to better product mix and higher capacity utilization, and company’s superior fundamentals with attractive valuations compared to peers, Saral Gyan team recommends “Buy” on Sterling Tools Ltd at current market price of Rs. 746.35 for target of Rs. 1400 over a period of 12 to 24 months.

Buying Strategy:
  • 70% at current market price of 746.35
  • 30% at price range of 520 - 570 (in case of correction in stock price in near term)
Portfolio Allocation: 3% of your equity portfolio.

To Read / Download Saral Gyan Hidden Gem - Aug'16 Research Report on Sterling Tools Ltd - Click Here

If you have patience and want to add extra power in your portfolio, start investing some portion of your savings in fundamentally strong small and mid cap companies - Hidden Gems & Value Picks.

The stocks we reveal through Hidden Gems & Value Picks are companies that either under-researched or not covered by other stock brokers and research firms. We keep on updating our members on our past recommendation suggesting them whether to hold / buy or sell stocks on the basis of company's performance and future outlook.

An opportunity missed is an opportunity lost, subscribe to Hidden Gems & Value Picks and start investing systematically in fundamentally strong small and mid cap companies. Avail attractive discounts by subscribing to our combo packsclick here for details.

Do contact us in case of any queries, we will be delighted to assist you. 

Wish you happy & safe Investing.

Regards, 
Team - Saral Gyan

Friday, November 17, 2017

Value Pick Stock - Minda Corp Ltd - ROI @ 101% in 8 Months

Dear Reader,

We are pleased to inform you that our Value Pick stock of February 2017 - Minda Corporation Ltd (BSE Code: 538962, NSE Code: MINDACORP) which was released this year on 28th March'17 is giving as on date returns of 101% to our Value Picks members. We suggested Buy on Minda Corp at price of Rs. 91.35 on 28th Mar'17 with a target price of Rs. 140. Stock has already achieved our target price. Minda Corp stock price made its 52 week high of Rs. 186.40 on NSE today and closed at Rs. 183.90 giving absolute returns of 101% in period of 8 months. We advised our members to book partial profits today by selling 50% of their holding and continue to hold the rest for long term.

Below is the summary of Minda Corporation Ltd shared by us under Value Pick stock - Feb'17 released on 28th March 2017.

1. Company Background:

Minda Corporation Limited (Minda Corp) is a diversified company with a product portfolio encompassing from Mechanical & Electronic Security System, Electronic Controllers for Electric Vehicles and for Auto OEM's across the Globe. It also manufactures Die Casting Parts for auto and consumer durable industry.

The Company is one of the largest suppliers of 2 wheeler, 3 wheeler and Off Road vehicles Electronic & Mechanical Security System to OEM's and exports about 20% of its products to USA, UK, Europe & South East Asia and ASEAN countries. Headquarter at Noida, Minda Corporation Limited is an erstwhile Joint Venture with Huf Hülsbeck & Furst GmbH & Co. KG, Germany.

The company manufactures different lines of automobile parts that broadly fall under the following categories:

i) Safety, security and restraint systems: This business involves manufacture of products like locks, door handles, immobilizers and die casting parts.  Minda Corp is the market leader in two wheeler security systems with around 35% market share. Exposure to Passenger Vehicle is via MVAST—a 50:50 JV that manufactures products like locks & keys, immobilizers, door handles and latches for clients like M&M, Tata Motors and Nissan. This business also have exposure to Indonesia and Vietnam through subsidiaries PT Minda Automotive (Indonesia) and Minda Vietnam.

ii) Driver information and telematics: This business involves manufacture of wiring harness, connectors, instrument clusters and sensors and contribute around 45% of total revenue. Minda Corp is the market leader in wiring harness for two wheelers and also supplies to CV and tractors. Its 51:49 JV with Minda Furukawa Electric (MFE) serves Japanese PV manufacturers like Maruti Suzuki, Nissan/Renault and Honda Cars. Minda Corp also has a 51:49 JV with Stoneridge for manufacture of instrument clusters and automotive sensors and serves clients like Tata Motots, M&M, Ashok Leyland and Bajaj.

iii) Interior systems: Under this business, the company offers products like glove box, cup holders and covers for steering columns & seats. The segment derives revenue from Europe through Minda KTSN. Key clients include VW, BMW, Daimler and Plastal. Minda KTSN has manufacturing facilities in Germany and in lowcost centres like Poland and Czech Republic. 

The Company is building Spark Minda Technical Centre in Pune which would focus on Electronics and Mechatronic product development. This centre will be equipped with state-of-the-art R&D and testing equipments including high-end EMC / EMI testing facilities for advanced system engineering.

2. Recent Development: (as on 28th Mar'17)

i) Minda Corporation (through its subsidiary) Announces a 50:50 Joint Venture with SBHAP, China (a BAIC group subsidiary) – Aug 2016

Minda Corporation Limited has signed a 50:50 joint venture with Shandong Beiqi Hai Hua Automobile Parts Co., Ltd, China (a BAIC group subsidiary) through its 100% subsidiary Minda KTSN.

This joint venture shall initially focus on producing and selling products such as ‘Plastic Oil Pans and Cylinder Head’ along with other plastic under-bonnet / interior parts. It shall also have the rights for production and marketing of Minda KTSN products within china. The new joint venture shall be known as ‘Minda China Plastic Solutions Ltd’ and the start of production is expected in next 12 to 15 months. The JV shall be targeting global orders of major OEMs (such as VW, BMW and Daimler) having their manufacturing plants in China.

The total investment amount of the JV shall be USD 12,500,000. The total registered capital of the JV would be USD 5,000,000, of which, Minda KTSN and SBHAP shall contribute for 50 % of the equity interest in the JV from both parties.

SBHAP is located in Boshan District of Zibo City, Shandong Province. BAIC Group is a leading automotive parts manufacturers in China in Interior and Exterior systems. BAIC Group (founded in 1958) has realized vehicle sales of 2.49 million and operating revenue of RMB 345.22 billion, ranking 5th in vehicle sales and revenue in China automotive industry in 2015. It also ranks 207th in the Fortune 500, and 16th in the global automotive industry

ii) Minda Corporation acquires Panalfa Autoelektrik for Rs 45.5 crores – April 2016

Minda Corporation has acquired Panalfa Autoelektrik Limited (PAL) for about Rs 45.5 crores in April 2016. PAL, founded in 2007, is a part of the Panalfa Group, a major original equipment manufacturer of automotive systems and components in India.

PAL manufactures reduction gear starter motors and alternators as per latest international technology and quality standards under the Panalfa brand. It caters to the agriculture machinery, stationary engine, construction equipment and automotive markets globally. Reduction gear starter aotors are fast replacing the conventional direct-drive starter motors. The optimum weight and dimensions of these starter motors help deliver much greater torque and cranking strength. Alternators, with their high quality avalanche diodes, help enhance an automobile’s battery life.

Panalfa Autoelektrik, which has a manufacturing facility at Bawal (Haryana), supplies its products to OEMs in India and also exports to the US and European markets. Key customers of PAL include Eicher, Escorts, Greaves, HMT, Magneton, New Holland, Polaris, Sonalika and TAFE. PAL had revenues of over Rs 70 crores in FY2015 and employs about 400 people.

3. Financial Performance:

Minda Corporation consolidated net profit declines 36.29% in the December 2016 quarter

Net profit of Minda Corporation declined 36.29% to Rs 20.10 crore in the quarter ended December 2016 as against Rs 31.55 crore during the previous quarter ended December 2015. Sales rose 9.66% to Rs 712.93 crore in the quarter ended December 2016 as against Rs 650.12 crore during the previous quarter ended December 2015.

Minda Corporation consolidated net profit rises 10.19% in the September 2016 quarter

Net profit of Minda Corporation rose 10.19% to Rs 32.02 crore in the quarter ended September 2016 as against Rs 29.06 crore during the previous quarter ended September 2015. Sales rose 26.86% to Rs 774.41 crore in the quarter ended September 2016 as against Rs 610.43 crore during the previous quarter ended September 2015​

4. Investment Rationale: (as on 28th Mar'17)

i) Minda Corp is one of the largest suppliers of locksets, wiring harness and speedometers in the Indian automotive market. The company is a market leader across several product segments and has excellent relationships with OEMs due to its ability to offer consistent and superior quality products. The company has technological tie-ups with global suppliers, which offer it an edge over domestic peers and also gives access to MNC OEMs. We believe the company’s revenues can grow at 20% CAGR over next 2 to 3 years with increase in market share in both wiring harness and locksets segments and expansion of product offerings to existing customers.

ii) The company has joint ventures / technical collaborations with global leaders like Furukawa of Japan, Stoneridge of USA, VAST Access System of USA, Silca of Italy and UzAvtosonat of Uzbekistan. Company’s subsidiary, Minda KTSN contributed ~16% of Minda Corp’s FY2016 revenues and has plants in Germany, Poland and Czech Republic for products such as Plastic Interior trims & Subsystem, Kinematic Modules, Structural Modules, Soft Touch Technology. Minda KTSN is also setting up greenfield plant at Queretaro, Mexico for plastic interior parts.

iii) The recent acquisition of Panalfa Autoelektrik is a step towards company’s overall strategy to become a leading player in auto component and auto electricals sector. With the help of this acquisition, Minda Corp will be able to add new product in its product portfolio and continue to sustain its ongoing growth year-on-year. The company has already have presence in aftermarket business with network of more than 400 dealers. This acquisition will further help in increasing its penetration in aftermarket business of starter motors and alternator.

iv) Acquisition of Panalfa Autoelektrik not only add highly complementary products to Minda Corp’s existing product portfolio but also provide access to additional high profile customers, particularly in the commercial vehicle segment. Access to new manufacturing technology from Magneton, used for starter motors and alternators, is another key advantage. This acquisition has enabled Minda Corp to better service its global OEM and tier I blue chip customer base, and reinforces senior management’s focus on operational excellence.

v) Minda Corp aims to enhance its market share of around 25% in two wheeler segment to 30%. In commercial vehicles and tractors, growth is expected to improve going forward with recovery in demand. In passenger vehicle segment, the company aims to double market share to 30% from current 15% by making greater inroads into Japanese OEMs MSIL, Renault, and Honda.

vi) Wider product portfolio has successfully enabled the company to acquire new OEMs like Hero Moto Corp & Royal Enfield in domestic market, Yamaha in Colombia & Piaggio in China & Suzuki in Indonesia for supplying various auto ancillary parts. Further, the company is also exploring opportunities in Die Casting segment like compressor housing & has started receiving new orders from domestic as well as international market. Strong relationship with OEMs offers plenty of opportunities to the company to expand product portfolio and increase its offerings.

vii) Minda Corp has launched new products like steering roll connectors which could present an additional opportunity for growth once safety equipment like airbags becomes mandatory for Passenger Vehicles. Airbags will likely become mandatory for passenger vehicles in India by CY2018, this could lead to around 70 million US dollar market opportunity for steering roll connectors (SRC) by 2020E. This augurs well for Minda as Furukawa is the global leader for this product.

viii) Despite muted new vehicle industry growth in past quarters, Minda Corp aftermarket revenue has delivered significant growth year on year as it expanded its distributor network as well as product portfolio. The company has a disribution network of over 400 dealers. It has started commercial production of new products (control cable/ filter/ CDI relays etc) and expects these to incrementally add around 20% to its aftermarket revenue going forward.

ix) Minda Corp stands out with strong financial performance. The company has registered sales CAGR of 27.2% and profit CAGR of 25% with ROE of 18.3% over last 5 years, its debt to equity ratio is below 1 with high ROE and ROCE. The company’s management has rewarded shareholders by paying regular dividend, dividend yield at current price is 0.55%.

x) As of Dec’16, promoter’s shareholding in the company is 70.21% without pledging any shares. Institution shareholding in the company is 10.72% which includes investments of Kotak Mahindra, Birla Sunlife, UTI etc. In Sept’16, promoters increased their stake doing open market purchase around Rs. 100. Increasing stake by Promoters at higher levels is positive as it indicates better growth prospects of the company.​

5. Key Concerns & Risks:

i) Any sharp increase in commodity prices globally may adversely impact the company’s manufacturing cost and margin.

ii) Any significant delay in localisation efforts across businesses that currently have higher import content can impact the company’s operating margin and profitability.

6. Saral Gyan Recommendation: (as on 28th Mar'17)

As per our estimates, Minda Corp can deliver PAT of 162 crores for full financial year 2018-19 with annualized EPS of Rs. 7.74. At current price of 91.35, stock is available at forward P/E multiple of 11.8X based on FY18-19 earnings which makes it attractively valued compared to other auto ancillary companies.

Considering Minda Corporation’s technology ties up with leading global players that gives it edge over competitors with access to MNC OEMs, robust growth potential with significant increase in product portfolio by introducing new products, its leadership position with ability to gain market share across segment and attractive valuations with improved fundamentals,Saral Gyan team recommends “Buy” on Minda Corp Ltd at current market price of Rs. 91.35 for target of 140 over a period of 12 to 18 months.

Buying Strategy:
  • 80% at current market price of 91.35
  • 20% at price range of 80-85 (in case of correction in stock price in near term)
Portfolio Allocation: 3% of your equity portfolio.

An opportunity missed an opportunity lost. If you have patience and want to add extra power in your portfolio, start investing some portion of your savings in fundamentally strong small and mid cap companies - Hidden Gems & Value Picks.

Time has shown that smart investors have made their fortune by investing in equities in long term. None other asset class can match giving you such extra ordinary returns. Yes, its important for you to invest in right set of companies at right price with medium to long term perspective. If you think to invest in stocks for period of 3 months or 6 months, we suggest you to stay out of stock market because you are not investing, you are betting on volatility of stock market which could be risky.

The stocks we reveal through Hidden Gems & Value Picks are companies that either under-researched or not covered by other stock brokers and research firms. We keep on updating our members on our past recommendation suggesting them whether to hold / buy or sell stocks on the basis of company's performance and future outlook.

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Combo 5: VP + 15%
Rs. 9,000

In case if you are not comfortable in subscribing online, you can make the payment through cheque / cash deposit / NEFT transfer in any of our bank and writing back to us sharing transaction details. Click here for bank details.

Do contact us in case of any queries, we will be delighted to assist you.

Wish you happy & safe Investing. 

Regards, 
Team - Saral Gyan

Thursday, November 16, 2017

Hidden Gems & Value Picks Stocks 2017 Performance Update

Dear Reader,

At current situation, how does one know the right stock to invest in and that too at the right price which will ensure strong returns in the long term? This will be a question that will be the uppermost in the minds of most investors wanting to allocate part of their funds towards stocks. Especially in light of the heightened volatility in the markets in the past.

For instance, take a look at the period between 2005 and early 2008. During that time, there was a general sense of euphoria prevailing in India what with the country consistently logging in growth rates of 9% plus and the stock markets zooming to 21,000 levels. And then this optimism snapped.

The global financial crisis reared its ugly head and sent global economic growth and world stock markets including India into a tailspin. Suddenly there was nervousness all around. Forget bad stocks with bad fundamentals, retail investors in India were loathe to put in their money even in good companies available at attractive prices fearing that prices will fall down further. Then 2013 dawned, signs of recovery began to be noticeable and stock markets surged once again. And with stable government in place, major indices Sensex and Nifty made all time highs this year.

Before the demonetisation event, India was on the track of recovery with factors like normal monsoon, seventh pay commission, public infrastructure investments and low crude oil price favouring it. However post demonetisation and later with implementation of GST this year, we have seen sluggish growth over last 2 quarters. We firmly believe that the government move to re-stimulate the economy through recapitalization of banks will help Indian economy to grow at a faster pace in coming years.

Corrections in bull market are healthy and give opportunity to invest. Such corrections in bull markets do test your patience and conviction. If you expect a straight-line appreciation in stock markets, that is not going to happen. Profit bookings at regular intervals bound to bring the indices lower.

The idea really is not to time the markets. That is a feat best left to speculators. For long term investors, even at present when overall valuations of companies seem on the moderate side, there will still be stocks that they can look to add on to their portfolios. These stocks if picked at the right price by proven approaches can turn into multi-bagger opportunities.

We are pleased to share that Hidden Gems (Unexplored Multibagger Small Cap Stocks) and Value Picks (Mid Caps with Plenty of Upside Potential) recommended by our equity analysts in 2017 have outperformed small and mid cap index by wide percentage points ensuring much better returns for our members.

Below is the performance update of small and mid cap stocks recommended by us in 2017 under our Hidden Gems and Value Picks subscription service:
As illustrated in the table above, average returns (as on date) of Hidden Gems stocks recommended in 2017 till August is 27.1% compared to small cap index average returns of 19%. As on date, Hidden Gems stocks are outperforming small cap index by 8.1%.

Our Value Picks stocks of 2017 also outperformed Mid Cap Index. Average returns (as on date) of our Value Picks stocks is 41.7% compared to average returns of 16.8% of mid cap index, out-performance of 24.9%.
At Saral Gyan, team of equity analysts keep on evaluating small and mid cap stocks to explore the best Hidden Gems and Value Picks of stock market. Saral Gyan - Hidden Gems and Value Picks are the small and mid cap stocks with high probability to become multi-bagger stocks in future and a path for our investors to create wealth through equity investments in a long run.

Under our Wealth-Builder service, we encourage our members to replicate our Wealth-Builder portfolio by investing in selective high quality small and mid cap companies. These companies are reporting 20-30% + annualized growth and got their due share of re-rating and delivered exceptional returns to our members so far. Since 1st Jan 2013, Nifty has given returns of 73.4%, Sensex returns is 70.1% where as Wealth-Builder portfolio has given returns of 337.8% returns to our members. In case you have not yet started building a portfolio of high quality and fundamentally strong growth stocks for long term wealth creation, please find below the Wealth-Builder portfolio allocation & performance update for your reference.

We believe, investing in Wealth-Builder portfolio with regular portfolio review from our end can help you achieve market beating, very good returns over a longer team and help you take care of yourself and your family needs, which ultimately lead to a healthy and wealthy life after retirement.

We also take this as an opportunity to inform our readers that our Combo - 2 (Annual subscription of Hidden Gems, Value Picks and 15% @ 90 Days) is the best selling subscription service at Saral Gyan, we have registered maximum subscription of Combo 2 since beginning of this year followed by Combo 1 subscription which includes Wealth-Builder (an offline portfolio management service) also. We keep on updating our members on our past recommendations suggesting them whether to hold / buy or sell stocks on the basis of company's performance and future outlook.

Now you can add power to your equity portfolio by investing in best of small & mid cap stocks - Hidden Gems & Value Picks. Avail attractive discounts by subscribing to our combo packs. Below are the details of our annual subscription charges, simply click on SUBSCRIBE! link to subscribe to our services online using debit / credit card or net banking facility.

SARAL GYAN
SUBSCRIPTION SERVICE
ANNUAL SUBSCRIPTION
PRICE
PAY ONLINE 
CARD / NET BANKING 
Hidden Gems
Rs. 10,000
Value Picks
Rs. 6,000
15% @ 90 Days
Rs. 4,000
Wealth-Builder
Rs. 20,000
Combo 1: HG + VP + WB + 15%
Rs. 32,000
Combo 2: HG + VP + 15%
Rs. 16,000
Combo 3: HG + VP
Rs. 14,000
Combo 4: HG + 15%
Rs. 12,000
Combo 5: VP + 15%
Rs. 9,000

In case if you are not comfortable in subscribing online, you can make the payment through cheque / cash deposit / NEFT transfer in any of our bank and writing back to us sharing transaction details. Click here for bank details.

Do contact us in case of any queries, we will be delighted to assist you.

Wish you happy & safe Investing. 

Regards, 
Team - Saral Gyan

Sunday, November 12, 2017

Releasing Today! Wealth-Builder Portfolio Update - Nov'17

Dear Reader,

We continue to remain invested in high quality small and mid cap companies with strong fundamentals and increase allocation in these companies in case of fall in stock prices during market correction.We believe any major correction in current market must be considered as a buying opportunity. We expect cyclical stocks with strong fundamentals will continue to outperform going forward considering ease in interest rates, stable crude oil prices and higher spending.

Overall market sentiments were bullish since beginning of this year with continuation of positive news flows like uptrend of global recovery, decline in inflation, revival in rural growth with good monsoon in the country. With continuous buying by domestic Institution investors backed by strong retail inflows, Nifty moved above the psychological mark of 10,000 in the month of July this year. Currently, the PE ratio of Nifty 50 stocks is around 26 and is trading well above its historic average. However, with expectation of increase in earning growth in coming quarters which mainly got delayed due to demonetisation and later due to GST implementation, Nifty is expected to trade at similar valuations going forward.

High quality companies reporting 20-30% + annualized growth can deliver exceptional returns for the shareholders in long termIn case you have not yet started building a portfolio of high quality and high growth stocks for long term wealth creation, please find below the Wealth-Builder portfolio allocation for your reference.
We believe, investing in Wealth-Builder portfolio with regular portfolio review from our end can help you achieve market beating and very good returns over a longer term and help you take care of yourself and your family needs, which ultimately lead to a healthy and wealthy life after retirement. 

Since inception, our Wealth-Builder portfolio has outperformed Nifty and Sensex by wide margin. Since 1st Jan 2013, Nifty has given returns of 73.4%, Sensex returns is 70.1% where as our Wealth-Builder portfolio has given returns of 337.8% to our members.
In terms of performance, 6 top performer stocks out of 18 of Wealth-Builder portfolio have given returns in the range of 80% to 745% since 1st Jan'13 that too when many of these stocks out of 18 were added in portfolio during last couple of years. Moreover, 10 stocks out of 18 have made 52 week high / all time high recently. We continue to hold these stocks as we believe these companies are registering good growth every quarter and doing all the right things to continue delivering robust top line and bottom line with strong operating margins.

There were few laggards also which have not performed up to our expectations and we exited these stocks and allocated the available funds to other good investment opportunities to ensure that Wealth-Builder portfolio continue to outperforms major indices by wide margin. 

Note: Wealth-Builder portfolio update - Nov 2017 will be released on 12th Nov'17 (by end of the day today) and we will share the same with our Wealth-Builder members.


Wealth-Builder is our offline portfolio management service. Using Wealth-Builder, you can manage your portfolio like a professional.

1. You Plant – You will manage your money at your own. Using your own Dmat account, you will purchase and sell shares at right point of time.

2. We Nurture – We will guide you with detailed report suggesting which stock to buy, at what price to buy and of course how much to buy, when to sell and how much to sell. Based on our recommendations, you will create and modify your portfolio to maximize your returns on your investments over a period of time.

3. You Harvest – It’s a fact that equities can give you maximum returns compared to any other asset class if invested with a long term horizon (3 to 5 years and above). Investing in fundamentally strong small and mid cap companies ensures that you keep harvesting your money in form of regular and higher dividends year after year along with capital appreciation.

Below are the unique advantage and benefits of Wealth-Builder over conventional PMS and Mutual Fund:

1. You manage your money at your own without giving it to mutual fund or PMS with benefit of any time access to your portfolio.

2. You will not be charged any asset management fee, exit / entry load, administration charges. Only one time nominal annual subscription cost will be charged.

3. Wealth Builder ensures capital protection; your portfolio will not be over churned to earn higher brokerage like many brokerage houses.

4. Exposure to our well researched stocks - Hidden Gems and Value Picks.

5. Limited transactions – once or twice in a month, you can manage your portfolio giving only 30 – 60 minutes in a month without affecting your busy schedule.

Wealth-Builder ensures giving better returns compared to major indices like Sensex or Nifty.

Wealth-Builder subscribers need to replicate our recommended portfolio in exact proportion. For ex: If we recommend to invest Rs 50,000 in “x” company with portfolio allocation of 5% in Rs. 10 lakh portfolio, subscriber starting his portfolio with Rs. 2 lakh need to invest Rs. 10,000 in “x” company with similar portfolio allocation i.e. 5%. On monthly basis, we review Wealth-Builder portfolio and update our members in terms of any changes in allocation or exit / entries in stocks based on fundamental analysis and recent developments in these companies.

Start managing your equity portfolio like a professional, subscribe to Wealth-Builder by paying nominal annual fee of  Rs.20,000 for entire year.

Click here to subscribe to Wealth-Builder online. You can avail attractive discounts on our combo packs, click here for details.

In case if you are not comfortable in making online payment, click here to know about our other payment options and bank details.

Do contact us in case of any queries, we will be delighted to assist you. 

Wish you happy & safe Investing.

Regards, 
Team - Saral Gyan