INDIA MOTOR PARTS LTD-- IMPAL

IMPAL CMP 680,BSE CODE 590065

INDIA MOTOR PARTS IS A TVS GROUP COMPANY WHICH TRADES BRANDED SPARE PARTS OF AUTO ANCILLARIES IN THE REPLACEMENT MARKET.  IT HAS TIE UP WITH VARIOUS AUTO ANCILLARIES COMPANIES TO SELL THE BRANDED PARTS.

OVER THE PAST FEW YEARS, STRONG GROWTH IN THE SALES OF AUTO SECTOR HAS CREATED A WONDERFUL OPPORTUNITY FOR A COMPANY (ONE OF A KIND) LIKE IMPAL.

THERE HAS BEEN INCREASING AWARENESS AMONG CONSUMERS TO GO FOR BRANDED SPARES FOR THE PURPOSE OF REPAIRING THEIR VEHICLES DUE TO BETTER QUALITY AND INCREASED LIFE OFFERED BY THESE PRODUCTS.

THE BEST THING ABOUT THIS COMPANY IS THAT EVEN IF DUE TO INFLATION AND OTHER ISSUES RELATED TO SLOWDOWN ETC WHEREIN THERE IS SLOWDOWN IN THE AUTO SPACE, THIS COMPANY WILL CONTINUE TO GROW CONSISTENTLY BECAUSE THERE WILL BE MORE FOCUS AMONG CONSUMERS TO GO FOR FREQUENT REPAIRS IN THEIR VEHICLES INSTEAD OF PURCHASING NEWER VEHICLES DUE TO LESSER SPENDING POWER.  PLUS WITH INCREASED AWARENESS OF THE BENEFITS OF BRANDED HIGHER QUALITY SPARES, THERE ARE INCREASED GROWTH PROSPECTS FOR THE COMPANY.

AND IF THE AUTO SALES INCREASE, THEN ALSO THIS COMPANY ENJOYS MORE NUMBER OF CUSTOMERS FEW YEARS DOWN THE LINE.

A LOOK AT THE FINANCIALS OF THE LAST FEW YEARS SHOWS CONSISTENT GROWTH BY THE COMPANY. PLUS THERE HAS BEEN GOOD REWARD FOR THE SHAREHOLDERS IN TERMS OF CAPITAL APPRECITAION AND HIGHER DIVIDENDS.

EQUITY IS SMALL AT 4.16 CRORE WITH AROUND 41 LAC SHARES OUTSTANDING. PROMOTER HOLDING IS AT 52%. MARKET CAP BASED ON CMP IS AROUND 281 CRORES.

YEAR	06	07	08	09	10	11
SALES	207	227	244	300	358	429
% GROWTH		10%	7.5%	26.2	19%	19.83%
OP	14.5	17	18.18	26	37.29	40.8
NP	9	10.8	12	17.37	24.75	28.17
% GROWTH		20%	10%	44%	42.6%	13.8%
EPS	20.8	25	27.24	40	59	67.7

COMPANY HAS DECLARED (INTERIM) DIVIDEND OF RS 17 PER SHARE.

COMPANY HAS ALL THE ATTRIBUTES OF A RETAIL STORY AVAILABLE AT REASONABLE VALUATION.

POSITIVES:

1.       LOW CAPEX BUSINESS MODEL

2.       CONSISTENT GROWTH

3.       REASONABLE VALUATIONS OF A PE OF AROUND 10 BASED ON LATEST RESULTS.

4.       CONSISTENT FREE CASH FLOW GENERATION.

5.       INCREASING DIVIDENDS OVER THE YEARS

6.       ALL THESE YEARS, THE GROWTH HAS BEEN ACHIEVED WITHOUT EQUITY DILUTION OR INCREASING DEBT.

7.       HEALTHY RETURN RATIOS

NEGATIVES:

1.       UNLESS THE MANAGEMENT AGGRESSIVELY RAMPS UP OPERATIONS IN DIFFERENT REGIONS, EXPLOSIVE GROWTH MIGHT NOT OCCUR.

2.       COMPANY MIGHT BE EXPOSED TO SOME ISSUES LIKE DEBTORS ETC.

3.       THREAT OF COMPETITION EXISTS.

4.       VERY POOR LIQUIDITY 

TECHNOFAB ENGINEERING LTD

TECHNOFAB ENGG LTD

Cmp 162 market cap 170 crores.

Technofab engineering is an EPC company involved in turnkey projects for  the power, infrastructure and industrial sectors.   Its main area of work is in balance of plant space. (BOP)

The projects taken up fall in the following broad categories

·         Industrial, Utility and Low Pressure Piping Systems

·         Fuel Oil, Unloading, Storage and Handling Systems

·         Fire Detection, Alarm and Protection Systems

·         Water, Wastewater and Effluent Treatment and Recycling Systems.

·         Tankages

·         Raw / Sea Water Intake Systems

·         Plant Electrification / Transmission & Distribution / Rural Electrification

CUSTOMER LIST

·         Power Sector - NTPC / BHEL / LANCO / SEB’s / DVC / Reliance / ABB / Siemens / Alstom

·         Nuclear Power - NPCIL

·         Industrial Sector - NALCO / SAIL / RINL / NMDC / NFL / Maruti / IFFCO

·         Oil & Gas - TEMA Oil Refinery / GAIL / IOC

·         Water Systems and Water Treatment - Municipalities / NBCC / World Bank / ADB / AFDB aided Projects

FINANCIALS

Equity capital is 10.49 crores and each share has a face value of Rs 10. Promoter holding as on dec 10 was 38.23% as against 36.8% as on Sep 10 qtr. Even during last qtr of fy 11, the promoters have been buying from open market through creeping acquisition.

As on dec 10, fii holding was 13%.

The company had come out with an IPO in fy 10 at a price of 240.  As on Dec 2010, the company had unutilised amount of 44 crores out of total proceeds of 71 crores.

Company has low debt all throughout the last few years.

 Last few years results

Year	05	06	07	08	09	10	9mfy10	9mfy11
Sales	50	54	61	81	149	200	112	166
OP	1.9	2.74	3.13	9.9	22.27	33.76	17.38	25.5
Int	1.5	2	1.6	1.6	3.24	3.17	2.27	2.81
NP	0.28	0.48	0.79	5.31	11.7	19	10	15

Order book as on Nov 2011 was around 780 crores which gives strong revenue visibility for the next 2-3 years.

POSITIVES:

1.    The company has shown stellar growth in sales and net profits especially from fy 08. Over fy 06 to fy 10, turnover has grown at CAGR of 39%, EBIDTA at 87% and Adj Net profit at 148%.

2.    Healthy order book giving revenue visibility for next 3-4 years.

3.    Geographical diversification into countries outside India like their foray into Ghana, Zambia etc.  Margins from exports are expected to be higher as compared to domestic business.

4.    Product diversification—The company is continuously trying to broaden its product range like  product storage tank, large floating roof, double walled tanks, cryogenic tanks as well as process tanks used in zinc and alumina industries.

5.    Low leverage—In a very capital working intensive industry, the company has low leverage as compared to peers.

6.    Promoters have been raising their stake since listing through creeping acquisition from the markets.

RISK FACTORS

1.    Further growth will require higher working capital to be employed by the company.

2.    High client concentration in its order book. Top 5 clients account for around 30-35% of its order book.

3.    The usual sector specific risk factors of delayed execution and delayed payment apply to this company.

4.    There is some lumpiness to the earnings of the company with March qtr being the best quarter as compared to other quarters.

BAJAJ CORP LIMITED

BAJAJ CORP

Bajaj Corp is a company belonging to the Shishir Bajaj group. It had come out with IPO at a price of 660 per share with face value of share at Rs 5.   Bajaj Corp is subsidiary of Bajaj Consumer Care and is the exclusive licensee of the brands owned by Bajaj Consumer Care for 99 years beginning 2008.

The company is a market leader in the light hair oil category with its Bajaj Almond Drops Hair  Oil brand.  The brand has close to 50% market share in the category.  The company has grown its market  share from 31.4% in fy 05 to 52.5% in Dec 2010 and has been able to increase the cost of a 100 ml bottle from Rs 28 to Rs 42 during that period.  So effectively the company does have some pricing power.  Bajaj Almond drops hair oil contributes to around 90% of total turnover for Bajaj Corp.

HAIR CARE market is of around 9000 crore and accounts for around 8% of the overall FMCG market.

And hair oils constitutes around 55% of total hair care market, rest of the market taken by shampoos, hair dyes, hair conditioners etc.

Among the hair oil category,  coconut based hair oils have around 51% share whereas other categories like cooling hair oil has 12% share, heavy amla based hair oils has 15% share whereas the light hair oil has around 14% share of total hair oil market.

Light Hair oil category is among the fastest growing category in the hair oil segment.  It has been growing close to 27% CAGR since past 4-5 years compared to the overall  21% growth in hair oil market.   Almond hair oils is growing at 32.7% CAGR by volume and 41% by value in the last 5 years.  This category has been the main driver in the light hair oil category growth.

As on Dec 10,  Bajaj Corp had 52% market share by value and 48.7% market share by volume.

Besides Bajaj Almond Drops hair oil, the company has other brands like Brahmi Amla, Amla Shikakai, and Jasmine oils and also has Red/Black tooth powder.

FINANCIALS

Current market cap at price of around 460 is 1375 crores.  Book value is 110 per share.  Company has 352 crores as investments which includes FDs, bank CDs, FMPs etc.  

Last two years and 9month fy 11 results are as below

Year	09	10	9m fy 10	9m fy 11
Sales	244	330	208	248
Ebidta	51.62	97.4	64	77.4
Ebidta margin	21.12%	29.51%	30.72%	31.1%
Net profit	47	83.91	56.5	57.22
NPM	19.23%	25.43%	27.17%	23.21%

The company had incurred IPO expenses worth 18.95 crores and is charging these expenses to the profit and loss accounts during the last three quarters of fy 11 after which IPO expenses will not recur in the following quarters or year.  This explains the reduced NPM of 23.21% as compared to 27.17% for 9M fy 10, inspite of higher EBIDTA margins during same periods.

RAW MATERIALS 

Raw materials constitute around 42% of total expenses and is mainly consisting of LLP – light liquid paraffin (35%), glass bottles (26%), perfumes and other additives (8.9%), refined veg oils (8.25%), corrugated boxes (6.76%), caps (5.6%) and others amounting to 8.66%.

 

Out of these, the price of LLP has been increasing consistently over the years since it is a crude derivative.

GROWTH DRIVERS:

The company is looking to penetrate the rural markets where the penetration of light hair oils is low and chances of gaining higher market share are bright due to rural demand.   Company has also launched smaller packs in satchet forms.

The company has ample cash and plans to make some suitable acquisition which complements its current business.

It also plans to launch brand extensions of Bajaj Almond drops and hence wishes to leverage the brand name further.

POSITIVES:

Company is market leader in its category of light hair oil with around 50% market share.

Company is debt free and has close to around 350 crores post its IPO to make some suitable acquisition.

The sharp correction in its share price (IPO was priced at 660 per share) from 800 levels post its listing to current price of around 450-460 offers a better entry price.

NEGATIVES:

Currently company has only a single product namely Bajaj Almond drops hair oil which contributes major part of its sales and profits.

Till date the management has not made any move in the direction of utilisation of funds for acquisition etc.

Management gave themselves dividend amounting to around 100 crores before bringing out the  IPO.

Aggresive entry of other players like Marico and Hind lever in the same segment of light hair oils might impact the company adversely.

Raw material price volatility might affect profitability if crude prices continue to rise.

TECHNICALS:

Post its listing, the stock has posted a high of around 816 and then has been in a sustained downtrend and posted a low of 367 in feb 2011 after which it posted a sharp rise to levels of around 547 within just 3 days giving faster retracement of the last segment of its fall. Since then it has been consolidating between 430 to 480 levels.