Dear Sir,

Recently we shared details on a very good company with our Alpha and Alpha + members and would like to share with you details on the same.

These are interesting times for auto ancillary companies in India; crude prices are falling, interest rates have started trending lower and after a slump of 2 years automobiles sales are expected to improve in the months and quarters ahead. What can add icing to the cake is if someone can find a good company with reasonable entry barriers to its business and most importantly available at reasonable valuations because these days valuations aren’t cheap for good companies.

With reasonable valuations, if the company does well you get the benefit of both Earnings and PE expansion as experienced in our multiple recommendations which are up 5-15 times.

We believe we have found one such company and you too can get the name of the stock and invest in it by subscribing to either of Alpha or Alpha + before 28thFeb’15.

Details on latest Alpha stock

In general we don’t like to compromise with the quality of stocks we share details on or invest in because quality of business saves you in troubled times and such companies are the first ones to bounce back when the going gets good.

The stock that has been chosen for recommendation deals in only one kind of product but is amongst the global leaders in its line of business. Over the years the company has forged strong tie-ups with all the leading OEMs and as a result commands a mammoth 50% + market share.

The company’s sales to OEMs enjoy strong protective factors due to established track record of product quality; and relatively high industry entry barriers due to long product approval process of OEMs. This apart, the technological know-how, and ability to offer products at much lower cost in comparison to competitors also act as entry barriers.

Besides, the company has a very balanced mix of OEM, aftermarket and exports sales. While after-market sales lend stability to revenues during extended periods of slowdown, export sales offer strong opportunities of expansion into newer markets and thereby higher growth for the company.

As far as automobile industry is concerned, after a slump in sales of last 2-3 years, with economic recovery expected in 2015, demand for automobiles across the various categories is likely to receive required impetus. While sales growth in commercial vehicles and passenger vehicles is expected to enter the positive trajectory, growth is expected to accelerate in the two-wheeler and three-wheeler segments, driven by expected moderation in interest rates, fall in ownership cost (lower crude prices) and improvement in economic activity and consumer sentiments.

Operating Performance – As far as operating performance of the company is concerned, it has consistently reported stable sales and very good profitability across the years.

The level of profitability of the company can be judged from the fact that on standalone basis its gross margins are in excess of 45%, EBITDA margins 20% + and PAT margins in the range of 10-12%. Also, the pre-tax ROE on standalone basis is in excess of 25%.

Besides, the promoter holding is in excess of 50% and the company paid out a very good dividend last year.

As mentioned above, you too can get the name of the stock and invest in it by subscribing to either of Alpha or Alpha + before 28th Feb’15.

Best Regards,

Ekansh Mittal
Ph.: 0512-6050062, Mob: +91-9818866676
Email: [email protected]