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Hi s t or y:
Munjal Auto Industries Ltd. (MAIL) is a part of a famous Hero Group
of companies, sporting flagship companies like Hero Motocorp Ltd
(The world’s largest producer of Motorcycles) and Hero Cycles (The
world’s largest producers of cycles). During 2005-2006 Binola Unit of
the Company was demerged into separate Company namely, Shivam
Autotech Limited in the ratio of 1:2.
Key Hi ghl i ght s :
• Leading auto component manufacturing company
in India producing complete Exhaust systems,
Wheel rims and other automotive assemblies.
• The company holds the pride of being among the
largest manufacturer of the exhaust systems in the
world, manufacturing close to 12,000 systems per
day. MAIL manufactures over 20 different models
of exhaust systems complete for motorcycles and
scooters. It has capability to manufacture exhaust
system for four wheelers also.
• Company produces more than 10,000 spoke rims
for motorcycles and steel wheel rims everyday.
MAIL has the capability to manufacture Steel
Wheel rims for two wheelers, three wheelers and
passenger cars.
• Its products are Exhaust Systems Complete, Steel
Wheel Rims, Motorcycle Spoke Rims.
• Its major customer are Hero Motocorp, Autofit Pvt.
Ltd, GM and Schneider Electric.
• Munjal auto is a leader in providing specialized
automotive components involving processes of
stampings, electroplating, painting and forging.
• Currently company has three plants Waghodia
Plant, Bawal Plant and Haridwar plat.
• The company's Haridwar plant in Uttarakhand
commenced operations from 31st March 2010 and
Bawal unit in Haryana commenced operations in
Dec 09.
• The principal customer Heromotocorp is a rocksolid
performer. It continues to be a formidable
player in the two-wheeler industry is and
consolidating its market share to reach over 50
percent currently
La t e s t De v e l opment :
• On Dated 24th September, Board has approved Split of FV from Rs 10 to Re 1 per share.
Inve s tment Rat i ona l e :
• Company’s Debt-Equity is in comfortable zone (D/E ratio=0.48) and company is reducing it every
year.
• MAIL is a consistence dividend paying company, this year company has announced 75% dividend
(FY11=75%, FY10=50%, FY0915%)
• The company has total investments in the books are 27.52 cr. (which is in form of unquoted units).
NAV of the investment is around Rs 27.50 per shares.
• Its major customer is world's largest two wheeler manufacturer Hero MotoCorp. is growing above
industry rate. The company has lined up capex of Rs 800-900 crore for FY 2012, which would
largely be utilized towards setting up new plant. Besides this, it plans to expand capacity from 6.15
million vehicles as on 31st March 2011 to 6.4 - 6.5 million vehicles end of FY 12 through various
measures at existing plants such as de bottlenecking, out sourcing parts etc.
• Hero Motocorp has reported sales growth of 20.1 percent for the second quarter from July-to-
September. It sold 1,544,315 units as against 12,85,944 units in the corresponding quarter of 2010-
11.
o During the September month Hero Motocorp has achieved its highest ever monthly sales, it
sold 5,49,625 units in September.
• The company is currently working at a capacity of 60.63% in Mufflers (which contributes around
86% of the total sales), Autorims at capacity of 41.10% (Which contributes around 11% of the total
sales), and Scooter Wheel at capacity of 72% (Contributes 2.67% of total sales), thus company is
able to meet the Hero Motocorp’s total requirement in near future.
• The company enjoys positive cash flow for last 5 years.
• Recent selloff in commodity will help company to improve margin in upcoming qtrs.
• Currently company is available at a PEx of 5.23 on TTM basis.
• Market cap to sales is only 0.31, which gives clear visibility for appreciation.
• Price to Book Value (P/BV) is only 0.56.
• ROCE is above 23% since last 5 years.
• At this price company’s dividend yield is 3.07%
Indus t r y:
The present size of the auto components industry in India was $26 billion in 2011, which is <1% of the
global auto components industry. The Indian auto parts industry has been growing at a CAGR 18% p.a. for
past 7 years. Further, in tandem with the surge in vehicle production, the country's auto parts industry is
aiming for a fourfold growth to around `5 trillion ($110 billion from $26 billion by 2020) {Automotive
Component Manufacturers Association of India (ACMA)}. The industry for the first time, during FY11
recorded a Year on Year (YOY) growth at the highest 36% compared to the last year on major contribution
from exports at USD 5 billion and fresh investment from US at approximately USD 2 billion. Seeing the
vast potential of the automobile industry, Indian auto component industry had increased its Capex by 33%
to `9,000 crore in 2010-11. In coming years Indian is going to be hub for the auto ancillary due to favorable
political condition and affordable labor. Till now many international auto major has announce to source
there auto part need from India. Rising per capital income in the country, due to initiative taken by Govt.
through MANREGA and other schemers will help to increase per capita income and this will help to boost
two wheeler demands in rural areas.
Ri sk
Although Auto components’ industry is bound to grow in near future but still other prime factors capable
of hampering its growth are: lingering post-crisis difficulties in high-income countries, political turmoil in
the Middle-East and North Africa and slow industrial production and trade from Japan due to earthquake
and tsunami.
Quar t e r ly Re sul t :
During the Q1 FY2011-12 (June), the company's net sales grew by 66.9% to Rs 160.83 crore. PBIDT
margin was 91.18 down from 9.21% year ago due to rise in raw material cost. Raw material cost to net
sales increased from 68.49% to 76.56% in June 11. Staff cost increased 36% on YoY basis, while Employ
cost to sales declined to 3.74% compare to 4.59% in June10. The growth in PBIDT was up 66.5% to Rs
14.77 crore. The interest cost surged 109% to Rs 1.49 crore while the depreciation cost grew by 37% to Rs
2.47 crore. The other income was also up by 130% to Rs 0.92 crore. Further PAT was boosted by robust
132.8% to Rs 10.15 crore.
Va luat i on & vi ew:
After strong double-digit growth in FY 2009-10 and FY 2010-11, the Indian auto industry is facing
headwinds to growth in the current fiscal. The adverse impact of the macro factors has dented the demand
of cars, M&HCVs while light commercial vehicles and Two Wheelers have remained less affected from
this move. With slow-down in demand, even the industry body SIAM has downgraded the annual forecast
to 11-13% against 12-15% previously forecasted for financial year 2011-12. The worst downgrade in
growth forecast was for passenger vehicles to 10-12% against previous 16-18%. Largest passenger car
player Maruti expecting single digit growth reiterated this for FY 2012. On the positive side, the easing
metal and polymer prices can provide some respite for the auto companies. The current quarter is typically
a dull quarter on monsoons, and sales are expected to pick up from October 2011 with festive season
kicking in.
As MAIL is an auto ancillary company and caters to mainly two wheeler industry, is expected to do well in
near future as two wheeler industries has shown good growth compare to Car and M&HCVs. Due to high
interest cost, now we expect shift of demand from Car to Two wheeler from mid income consumer..
Its major customer Hero Motocorp is one of the largest two wheeler producer in India with monthly auto
sales over 5 lakhs unit. After exit from JV with Honda, Hero motocorp is now free to export its vehicle to
other countries also. Being a major supplier for the auto part to Hero Motocorp, Munjal Auto is expected
to be a major beneficiary from this move.
During the FY 2010-11 MAIL has shown 78.8% growth in Top line and 57.3% jump in bottom line. We
expect company to deliver Earnings of Rs.29 per share in FY 2011-12 and Rs 33-34 in FY13. On these
earnings MAIL currently trades at a PEx 5.58 of FY11-12 and 4.83 times of FY12-13 earnings. On this
performance we advise to accumulate this stock for medium-term in range of 130 to 160 for a target price
of Rs 220. Higher targets 270+ are also possible in next 2-3 years
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Hi s t or y:
Munjal Auto Industries Ltd. (MAIL) is a part of a famous Hero Group
of companies, sporting flagship companies like Hero Motocorp Ltd
(The world’s largest producer of Motorcycles) and Hero Cycles (The
world’s largest producers of cycles). During 2005-2006 Binola Unit of
the Company was demerged into separate Company namely, Shivam
Autotech Limited in the ratio of 1:2.
Key Hi ghl i ght s :
• Leading auto component manufacturing company
in India producing complete Exhaust systems,
Wheel rims and other automotive assemblies.
• The company holds the pride of being among the
largest manufacturer of the exhaust systems in the
world, manufacturing close to 12,000 systems per
day. MAIL manufactures over 20 different models
of exhaust systems complete for motorcycles and
scooters. It has capability to manufacture exhaust
system for four wheelers also.
• Company produces more than 10,000 spoke rims
for motorcycles and steel wheel rims everyday.
MAIL has the capability to manufacture Steel
Wheel rims for two wheelers, three wheelers and
passenger cars.
• Its products are Exhaust Systems Complete, Steel
Wheel Rims, Motorcycle Spoke Rims.
• Its major customer are Hero Motocorp, Autofit Pvt.
Ltd, GM and Schneider Electric.
• Munjal auto is a leader in providing specialized
automotive components involving processes of
stampings, electroplating, painting and forging.
• Currently company has three plants Waghodia
Plant, Bawal Plant and Haridwar plat.
• The company's Haridwar plant in Uttarakhand
commenced operations from 31st March 2010 and
Bawal unit in Haryana commenced operations in
Dec 09.
• The principal customer Heromotocorp is a rocksolid
performer. It continues to be a formidable
player in the two-wheeler industry is and
consolidating its market share to reach over 50
percent currently
La t e s t De v e l opment :
• On Dated 24th September, Board has approved Split of FV from Rs 10 to Re 1 per share.
Inve s tment Rat i ona l e :
• Company’s Debt-Equity is in comfortable zone (D/E ratio=0.48) and company is reducing it every
year.
• MAIL is a consistence dividend paying company, this year company has announced 75% dividend
(FY11=75%, FY10=50%, FY0915%)
• The company has total investments in the books are 27.52 cr. (which is in form of unquoted units).
NAV of the investment is around Rs 27.50 per shares.
• Its major customer is world's largest two wheeler manufacturer Hero MotoCorp. is growing above
industry rate. The company has lined up capex of Rs 800-900 crore for FY 2012, which would
largely be utilized towards setting up new plant. Besides this, it plans to expand capacity from 6.15
million vehicles as on 31st March 2011 to 6.4 - 6.5 million vehicles end of FY 12 through various
measures at existing plants such as de bottlenecking, out sourcing parts etc.
• Hero Motocorp has reported sales growth of 20.1 percent for the second quarter from July-to-
September. It sold 1,544,315 units as against 12,85,944 units in the corresponding quarter of 2010-
11.
o During the September month Hero Motocorp has achieved its highest ever monthly sales, it
sold 5,49,625 units in September.
• The company is currently working at a capacity of 60.63% in Mufflers (which contributes around
86% of the total sales), Autorims at capacity of 41.10% (Which contributes around 11% of the total
sales), and Scooter Wheel at capacity of 72% (Contributes 2.67% of total sales), thus company is
able to meet the Hero Motocorp’s total requirement in near future.
• The company enjoys positive cash flow for last 5 years.
• Recent selloff in commodity will help company to improve margin in upcoming qtrs.
• Currently company is available at a PEx of 5.23 on TTM basis.
• Market cap to sales is only 0.31, which gives clear visibility for appreciation.
• Price to Book Value (P/BV) is only 0.56.
• ROCE is above 23% since last 5 years.
• At this price company’s dividend yield is 3.07%
Indus t r y:
The present size of the auto components industry in India was $26 billion in 2011, which is <1% of the
global auto components industry. The Indian auto parts industry has been growing at a CAGR 18% p.a. for
past 7 years. Further, in tandem with the surge in vehicle production, the country's auto parts industry is
aiming for a fourfold growth to around `5 trillion ($110 billion from $26 billion by 2020) {Automotive
Component Manufacturers Association of India (ACMA)}. The industry for the first time, during FY11
recorded a Year on Year (YOY) growth at the highest 36% compared to the last year on major contribution
from exports at USD 5 billion and fresh investment from US at approximately USD 2 billion. Seeing the
vast potential of the automobile industry, Indian auto component industry had increased its Capex by 33%
to `9,000 crore in 2010-11. In coming years Indian is going to be hub for the auto ancillary due to favorable
political condition and affordable labor. Till now many international auto major has announce to source
there auto part need from India. Rising per capital income in the country, due to initiative taken by Govt.
through MANREGA and other schemers will help to increase per capita income and this will help to boost
two wheeler demands in rural areas.
Ri sk
Although Auto components’ industry is bound to grow in near future but still other prime factors capable
of hampering its growth are: lingering post-crisis difficulties in high-income countries, political turmoil in
the Middle-East and North Africa and slow industrial production and trade from Japan due to earthquake
and tsunami.
Quar t e r ly Re sul t :
During the Q1 FY2011-12 (June), the company's net sales grew by 66.9% to Rs 160.83 crore. PBIDT
margin was 91.18 down from 9.21% year ago due to rise in raw material cost. Raw material cost to net
sales increased from 68.49% to 76.56% in June 11. Staff cost increased 36% on YoY basis, while Employ
cost to sales declined to 3.74% compare to 4.59% in June10. The growth in PBIDT was up 66.5% to Rs
14.77 crore. The interest cost surged 109% to Rs 1.49 crore while the depreciation cost grew by 37% to Rs
2.47 crore. The other income was also up by 130% to Rs 0.92 crore. Further PAT was boosted by robust
132.8% to Rs 10.15 crore.
Va luat i on & vi ew:
After strong double-digit growth in FY 2009-10 and FY 2010-11, the Indian auto industry is facing
headwinds to growth in the current fiscal. The adverse impact of the macro factors has dented the demand
of cars, M&HCVs while light commercial vehicles and Two Wheelers have remained less affected from
this move. With slow-down in demand, even the industry body SIAM has downgraded the annual forecast
to 11-13% against 12-15% previously forecasted for financial year 2011-12. The worst downgrade in
growth forecast was for passenger vehicles to 10-12% against previous 16-18%. Largest passenger car
player Maruti expecting single digit growth reiterated this for FY 2012. On the positive side, the easing
metal and polymer prices can provide some respite for the auto companies. The current quarter is typically
a dull quarter on monsoons, and sales are expected to pick up from October 2011 with festive season
kicking in.
As MAIL is an auto ancillary company and caters to mainly two wheeler industry, is expected to do well in
near future as two wheeler industries has shown good growth compare to Car and M&HCVs. Due to high
interest cost, now we expect shift of demand from Car to Two wheeler from mid income consumer..
Its major customer Hero Motocorp is one of the largest two wheeler producer in India with monthly auto
sales over 5 lakhs unit. After exit from JV with Honda, Hero motocorp is now free to export its vehicle to
other countries also. Being a major supplier for the auto part to Hero Motocorp, Munjal Auto is expected
to be a major beneficiary from this move.
During the FY 2010-11 MAIL has shown 78.8% growth in Top line and 57.3% jump in bottom line. We
expect company to deliver Earnings of Rs.29 per share in FY 2011-12 and Rs 33-34 in FY13. On these
earnings MAIL currently trades at a PEx 5.58 of FY11-12 and 4.83 times of FY12-13 earnings. On this
performance we advise to accumulate this stock for medium-term in range of 130 to 160 for a target price
of Rs 220. Higher targets 270+ are also possible in next 2-3 years
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