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Company background Munjal Auto Industries Ltd. (MAIL) manufactures Exhaust systems for 2-w and 4-w, spoke rims for 2-w, Steel Wheel Rims for 2-w and 4-w, Fuel Tanks for 4-w, Seat Frames for 4-w and other automotive assemblies. The company has technical collaboration with Samsung Industries Ltd. of Korea for the manufacture of Fuel Tanks for Four Wheelers. Munjal Auto is a part of Hero Group. Key highlights from management meet
~90% of Hero MotoCorp’s (HMCL) muffler requirements are met by Munjal Auto, with balance being supplied by Majestic Auto (Hero Group Company). The company supplies to all HMCL models, except 100 cc bikes.
December month production has been the best ever in the company’s history. HMCL normally has a 5-day plant shutdown in December every year; however, this time as demand for 2-w remains strong, it has decided to do away with the shutdown.
MAIL indicated that it supplies ~18k units/day of HMCL’s daily requirement of 22k units. It expects this daily run rate to go up to 22k units of HMCL’s requirement of 25k/day.
Mufflers contribute 80-85% of MAIL’s revenue, with balance being wheel rims, fuel tanks and other small components. ~97% of MAILs’ revenue comes from HMCL. It supplies fuel tanks to Tata Nano and is in talks with General Motors for supplies of chassis components for its models.
MAIL currently operates at >100% utilisation in 2-w and will be debottlenecking its existing plants to cater to HMCL’s requirements. Plant wise production stands at 8k units/day at Haridwar (to go up to 9.5k units in FY13), 5.5k units at Bawal (7k units in FY13) and 4.5k units at Baroda. Management categorically stated that 2-w business is low capital intensive and with Rs250-300 mn capex, it can generate Rs1 bn revenue in 2 years time.
MAIL has ~1,300 workers at Baroda, while ~300 workers at Haridwar + Haryana. Splendor/Passion/CD Dawn are produced at Haridwar and Haryana plants, while >100 cc models of HMCL are produced only at Baroda. 49% of MAIL’s revenue comes from tax free Haridwar plant, which also contributes ~80% to profits. Haridwar plant has excise benefit till FY19 and income tax benefit FY14. 70% of Haridwar profits post FY14 will be taxed.
The company stated that it will continue to focus on HMCL only and is not looking to supply to any other 2-w OEM.
On 4-w, it currently operates at ~25% utilisation (it has capacity to produce 800 fuel tanks/day at Baroda at capex of Rs250 mn) and meets 80% of Tata Nano’s fuel tanks needs. It is actively in talks with General Motors (GM) for supplies of fuel tanks and chassis components, which if materialises has the potential to generate Rs1 bn revenue on capex of Rs700-800 mn as also provide much needed revenue diversification (away from over dependence on HMCL). It currently has technology tie up with Samsung Industries of Korea for fuel tanks for 4-w. Management indicated that it will always look out for technological tie ups for any new 4-w component supplies.
It will incur capex of Rs250-300 mn on 2-w dedicated to HMCL, once it puts up its fourth plant.
Typically, the order schedules from OEs follow a three steps approach: Firstly, MAIL will be given the annual production plan Then it gets 3 months rolling plan and Lastly it gets firm schedule for next month on every 26th of the current month.
It paid dividend of Rs7.50 per share in FY11 (~4% dividend yield).
Consistent growth with healthy balance sheet profile MAIL has maintained consistent growth trajectory with revenue/EBITDA/PAT CAGR of 34%/30%/34% over FY08-11. This has been led by consistent performance by its largest client HMCL (23%/21%/28% CAGR over FY08-11). The company has efficiently managed its working capital with net working capital hovering at -5 to 5 days over FY09-11. Balance sheet is healthy at net D/E of 0.31x, though the rise in leveraging is led by investment in capacity expansion over FY09-11. Its return ratios remain strong at 25-30% in FY11.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Company background Munjal Auto Industries Ltd. (MAIL) manufactures Exhaust systems for 2-w and 4-w, spoke rims for 2-w, Steel Wheel Rims for 2-w and 4-w, Fuel Tanks for 4-w, Seat Frames for 4-w and other automotive assemblies. The company has technical collaboration with Samsung Industries Ltd. of Korea for the manufacture of Fuel Tanks for Four Wheelers. Munjal Auto is a part of Hero Group. Key highlights from management meet
~90% of Hero MotoCorp’s (HMCL) muffler requirements are met by Munjal Auto, with balance being supplied by Majestic Auto (Hero Group Company). The company supplies to all HMCL models, except 100 cc bikes.
December month production has been the best ever in the company’s history. HMCL normally has a 5-day plant shutdown in December every year; however, this time as demand for 2-w remains strong, it has decided to do away with the shutdown.
MAIL indicated that it supplies ~18k units/day of HMCL’s daily requirement of 22k units. It expects this daily run rate to go up to 22k units of HMCL’s requirement of 25k/day.
Mufflers contribute 80-85% of MAIL’s revenue, with balance being wheel rims, fuel tanks and other small components. ~97% of MAILs’ revenue comes from HMCL. It supplies fuel tanks to Tata Nano and is in talks with General Motors for supplies of chassis components for its models.
MAIL currently operates at >100% utilisation in 2-w and will be debottlenecking its existing plants to cater to HMCL’s requirements. Plant wise production stands at 8k units/day at Haridwar (to go up to 9.5k units in FY13), 5.5k units at Bawal (7k units in FY13) and 4.5k units at Baroda. Management categorically stated that 2-w business is low capital intensive and with Rs250-300 mn capex, it can generate Rs1 bn revenue in 2 years time.
MAIL has ~1,300 workers at Baroda, while ~300 workers at Haridwar + Haryana. Splendor/Passion/CD Dawn are produced at Haridwar and Haryana plants, while >100 cc models of HMCL are produced only at Baroda. 49% of MAIL’s revenue comes from tax free Haridwar plant, which also contributes ~80% to profits. Haridwar plant has excise benefit till FY19 and income tax benefit FY14. 70% of Haridwar profits post FY14 will be taxed.
The company stated that it will continue to focus on HMCL only and is not looking to supply to any other 2-w OEM.
On 4-w, it currently operates at ~25% utilisation (it has capacity to produce 800 fuel tanks/day at Baroda at capex of Rs250 mn) and meets 80% of Tata Nano’s fuel tanks needs. It is actively in talks with General Motors (GM) for supplies of fuel tanks and chassis components, which if materialises has the potential to generate Rs1 bn revenue on capex of Rs700-800 mn as also provide much needed revenue diversification (away from over dependence on HMCL). It currently has technology tie up with Samsung Industries of Korea for fuel tanks for 4-w. Management indicated that it will always look out for technological tie ups for any new 4-w component supplies.
It will incur capex of Rs250-300 mn on 2-w dedicated to HMCL, once it puts up its fourth plant.
Typically, the order schedules from OEs follow a three steps approach: Firstly, MAIL will be given the annual production plan Then it gets 3 months rolling plan and Lastly it gets firm schedule for next month on every 26th of the current month.
It paid dividend of Rs7.50 per share in FY11 (~4% dividend yield).
Consistent growth with healthy balance sheet profile MAIL has maintained consistent growth trajectory with revenue/EBITDA/PAT CAGR of 34%/30%/34% over FY08-11. This has been led by consistent performance by its largest client HMCL (23%/21%/28% CAGR over FY08-11). The company has efficiently managed its working capital with net working capital hovering at -5 to 5 days over FY09-11. Balance sheet is healthy at net D/E of 0.31x, though the rise in leveraging is led by investment in capacity expansion over FY09-11. Its return ratios remain strong at 25-30% in FY11.
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