Munjal Auto Industries - Accelarating Towards Success

At last, the outcome of one of the most awaited event of 2014, is revealed, and it definitely proved to be above expectations of most of the analyst in the country. Markets got what it wanted.
Now comes the most interesting part of delivering by the newly formed NDA government.
The rise in stock markets off-late, was based on the positive speculations of strong govt formation. So it was more of sentiments that led to such rally, rather than any improvement in financial performance.
But with time, investors will again demand the performance, and then, they will once again start judging the markets based on it.
Lets keep our fingers crossed that NDA govt will not let us down.

If things goes as per expectations and growth starts picking up, auto sector would one of the first movers in the market. Hence, I am going with one of the stock in auto parts sector, which has been able to show consistent growth, even in difficult times. Hope to see it perform even better with favoring market conditions in future, as expected.

Munjal Auto Industries is a leading auto component manufacturing company in India producing Exhaust systems complete for two wheelers and four wheelers, Spoke rims for two wheelers, Steel Wheel Rims for Two Wheelers and Four Wheelers, Fuel Tanks for Four wheelers, Seat Frames for four wheelers and other automotive assemblies. The company has a technical collaboration with Samsung Industries Ltd. of Korea for the manufacture of Fuel Tanks for Four Wheelers. The company holds the pride of being among the largest manufacturer of the exhaust systems in the world, manufacturing close to 22,000 systems per day. Besides the company produces more than 10,000 spoke rims for motorcycles and steel wheel rims every day.

List of Esteemed Customers:
1) Hero MotoCorp
2) Tata Motors
3) Tata Johnson Controls Automotive
4) General Motors India
5) Piaggio Vehicles Pvt Ltd
6) Suzlon

Moving on to financial now,
Company has been able to grow at CAGR of 25% in sales, even in a period which was considered to be tough for the auto industry.
For the first nine months in current year, the company has shown sales growth of 13% and net profit growth of 23%. The numbers were quite moderate because of the slowdown in auto industry.
But with expectation of things getting back to normal, they should be able to post 25% growth in sales going ahead, with the strong customer base that they have.

The results will be declared today itself.
Irrespective of numbers declared, the company should perform well in future.
Company has a meager debt, which is good.
The company has always paid a good dividend also, year after year.
Company has a strong product portfolio.
Company has time and again, taken various steps to improve their operating efficiency which could lead them to better performance in terms of margin by reducing their operating cost.

My Views: 
The company will be coming out with full year numbers today, and it should be in line with the expectations.
The company is expected to post a sales of 220 Cr for Q4, which will take their full year sales close to 820 Cr, which represents a growth of 15% over past year.
Once growth starts picking up, it won't take too long for the company to go back to 25% growth.
The EPS for the full year, is expected to be around 9.3. Considering that, the company is currently trading at a P/E of 6, which is quite less, considering the scope in the industry, if the purchasing power of every individual increases in India.
The stock definitely is looking very good for long term, but for those, who want to be on safer side, can wait for results to be declared today, and then take their decision.

The entire post is based on the assumption that growth cycle will pick up, which is not in hand of any individual. So, please do enough research work from your end, and take decision based on your belief about the new govt.

Note: One can also have a look at Shivam Autotech, which operates in the same sector and seems to have equally good potential in the future. Both of these stocks looks good to me in terms of valuation.