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Hello Readers

Auto & Auto-Ancillaries sector nowadays has been amongst the most buzzing sectors . Our next Investment Idea belongs to Auto ancillaries space, which has been an out-performer throughout. The Auto Industry, as per the experts is likely to see a double digit growth this year. Therefore allocating a part of portfolio to this space shall be a smart bet.



The Company
Munjal Auto Industries Ltd is a accredited, leading auto component manufacturing company in India producing Exhaust systems complete for two wheeler 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.

Fundamental View

  1. The Company during P.Y 2016-17 has posted excellent profits around Rs 32 Cr. a 60 % increase when compared YoY.
  2. Although, the gross revenue has not been in line with F.Y 2015-16, the reason being poor performance in quarter 3 this year due to demonetization effect. However except Q3, the company has been a consistent performer throughout, expecting the same to continue the company may cross revenue of Rs 900 Cr this year.
  3. Currently the stock trades at P.E of 16 which is just half of Industry P.E.
  4. The Company operates at a healthy Debt-Equity ratio of 0.21, making it a safe investment bet.
  5. Other Financial ratios too are favorable as shown under :

Ratio
Munjal Auto Industies Ltd
Peers (Average)
Return on Equity
9.18
9.60
Return on Assets
5.12
-4.05
Return on Capital Employed
7.09
9.68
Fixed Assets Turnover
3.28
2.35

Moreover, the Board of Directors of the Company has proposed a dividend of Rs 2 per share and bonus @ 1:1 subject to approval of members in GM (expected to be credited till end of July).

Technical View

  1. The Stock is currently trading above its all significant moving averages ..i.e.. above 20,50,200 DMA.
  2. It's charts are bullish from short term perspectives too, one of my favorites, a bull channel followed by a breakout as shown under
  3. Further another bullish confirmation witnessed is a bollinger squeeze with low volumes and upward price expansion thereafter, as shown under
  4. Other Indicators too provide bullish forecast as shown, RSI oscillating between 60 to 80, MACD(26,12) higher than EXP(9), MFI oscillating between 50 to 80 and a upward sloping price volume trend line.



Concluding Decision

Munjal therefore is a BUY at CMP of 107 with a stop of 96 ( which is it's 200 DMA) for Mid term as well as longer term.

Best Wishes for your Investment !!!

Thanks !!!



Note: The Above is just a information available in public domain and therefore, should not be taken as a research report.

Registration status with SEBI:  I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations.

Disclosure : I do not have any holding directly/indirectly in Bhageria Industries Limited.


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