This auto part maker is well positioned to exploit the demand surge in the auto sector. The company looks fairly undervalued on absolute and on comparative basis. The temporary slowdown in price performance might be attributed to the rise in the input cost of metals required in manufacturing of the parts . Company has reputed global partners and has seen positive growth trajectory in top and bottom line consistently .
With a book value of 32 , the stock is trading at 66 i.e almost at 2x of its book value and has negligible Debt / equity ratio of 0.17 . Stock has 10 / 11 score in our Quest stock picking algorithm which provides us the cushion of an educated trading / investment bet .
Stock Name : Munjal Auto , Current Price : 66 , Target 1 : 80 , Target 2 : 95+ , Target 3 : 160+. Time frame between 4 to 12 months for short term & long term respectively.
( Upcoming annual Results will be good but immediate quarterly results might not be attractive . considering the higher collection period impacting the working capital usage in the auto sector). The targets are basis the nominal growth expected in the auto sector in coming months / years
Recommendation Basis
- Company market cap is 660 crores and has a sales of approx. 2000 crores in FY Year Mar 2021
- Increase in sales growth across 1 and 3 & 5 year period.
- Stellar improvement in top/bottom line with very efficient debt usage.
- Undervalued amongst peers and stock can see upward movement with the overall auto sector movement.
- Improved inventory turnover ratio reaching almost pre-covid levels
