Interesting on first look. But what’s the trigger that would make it expensive in near future:
)- Marked by lowtopline growth (no point comparing with FY09 which was extraordinary rather than the other way round). My guess is it would struggle to post 25% growth both in topline& bottomline this year.
)- Low asset turnover.
)- Gross block has moved from Rs 55 cr in FY06 to Rs 87 cr in FY10 and sales from Rs 64 cr to Rs 84 cr in same period. What do you do with such a company.
)- Rising commodity prices would strain the margin since it can’t pass on the hikes to OEMs.
)- NPM of 30% is a surprise, will need to investigate more. Who are the competitors and what distinguishes this company. Is chinese imports a threat (doesn’t seem so).
)- Slowdown in auto sector growth will impact its fortunes. Howmuch does refrigeration contributeinitssales?
)- Zero debt, FCF are plus.
)- There is no valuation gap from its industry PE.
)- I hopedividend yield was not a filter criteria for its screening because Rs 2.50 out of Rs 5 it did last year was a special dividend.
In this space of automotive small caps, i feel Suprajit was a better pick.