Hi,
Its also important to look at who the buyers are…I think the buyer is one of the main adviser/fund manager at M3 Investments
Regards,
Ayush
http://www.nseindia.com/content/equities/bulk.csv
The easiest way to match buyers & sellers in Bulk deals, is from above link
Date,Symbol,Security Name,Client Name,Buy/Sell,Quantity Traded,
Trade Price / Wght. Avg. Price,Remarks
**24-AUG-2011,SUPRAJIT,Suprajit Engineering Limi,RAJASHEKAR IYER,BUY,800000,16.75,-
24-AUG-2011,SUPRAJIT,Suprajit Engineering Limi,SCIL VENTURES LIMITED,BUY,1000000,16.75,-**
**24-AUG-2011,SUPRAJIT,Suprajit Engineering Limi,SUNDARAM GROWTH FUND,SELL,2722122,16.76,-**http://www.linkedin.com/profile/view?id=13905235
Rajashekar Iyer is MD SCIL Ventures Limited and Advisor, M3 Investment Pvt Ltd… So he bought in his personal account almost as much as he bought in SCIL Ventures account.
Ayush -Don’t know much about M3. Why do you make much of his Advisor role at M3 Investment??
Hi Donald,
I was looking over compitators “remson, acey engineering, madhusudan” and not able the find thecable capacity of eachwith market share percentage.
Is any of them is planing some expansion plan?
Regards,
Vishal
Hi Vishal,
One way of looking at this:
1). Two wheeler segment competitors - those you mention - can’t do much! 100% of TVS, 90% of Bajaj and 75% of Hero Honda business is cornered by Suprajit.
2). 50% of Suprajit revenues - comes from these customers; 20-25% from Exports
3). Non-Automotive is expected to contribute 25 Cr in FY12 ~7% (375 Cr FY12 Sales)
4). Replacement market is expected to contribute 50 Cr in FY12 ~13%
So what’s remaining - 4 wheeler cables sales - will contribute max 10-15% of FY12 Sales. That’s the segment mainly at risk.
Q2 results will be interesting and point the way forward if Suprajit can do 375 cr Sales with say 35 Cr PAT levels. As for me, I see the odds tilted in Suprajit’s favour that it can deliver these numbers.
We should continue to evaluate and decide if we find current valuations compelling enough. (less than 6x FY12 earnings). And buy more if and when it gets cheaper!
http://in.reuters.com/article/2011/09/01/heromotocorp-sales-idIND8E7JQ00120110901
Thu Sep 1, 2011 4:29pm IST
NEW DELHI, Sept 1 (Reuters) - India's Hero MotoCorp
sales of two-wheelers in August:
Aug 2011 Aug 2010 Pct Chg
503,654 424,617 18.6Donald,
please show new messages first instead of showing old messages first.
Suprajit Engineering Opens New Automotive Cable Plant In Bengaluru
(RTTNews) - Suprajit Engineering Ltd. said its wholly-owned subsidiary Suprajit Automotive Ltd. performed a groundbreaking ceremony for a 100 percent new automotive cable plant at Bengaluru.
The company said the plant would commence production before the end of 2012 to meet the new projects received from certain marquee customers for exports.
The company also performed a groundbreaking ceremony for another new plant at Doddaballapur, Bengaluru. This plant is expected to produce some of the newproducts, which are currently in advanced stage of development.
At the BSE, Suprajit Engineering shares are being traded at Rs.18.25, up by 1.39 percent from the previous close.
Hi Donold,
Thanks for clarification, now if i look over the clear picture what i have understand
1.sales from 2wheeler section can’t be seen muchramp up as major players inIndianmarkets are TVS,Bajaj and hero Honda
2). catching replacement market more than 25% is really very tough, in case if they top-line canfurthergo by 50 Cr.
3.Non-automotivesegment can be seen some improvement only after once new plant isstarts itsproduction.
One concern i look over this is why they are not able tocapture"4 wheeler cables sales", and which is the biggest company to manufacture the cables for 4-wheeler.
Regards,
Vishal
Hi All,
I joined this group few week back and amazed to see the kind of analysis that gets done here. I have been following Suprajit for over 6 months but was not sure of long term prospect. After going through the analysis I am convinced about the future prospect of this company.
My main concern was around scalability. They have already captured 60-65% of market share so how much upside they have. But looking at the possible expansion area i.e. 4 wheeler, non-automotive, replacement market it seems they still have significant addressable market.
Thanks,
Ved
I was going through the past data of Suprajit and one major concern with Suprajit is its Pricing Power (or lack of it):
Consider this for the last 9 years:
- Capacity Growth (CAGR) - 24.8%
- Gross Block Growth - 22.1%
- Sales Growth - 22.6%
- PAT Growth - 26.2%
- Per unit realization Growth (for cables) - 2.6%
So, almost the entire growth for Suprajit is because of additional capacity andadditionalproduction. There is hardly any price increases - 2.6% in an inflationary environment in India is quite poor. What this also means is that to grow further, the company has to keep investing in additional capacities and free cash flows generated would be minimal.
There is especially some concern for years 2008 and 2009 when unit prices for cables came down from INR 28 per unit to INR 21 levels. Now in those years, the commodity prices were on the rise and ideally one would expect the output prices to increase as well. But that didn’t happen and on the contrary, the sales and margins suffered.
Since Suprajit serves big clients (TVS, Bajaj, Hero, JD, etc.), the lack of pricing power would perhaps continue even in the future and would be a concern.
On the same lines, the company used to trade at double digit P/E multiples back in 2007 and 2008. But poor performance during the economic slowdown and lower margins made investors shun this company and now its trading at P/E of 6.3.
The profit margins did drop during the slowdown from 9% levels to 4.5%.Now, the company is doing quite well for the last couple of years and is back to the 9% profit margins and 16-17% operating margins.The MD is quite confident that these margins are sustainable in the long run. It would be interesting to see how things pan out in an inflationaryenvironmentand if there is another commodity price increase.
1 Like
Hi Rajat
Sorry I missed your very succinct posts.
I had some segment data on per unit realisations for Fy05 till Fy10. If I remember correctly these were pointing to mixed results. Let me dig that out, update with Fy11 and reshare.
Following is the segment wise Sales & realisation data.
Yes the price realisation data is not encouraging. On the Other hand there is steady improvement In Asset Turns in last 4 years - leading to steady improvement in RoEs to over 35% in FY11.
How do you read these together?
| Fixed Asset Turnover (x) | 4.00 | 3.44 | 2.96 | 2.74 |
| Total Assets Turnover (x) | 2.08 | 1.82 | 1.82 | 1.43 |
| Sales | Mar 2011 | Mar 2010 | Mar 2009 | Mar 2008 | Mar 2007 | Mar 2006 | Mar 2005 |
| Value (Rs.) | |||||||
| Control Cables | 2,259,076,637 | 1,370,913,321 | 1,048,194,831 | 893,671,581 | 856,235,401 | 745,780,306 | 622,988,841 |
| Contribution (%) | 75.56% | 70.47% | 64.93% | 65.80% | 66.04% | 63.34% | 67.70% |
| YoY growth (%) | 64.79% | 30.79% | 17.29% | 4.37% | 14.81% | 19.71% | |
| Per unit realisation | 27.77 | 26.99 | 20.67 | 21.21 | 30.19 | 27.09 | 24.22 |
| Speedo Cables | 403,940,597 | 368,500,497 | 268,706,976 | 248,654,849 | 248,944,808 | 202,260,844 | 134,527,620 |
| 13.51% | 18.94% | 16.65% | 18.31% | 19.20% | 17.18% | 14.62% | |
| YoY growth (%) | 9.62% | 37.14% | 8.06% | -0.12% | 23.08% | 50.35% | |
| Per unit realisation | 28.69 | 27.30 | 23.28 | 22.87 | 22.04 | 22.15 | 23.50 |
| Speedometers | 162,596,085 | 139,288,208 | 124,718,336 | 126,780,617 | 122,117,292 | 130,218,926 | 80,175,533 |
| 5.44% | 7.16% | 7.73% | 9.34% | 9.42% | 11.06% | 8.71% | |
| YoY growth (%) | 16.73% | 11.68% | -1.63% | 3.82% | -6.22% | 62.42% | |
| Per unit realisation | 285.49 | 281.08 | 278.95 | 240.29 | 227.88 | 248.95 | 256.18 |
| Others | 164,289,233 | 66,747,959 | 172,669,513 | 88,995,459 | 69,317,191 | 99,192,133 | 82,586,741 |
| 5.49% | 3.43% | 10.70% | 6.55% | 5.35% | 8.42% | 8.97% | |
| YoY growth (%) | 146.13% | -61.34% | 94.02% | 28.39% | -30.12% | 20.11% | |
| Total | 2,989,902,552 | 1,945,449,985 | 1,614,289,656 | 1,358,102,506 | 1,296,614,692 | 1,177,452,209 | 920,278,735 |
I don’t think realization per unit really gives any meaningful information or indication of its moat. Realization can remain constantfor various reasons i.e. input cost has come down, process has become more efficient etc and they want to pass on these benefits to client. In my view we should look at its ability to maintain operating margin over the years.
1 Like
Donald Sir,
This company seems to be a dominant player in auto ancilliary space, catering to the 2 wheeler segment mostly and now diversifying to overseas auto companies , seems to be less cyclical than say a maruti or m&m. Valuation also seems compelling. Rerating of the stock can happen due to more sales to replacement market , more exports, more penetration to 4 wheelers and non-automative users. Also having a pretty decent operating margins. But the big question is can it occupy a say 25% of a investor portfolio. I know you like Mayur Uniquoters a lot and have a big position. But what about suprajit ? I guess it can take a max of 10% of portfolio due to lack of pricing power. Your views are invited. Thanks!
I agree with ved… Auto Ancillary players hardly have pricing power and hence the only thing they need to embark upon to maintain and improve margins is optimising product processes and employing latest technology by virtue of which many of the Indian Auto Ancillary players have been able to infact reduce the cost considerably… This is the reason why over the years although input prices have escalted considerably, their product prices have either remained constant or risen only marginally.
replacement market also don’t provide much scope for signifiacnt price revision as it is also controlled majorly by OEMs…however, OES i.e. players like Suprajit are able to extract better margins in Replacement market…
Key factors to look for in any Auto Ancillary player is its operating segment growth, its positioning in operating segment in terms of marketshare, entry barriers, its track-record of maintaing sales growth and margins over last many years and its scale of operations amongst others.
Rgds.
Thanks for your points Donald, Ved and Mahesh.
In case of Suprajit, the unit realizations have been fluctuating and its difficult to draw any meaningful conclusions. The keymoat for Suprajit is:
1). It is the largest player in cable market domestically and has strong existing relationships
2). It has plants located across India at severaldifferentlocations and thus can reduce ondistributioncosts and can serve its customers better
Both these points are very difficult to replicate and act as strong entry barriers. And looking at the expansion plans, the moat can only grow. But, the point is do these ensuresustained15% plus operating margins over a long term. I am not sure what happened in 2008 and 2009 and why the realizations fell so drastically! But can the same happen again?
PS: Just to check pricing power, I was going through Exide’s Annual Reports and found the following for the last 5 years (I could not get data beyond that):
1). Growth in no. of units sold - 8.9% (16,921,064 to 23,803,163)
2). Growth in per unit realization - 13.5% (2357 cr to 5496 cr)
I don’t have much idea about Exide’s business model, have never tracked it. I just happened to pick it up as it is one of the strongest players in the AutoAncillarysector and this playercertainlyseems to have pricing power.
Hi Friends,
I think we are mis-reading this data. IMHO, from this data we can’t say that Suprajit lacks pricing power. The co has been able to maintain and inc the operating margins over the years and is becoming stronger by the day. The issue is that the product is not inflationary in nature and hence it limits the growth impact. To take up what I’m trying to say, have a look at Indag Rubber or Balkrishna Ind. The growth of these two cos looks extra-ordinary as they continue to grow while at the same time the prices of end product also keeps increasing (thanks to increasing rubber prices). Hence the long term picture looks even more beautiful 
I remember reading a book in which the author had given the example of Texas Instruments. In that co the end product price used to keep falling but on closer analysis the author had noticed that the co was getting hugely efficient by the year. Rest is history…it was a huge multibagger.
The question for Suprajit could be - what next? As they have already cornered a significant chunk of the market, how big can they be say 5 yrs from now.