I gave a presentation on GNA Axles at ValuePickr - Chintan Baithak 2019 - #31 by pratyushmittal.
GNA Axles (VP).pdf (841.2 KB)
Notes from presentation:
- GNA Axles manufactures rear-axle shafts. While passenger vehicles are back-wheel driven, the commercial vehicles (CV) are front-wheel driven. In commercial vehicles the rear-wheels are responsible for torque. GNA specialises in these rear-axle shafts.
- Tractor rear-axles are the bulk of GNA’s sales.
- Automotive Axles is a customer of GNA. GNA only provides the shafts which are then bundled together with the housing, spindles and other parts together forming the complete axle.
- GNA is also putting up a capacity for SUVs since they are also front-wheel driven.
- The company mentions that 100% of its customers have been with the company for over 15 years. The clientele is impressive.
- From the Red Herring Prospectus (RHP), we see that company keeps adding a new customer in form of new plants to supply. For example, though the company might be supplying to Dara from before, they started supplying to their Brazil plant in 2014-15 and their Australia plant in 2015-16. This might be a driver for growth.
- Company came up with an IPO in 2016 @240 and raised 120 Crores.
- Company has increased the capacities consistently over last 3 years.
- Company seems to be doing very well even for the last 2 quarters when the whole CV industry is facing headwinds.
- Management seems positive about maintaining 10-15% growth in 2019-20. They mention in the Bloomberg Interview that a lot of business is shifting to India from Europe to cut costs. This is providing not just the industry growth but also the increasing market share.
RISKS
- Commercial Vehicle industry has been very volatile and cyclical over the years. It is largely dependent on the customers and margins can be under pressure sometimes.
- Auto ancillary businesses are not very scalable as they can’t broaden their product basket easily. Their addressable market is constraint.
- Company has a couple of unlisted group companies with decent size. They seem to be into gears. The company mentions that it has a common marketing team which is beneficial (from credit rating report).
- There are uncertainties around BS-VI rollout as many believe that there can a slump for a year after the roll-out due to increase in the prices of commercial vehicles.
Most of the work done by me has been from collection of comments from various interviews. I believe this is an interesting company to track as it has been doing well when others are lagging.