India motor parts ltd

IMPAL CMP 680,BSE CODE 590065


INDIA MOTOR PARTS IS A TVS GROUP COMPANY WHICH TRADES BRANDED SPARE PARTS OF AUTO ANCILLARIES IN THE REPLACEMENT MARKET. IT HAS TIE UP WITH VARIOUS AUTO ANCILLARIES COMPANIES TO SELL THE BRANDED PARTS.


OVER THE PAST FEW YEARS, STRONG GROWTH IN THE SALES OF AUTO SECTOR HAS CREATED A WONDERFUL OPPORTUNITY FOR A COMPANY (ONE OF A KIND) LIKE IMPAL.


THERE HAS BEEN INCREASING AWARENESS AMONG CONSUMERS TO GO FOR BRANDED SPARES FOR THE PURPOSE OF REPAIRING THEIR VEHICLES DUE TO BETTER QUALITY AND INCREASED LIFE OFFERED BY THESE PRODUCTS.


THE BEST THING ABOUT THIS COMPANY IS THAT EVEN IF DUE TO INFLATION AND OTHER ISSUES RELATED TO SLOWDOWN ETC WHEREIN THERE IS SLOWDOWN IN THE AUTO SPACE, THIS COMPANY WILL CONTINUE TO GROW CONSISTENTLY BECAUSE THERE WILL BE MORE FOCUS AMONG CONSUMERS TO GO FOR FREQUENT REPAIRS IN THEIR VEHICLES INSTEAD OF PURCHASING NEWER VEHICLES DUE TO LESSER SPENDING POWER. PLUS WITH INCREASED AWARENESS OF THE BENEFITS OF BRANDED HIGHER QUALITY SPARES, THERE ARE INCREASED GROWTH PROSPECTS FOR THE COMPANY.


AND IF THE AUTO SALES INCREASE, THEN ALSO THIS COMPANY ENJOYS MORE NUMBER OF CUSTOMERS FEW YEARS DOWN THE LINE.


A LOOK AT THE FINANCIALS OF THE LAST FEW YEARS SHOWS CONSISTENT GROWTH BY THE COMPANY. PLUS THERE HAS BEEN GOOD REWARD FOR THE SHAREHOLDERS IN TERMS OF CAPITAL APPRECITAION AND HIGHER DIVIDENDS.


EQUITY IS SMALL AT 4.16 CRORE WITH AROUND 41 LAC SHARES OUTSTANDING. PROMOTER HOLDING IS AT 52%. MARKET CAP BASED ON CMP IS AROUND 281 CRORES.

YEAR

06

07

08

09

10

11

SALES

207

227

244

300

358

429

% GROWTH

10%

7.5%

26.2

19%

19.83%

OP

14.5

17

18.18

26

37.29

40.8

NP

9

10.8

12

17.37

24.75

28.17

% GROWTH

20%

10%

44%

42.6%

13.8%

EPS

20.8

25

27.24

40

59

67.7

COMPANY HAS DECLARED (INTERIM) DIVIDEND OF RS 17 PER SHARE.

COMPANY HAS ALL THE ATTRIBUTES OF A RETAIL STORY AVAILABLE AT REASONABLE VALUATION.

POSITIVES:

1. LOW CAPEX BUSINESS MODEL

2. CONSISTENT GROWTH

3. REASONABLE VALUATIONS OF A PE OF AROUND 10 BASED ON LATEST RESULTS.

4. CONSISTENT FREE CASH FLOW GENERATION.

5. INCREASING DIVIDENDS OVER THE YEARS

6. ALL THESE YEARS, THE GROWTH HAS BEEN ACHIEVED WITHOUT EQUITY DILUTION OR INCREASING DEBT.

7. HEALTHY RETURN RATIOS

NEGATIVES:

1. UNLESS THE MANAGEMENT AGGRESSIVELY RAMPS UP OPERATIONS IN DIFFERENT REGIONS, EXPLOSIVE GROWTH MIGHT NOT OCCUR.

2. COMPANY MIGHT BE EXPOSED TO SOME ISSUES LIKE DEBTORS ETC.

3. THREAT OF COMPETITION EXISTS.

4. VERY POOR LIQUIDITY

1 Like

A little more delving by our friend Siddharth Shukla eons ago on his blog. Actually a year ago.

http://thriftyinvestor.blogspot.com/2010/04/stock-idea-india-motor-parts-and.html

http://thriftyinvestor.blogspot.com/2010/05/update-on-impal-hidden-value.html

1 Like

Thanks Kiran for bringing notice to my posts. yes its been more than an year but the story is intact. Good dividend yield & steady compounding. More of a value pick & steady compounder. They have been very conservative on expanding though. That seems to be a worry, but neither is the market giving it a high multiple. Another one of the companies with a healthy balance sheet,Cash Flows but muted growth. Additionally it is more of a safe business during recessions a la Ador Fontech types. The stock hasn’t corrected much during this mid-small cap correction. Low liquidity is a big factor too.

Its a good stock to be in…had invested earlier. Somehow I don’t see much undervaluation at current prices.

Regards,

Ayush

1 Like

The company holds more than 2.5% in Sundaram Finance and 10% in Royal Sundaram. The combined valuation of these two entities will be equal to its market cap.

1 Like

S Ram, Director of the company preside over the meeting in the absence of S Narayanan, Chairman of the company.Key takeaways of the AGM by Capital Mkt;

Sale of spare parts of the company is to a large extent dependent on the commercial vehicle segment and the transport operators' spend on spare parts are affected as the viability of transport operators is still hurt by both monthly rise in diesel prices as well as excess capacity in the long distance transport carrier industry.

Due to initiatives of new union government regarding infrastructure and mining, there is a hope but the impact at ground level is not yet seen.The company's business in mining areas is already at bottom and the fallout of Supreme Court judgement cancelling captive coal mines allotted illegally will be negligible.

Large capacities created in the last few years with multi axle goods carrying vehicles and shorter journey times enabled by the National Highway programmes, there appears to be excess capacity in long distance goods carriage still. The real revival in commercial vehicle segment happens only when there is operators' viability, which is still not there.

For the fiscal year 2014-15, the company's performance in the first quarter was satisfactory, with sales increasing at near 10%. In the second quarter, sales is likely to be affected due to seasonal effect. But the company expects sales to regain momentum in the second half i.e. third and fourth quarter of the current fiscal.

Overall the company feels this fiscal (FY2015) will also be tough & challenging one for the company.

1 Like

IMPAL WORKING (back of the envelope)

CORE VALUE @ 300cr (6.5x PE)
LISTED @ 1000cr (850 sundaram)
UNLISTED @ 450cr (365cr Royal Sundaram @ 5kcr)
CASH @ 200cr

Total @ 1950Cr

IMPAL Market Cap = 1060Cr

Approx 45% Discount to actual value Approx 55% Discount to investments and cash if you remove the value of core biz.

I own Sundaram finance since a decade and absolutely love that company, I wouldn’t mind seeing this as an alternative to holding Sundaram Finance + Additional cash flows/Dividends from core biz.

Core biz is trading work with 15% ROCE (ICRA) and hence would give it only a Single Digit PE.

I have valued Royal Sundaram @ 5Kcr - In 2018 aegis gave a 3800cr valuation for 40% stake. There is an optional value of value unlocking here.

The company has a good Dividend payout policy.

I normally completely avoid Holding companies, especially those with minority stake but am willing to consider IMPAL because they have a core biz of their own and I have very high regards and faith for the TVS-Sundaram group.

RISKS.

  • Holdco discount widens
  • Core biz does not grow/underperforms
  • Misallocation of capital
  • Underlying companies, SundFin/Royal Sundaram underperform.
1 Like