I looked at this company few months back, during lean days in college.
Here is a link of some basic analysis.
http://fundooinvestor.blogspot.in/
As discussed here also, even my concerns were regarding the growth and historically the company hasn’t been given P/E by the market.
No matter how much we feel the company is undervalued, the market should feel the same way.
the much talked about momentum of dec 11 qtr seems to be continuing in March 12 quarter also.
FY 12 eps close to 24 against adjusted eps of 19.5 for fy 11 and thats more than 20% growth in profits in a seemingly difficult year.
Stock price seems to be absolutely static in the 90-95 range.
I think declaration of dividend/special dividend might be the next trigger.
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http://fundooinvestor.blogspot.in/ Link: http://fundooinvestor.blogspot.in/
the fundooinvestor blog mentions about mazda holding 20000 shares of sbi. I cant find any mention in the fy 11 AR. any clues?
How does one rate this company interns of
size of opportunity
competitive ability
execution capability
fire in belly of promoter
vivek,
in terms of size of opportunity, it might not be too big.
competitive ability-- i think it should be above average bcos this is a technology driven business and if they were poor at it the business would not have survived.
execution capability-- looks good. now we need to see how the new facility contributes to top and bottom line.
fire in the belly–well you need a laparoscopy to find out the fire.
basically its a value pick and one has to be patient here.
khichdi pakne mein yahan kafi time lag sakta hai.
Thanks Hitesh for the flag up! You are so clued in, man:)
Mazda looks v v interestingly poised! I looked at the data. While the Annual data does show a commendable performance. it is in the quarterly data that -details and patterns emerge - clearly!
| Mazda Ltd. | FY2012 | FY2011 | Growth | ||||||||
| Segments | Q4 | Q3 | Q2 | Q1 | FY12 | Q4 | Q3 | Q2 | Q1 | FY11 | |
| Sales | |||||||||||
| Engineering | 30.46 | 28.64 | 23.04 | 14.70 | 96.84 | 26.07 | 17.92 | 17.11 | 20.03 | 81.14 | 19.35% |
| Food | 2.22 | 1.97 | 1.04 | 1.51 | 6.74 | 1.43 | 0.90 | 0.89 | 0.87 | 4.08 | 65.08% |
| Eng Contrib% | 93.19% | 93.56% | 95.68% | 90.70% | 93.49% | 94.80% | 95.23% | 95.07% | 95.84% | 95.21% | |
| Food Contrib% | 6.81% | 6.44% | 4.32% | 9.30% | 6.51% | 5.20% | 4.77% | 4.93% | 4.16% | 4.79% | |
| EBIT | |||||||||||
| Engineering | 5.76 | 7.34 | 5.36 | 3.91 | 22.37 | 4.10 | 5.58 | 5.24 | 6.00 | 20.92 | 6.95% |
| Food | 0.18 | 0.15 | 0.07 | 0.06 | 0.46 | 0.11 | -0.07 | 0.00 | 0.06 | 0.09 | 407.37% |
| Eng Contrib% | 96.99% | 97.95% | 98.78% | 98.43% | 97.98% | 97.49% | 101.26% | 100.09% | 99.03% | 99.57% | |
| Food Contrib% | 3.01% | 2.05% | 1.22% | 1.57% | 2.02% | 2.51% | -1.26% | -0.09% | 0.97% | 0.43% | |
| Eng EBIT margin | 18.92% | 25.61% | 23.26% | 26.62% | 23.10% | 15.74% | 31.12% | 30.63% | 29.93% | 25.78% | |
| Food EBIT margin | 8.05% | 7.78% | 6.37% | 4.15% | 6.84% | 7.39% | -7.72% | -0.51% | 6.77% | 2.23% | |
1. Food segment data - shows good improvement. EBIT margins have steadily moved up for last 4 quarters to over 8% and ~7% overall for FY12 (from 2.2% in FY11). registering a 65% over all sales growth and a a 400% EBIT growth over FY11 levels. It now contributes 6.5% of overall Mazda sales - no more a drag,. and not too insignificant any more, and may just prove scalable(?)
2. Q3 & Q4 data - both Engineering and Food segments registered consistent and improving performance. Why is there marked difference in Engg segment between Q1, Q2 and Q3 Q4?? Can we take it, that demand outlook has lifted from 2nd half for Mazda Engg segment products? Anyone has any insights here?
3. 15-20% increased production from Q1 FY13 augurs well for FY13 prospects.
If we know/can find the answer to Q2. above an opportunistic (mispriced) bet into Mazda at current levels -is very alluring!!
Thoughts invited from those who have followed Mazda business closely.My observations are purely from the data.
I intend to get deeper into this with your help.
Thanks for all the data donald.
from what I see the only pattern emerging from results is lumpiness on quarterly basis but company seems to be doing good on overall basis.
Once the market in its frenzy is done with the known names, these lesser known names will come into focus. I guess it is time to load on safe stocks like these where at least we know more than most.
Mazda has come out with yet another dazzling quarter, with sales growing at 28% and net profit more than 90%.
http://www.bseindia.com/corporates/anndet_new.aspx?newsid=e16faff3-215e-4dc1-99c8-9831589c61b5
It is indeed good performance in trying times for engineering industry. Also noticeable is the increase in margin for Food business close to 17% now as compared to 10% in FY 12. It is to be seen whether it is just one time spurt or sustainable in future. I think food division seems to be shaping up very well and may be significant contributor in times to come.
Only negative is increase in receivables slightly more than sales growth but given their growth one would not mind much.
It has close to 20 crores in cash + current investment. So Mazda business is available at 20 crores which is rediculously cheap (less than 2 years earning)for high margin/debt free/good ROE company.
I see strong re-rating potential here.
Discl: I exited the Mazda position to allocate capital to other stock but closely tracking the company to further add position if more capital is available.
Best Regards
Dhwanil Desai
Yes, Mazda has posted a very strong quarter thanks to the starting of the 4th unit which has added 20-25% capacity and It’s reasonable to expect that it would continue strong performance in the time to come!
Overall, It’s a very investment though I’ve few concerns.
Dhwanil, What’s your take on this?
Hi Aksh,
You are right.Typically higher payout to management and related party transactions are generally perceived as danger signs or at least worth checking out in detail. However, one has to evaluate on how much risk it poses and how much seem to be captured in the price? In my opinion, large chunk of related party transactions (where there is amount receivable pending) is from Croll Reynolds who is the technology provider and hence does not seem contrived. Transacations with HT engineering and Tarapore eneterprise (2.3 crores) arewith respectto companies related to Mr.Percy’s sister and can be subject to scrutiny. But, in the overall context, does it pose risk (to be seen as permanent loss of capital) at current valuation? mazda’s current valuation seems to be suggesting that either company is in deep trouble or numbers are manipulated (how else would one explain reasonably growing company trading at less than 2 years earning after discounting for cash/investments?). My personal view is that neither is true and hence any risk (if at all) posed by higher payout or related party transaction is already reflected in the price. If mazda were trading at P/E of 10-12, I would be worrying about these things but at P/E of 2, I would ignore it considering extremely attractive valuations.
Best Regards
Dhwanil Desai
Well Dhwanil, I agree with you that overall it’s a very good investment and I’ve been invested in it for quite some time now, Nevertheless, I would much prefer this fix pay to come down to not more than 10% of the net profit and pretty much aligned with the profitability of the company.
BTW, Market has reacted equally strongly to the Mazda’s results 
Aksh
Hi,
Yeah, very good set of nos especially when the capital good sector is doing poorly. I think things may improve for the co as the economy picks up.
Have added more after Q2.
Agree with Dhwanil. One should look at the materiality of these transactions and the valuations the co is available at. I also don’t think they are a concern. While at the same time I do agree that this co might not get a high PE easily. So one should be clear that its a medium term bet where the stock seems to be mis-priced currently.
Ayush
Also, other good thing in this co is decent dividends in past. I think this is a big positive which should help in value un-locking.
Ayush, the high dividends in the past are mainly due to the proceeds from the sale of the valves division… you we can expect lower dividends in future.
Hi Akbar,
For FY12 (a normal year) too the company gave a decent dividend of Rs 4 per share and hence I feel the co would maintain decent dividend going forward.
Hitesh Bhai,
If you are still tracking Mazda, how does the charts look for a fresh entry?
What is your view on the results? Since com has proved that growth can be achieved and with new capacity serving it for some more time don’t you think its a good bet?
Cheers
Vinod
vinod,
mazda is attractive especially after posting good q2 results. on charts there is a clear cut breakout from trading range of 90 to 106 so after a bit of consolidation for some more trading sessions upmove looks likely to resume.
I am worried about the low shareholding of the promoter group in this company (Just 34.46%), particularly because the market cap was just about Rs 42 crore for a large part of the year. Why has the promoter group not increased its stake aggressively if the stock is so deeply undervalued? Considering that the management pays itself Rs 1.8 crore each year, and the healthy cash flows of the company itself, what is stopping them?
The other thing is that they have chosen the dividend route to pay shareholders the income derived from sale of Valves business (given the high dividend distribution tax). Given the low promoter shareholding, why choose this method (the management might be too righteous but I doubt it)? And why not go for a buyback? Does the promoter group believes that the growth prospects for Mazda arebleak?
Hi Aditya,
Yes, initially i also used to be concerned about the low promoter stake but over the years there actions have been good on the dividend pay-out etc.
The promoters have increased stake over the years but very slowly.
Ayush
If you check,you will notice that in march 2001,promoter holding was 33.66 then even after allotting warrants @ 70, stake went down to 24.16 in march 2007 as promoters after allotting warrants (paid only 10 percent ),sold the old holdings in market ,Promoters regularly plays in market & again add holding,which now stands at 34.46.So despite despite getting warrants,promoters holding remains same around 2001 level.Now to trust such promoters is individual call.
