Simmonds Marshall Ltd:
BSE CODE: 507998
Market Rpice: Rs.39.5
Market Cap: Rs. 44 Crore
Globally, the Auto mobile industry and Capital goods sector showed sluggish growth since the past couple of years due to economic slow-down. In India, high interest rate too adversely affected these Industries. Now it seems that the interest rate peaked-out and economic activity showing early signs of recovery. So this is the right time to invest in the auto ancillary sector for a medium term perspective. Simmonds Marshall Ltd (SML) seems one of the best bet from this sector for a medium term investment perspective.
Simmonds Marshall Ltd Started in 1960 with the technical and financial collaboration with Firth Cleveland Fastenings Ltd, UK to manufacture high-end fasteners in India. In 1987 the company became a pure Indian company as the the Indian promoters bought back the entire holdings from the foreign partner.
Simmonds Marshall manufacturers wide range of top quality specialized Nylon insert self locking nuts, special fasteners, U-nuts, Wheel nuts, Bolts & Studs, Weld Nuts and cooled forged sleevers etc for the Auto Mobile and Industrial segment. SML is well known in the industry on its product quality. 95% of the company's revenue comes from the OEM (Original equipment manufacturers) segment. The company supplies its products to major global and almost all Indian Auto mobile companies including GM, Caterpillar, Dana, Suzuki, Honda, Fiat, Ashokleyland, Tata Motors, Hero,Bajaj and New Holland etc.
The company has been increasing its cold forming capacity and can produce over 50 crore nuts per annum in wide range from M4 to M48 diameter and equivalent imperil sizes. Growth in the Auto mobile sector directly helps the financials of the company as it is largely depends on the OEm segment. Though a tepid growth registered in the past few years, the expected growth in the Auto industry may boost the company's financial performance in the years to come.
The company having a very small equity capital base of Rs. 2.24 crore and a healthy reserve of around Rs. 35 crore as on March, 2014. Even though the FV of the stock is Rs.2/-, a small improvement in the margins would reflects a jump in the EPS as its low equity base. For the trailing twelve months period ended June 2014, the company reported a turnover of Rs. 110 crore and NP of rs. 4.4 crore. At the same time EPS reported at Rs.4/-. At the current market price of Rs. 39.5, the stock is trading with a TTM P/E of around 10xs. Considering the Industry's growth, we feel the company's performance should improve in the future and SML is a best medium term bet which carries very low downward risk.
Disclaimer: I/My dependants have no holdings in the above mentioned Stock.
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