@rk1771 wrote:
GNA AXLES LIMITED (‘GNA’) is one of the leading manufacturers of automotive transmission components, like rear axle shafts, other shafts, and spindles. The stock got listed in the year 2016.
Sales of the company are consistently increasing- from 400 crores in 2011-12 to 928 crores in 2012-19. Net profit in the duration has increased from 16 crores to 65 crores. With increasing sales operating margin has increased from 13% to 16%. The average ROE for the last seven years has been 14.25% with cyclicity. Even in the automobile slowdown, the company did manage well. However, in December 2019, sales/net profit have decreased. Management expects pain for another 1-2 quarters.
Exports account for almost 55% of the sales/profit. Debt is under control. Interest expense was 8 Crore out of OI of 145 crores. The company is working on almost 80% of the capacity utilization. Capacity is being enhanced. Capital work in progress amounts to around 245 Crores. 2019 marked entry into LCV/SUV segment.
Management is not known. Management remuneration looks a bit on the higher side. However lately management shareholding has gone up a bit. A small percentage [12%] of management shares is also pledged. Trade receivable has gone up to almost 30% of annual sales, however, most of the receivables are of less than 6 months.
Five mutual funds, including HDFC and Sundaram, holds around 9% of shares.
Investment Theme:
(i) The stock look undervalued at trailing p/e of 7, around 0.6 price to sales.
(ii) Past performance inspire confidence in future.
(iii) As capacity is being enhanced, sales and profit are likely to go up once the auto cycle turns.
(iv) The stock, if not a value trap, deserves rerating to a better PE of around 12.
[Disclosure- Not invested. Under radar]
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