Vijay Kedia and Dolly Khanna Trim Stake in this Multibagger Auto Ancillary Stock

2023 was a double century for the stock market, with over 200 stocks turning multibaggers.

Amid this bull rally, the smallcap arena stole the show, with a staggering 190 new entries in the multibagger club. Of these, 143 even soared to unprecedented heights, achieving all-time highs.

But amid this frenzy lies a crucial question: when to cash in? Sell too soon, and you risk leaving mountains of profit behind.

Sell too late, and you might find yourself clinging to rapidly deflating shares. Timing the market, as they say, is a tango with a blindfolded bull.

Therefore, many wise heads gravitate towards the wisdom of seasoned veterans, hoping to crack the code.

For such investors, today, we want to highlight one such stock which has come under the focus of not one but two investing gurus of India.

Dolly Khanna and Vijay Kedia have trimmed their stake in this multibagger stock.

A Word About Vijay Kedia and Dolly Khanna

Vijay Kishanlal Kedia is an Indian investor and trader based out of Mumbai and his company - Kedia Securities is the largest shareholder (after the promoter) in several listed companies.

Kedia has been involved in the Indian stock market since the age of 19. He has been described by many as a 'market master'.

Meanwhile, Dolly Khanna is a Chennai based investor, who is known for picking lesser-known midcaps and smallcaps. She has been investing in stocks since 1996.

Dolly Khanna's portfolio, which is managed by her husband Rajiv Khanna, is usually inclined towards more conventional stocks in manufacturing, textile, chemical, and sugar stocks.

Which stock did they sell and why?

The stock in question is Talbros Automotive Components.

The company manufactures gaskets and forging that are supplied to original equipment manufacturers (OEMs) and the aftermarket.

According to the latest shareholding pattern for Talbros, Doll Khanna and Vijay Kedia trimmed their stake in the company in the December 2023 quarter.

Vijay Kedia sold a 0.2% stake in the quarter under review. He held a 1.2% stake in the company as of September 2023, which reduced to 1% in the December 2023 quarter.

Dolly Khanna, too, sold a 0.2% stake in the company, reducing her stake to 1.3% in the December 2023 quarter. She held 1.5% in the September 2023 quarter.

While we don't know why they sold shares of Talbros Automotive, there are some reasons that we can guess.

Profit Booking

In 2023, the auto stock witnessed a remarkable growth of over 164%, with an outstanding 174% return over the past year.

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This surge was due to the company's aim of strengthening its EV portfolio. It secured orders from leading OEMs both domestically and globally.

Another significant reason behind the stock's surge is the company's robust performance. During the year under review, its total revenue stood at Rs 6.5 billion (bn), as against Rs 5.9 bn in the year-ago period, a growth of 12%. This was supported by a rising order book.

The gasket division was a cash cow and a market leader in the year under review. It continued to get more and more orders from domestic original equipment manufacturers (OEMs) and global OEMs.

For FY23, the company's profit after tax (PAT) came in at Rs 560 million (m) as against Rs 450 m, a growth of 24% on a YoY basis. The net profit grew based on softening input prices.

Talbros Automotive capitalised on increased economic activity in the automotive sector, with 25.9 million vehicles produced and a 20% YoY sales increase in FY 22-23.

Additionally, on 27 October 2023, the company underwent a 1:5 stock split, which means that each shareholder's existing shares with a face value of Rs 10 per equity share were split into five shares, each with a face value of Rs 2 per equity share.

This move has generated positive sentiment among investors as it made the shares appear more affordable, attracting new investors to the market.

So, the reason could be profit booking.

Strong Growth Prospects

Neither Vijay Kedia nor Dolly Khanna completely exited the stock. They still hold substantial stakes.

It's no surprise that Talbros Automotive's gasket division is one of its strongest segments.

The gasket division has shifted focus towards heat shields while constantly diversifying the segment portfolio and securing exports.

In this gasket division, for the first time in FY23, its heat shield division crossed about Rs 200 m of revenues, and it is expected to reach about Rs 900 m by the financial year 2027.

The company is working on increasing exports from the current level of 25-35% over the next 3-4 years. It also expects domestic demand to be robust in the coming years.

In the forging division, the company aims to leverage its capability to convert castings into forgings and increase its focus on electric vehicles.

A look at the Financials

Talbros' revenue has grown steadily over the past three years, with a CAGR of 13.4%. This indicates a strong and expanding business.

Net profit has also increased over the period but at a slower pace of 12.4% than revenue. This is reflected in the declining net profit margin, which fell from 8.8% in FY21 to 8.6% in FY23.

This can be attributed to a significant boost in production and sales due to increased economic activity and mobility.

Financial Snapshot (2021-23)

(Rs m, Consolidated)	FY21	FY22	FY23
Net sales	4,442.00	5,772.00	6,472.00
Sales growth (%)	15.3	29.9	12.1
Net profit	391	449	556
Net profit margin (%)	8.8	7.8	8.6

Source: Equitymaster

Further, the company's finances are also set to benefit from increasing EV penetration.

What Next?

Going Forward, the company expects to raise its EV revenues to Rs 2.5 bn by FY27. This growth in the EV segment will be driven by heat shields.

The management also plans to double revenue to Rs 22 bn by FY27. This will help EBITDA margins to move above 15-16% by FY27.

Apart from that, the company recently approved the divestment of its entire 40% stake in its joint venture company, Nippon Leakless Talbros. After the stake sale, Nippon Leakless will own 100% of the company.

Talbros Automotive Components says it will realise Rs 818 m for its 40% equity stake sale (JV Company valued at Rs 2 bn). This transaction is subject to certain conditions precedent and is expected to be completed in Q4FY24.

Talbros Automotive aims to utilise the proceeds for its future capex and expansions.

The proceeds will also help the company to invest in the business to capitalise on the strong acceptance of its products and quality by both marquee domestic and International automotive OEMs.

About Talbros Automotive

Talbros Automotive is engaged in the business of manufacturing gaskets and forging that are supplied to original equipment manufacturers (OEMs) and the aftermarket.

The company has majority share of over 50% in India in the gaskets division. It has aggressively invested in BS VI technology and is also focusing on post coating lines which leads to lower imports and higher cost savings.

The company was incorporated in 1956 and is part of the Talbros group promoted by Mr Pran Talwar and family.

It has four gasket production facilities - two at Faridabad in Haryana, and one each at Pune in Maharashtra, and Sitarganj in Uttarakhand.

To know more about the company, check out Talbros Automotive's financial factsheet and quarterly results.

You can also compare Talbros Automotive with its peers:

Talbros Auto vs Banco Products

Talbros Auto vs Gabriel India

Talbros Auto vs Suprajit Engineering

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