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  • Apr 18, 2023 - Vijay Kedia Picks Stake in this Auto Ancillary Company. Stock Rallies 40% in Two Days

Vijay Kedia Picks Stake in this Auto Ancillary Company. Stock Rallies 40% in Two Days

Apr 18, 2023

Vijay Kedia Picks Stake in this Auto Ancillary Company. Stock Rallies 40% in Two Days

  • Vijay Kedia believes that with all the work the company has put into launching an electric 3-wheeler, Atul Auto can very well be crowned the Tesla of this space.

This is what we wrote in January 2023 when it was reported that ace investor Vijay Kedia has upped his stake in Atul Auto.

Shares of Atul Auto have remained in focus ever since Kedia raised his holding to 8.4%. He has upped his stake for consecutive quarters now.

The latest developments show that Kedia's bullishness in the sector is not just limited to one stock. He also picked up a substantial stake in another auto ancillary company in the March 2023 quarter.

Who is Vijay Kedia?

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'.

To point out a few of his investments, he bought ACC at Rs 300 in 1992-93 and sold the stock around Rs 3,000 within a year and a half.

During years 2004 and 2005, he picked several multibagger stocks which gave returns of over 1,000% in the next 10-12 years. Few of these stocks were Atul Auto, Aegis Logistics, and Cera Sanitary.

To know more about Vijay Kedia and his investment strategies tune in to the video below:

Which stock did Vijay Kedia buy and why?

In the most recent March 2023 quarter, Vijay Kedia added Precision Camshafts to his portfolio.

According to a BSE statement of the shareholding pattern, Kedia bought 1 million shares, translating into a 1.05% stake in the company.

Reacting to the news, investors rushed to lap up shares of the smallcap. In the past two days, shares have rallied 40%.

While we do not know the exact reason why the investing guru decided to enter the counter, there are some reasons we can guess...

The first reason could be the company's established track record.

Precision Camshafts claims to be one of the largest camshaft manufacturers in the world, manufacturing all types of camshafts under one roof. The Pune-based company was incorporated in 1992 and it came out with its initial public offering in 2016.

It also has strong presence in over 17 countries such as Europe, UK, China, Brazil, Russia, and North America.

Another reason behind Kedia's bullish stance could be the longevity of the company's product. The camshaft is a crucial part of a car's engine, and Precision Camshafts manufactures over 150 types of camshafts, which are mainly utilised in passenger vehicles.

Coming to its financials...

The company's sales have doubled in the past five years while profit has more or less remained near the same level.

The past three years performance was impacted due to limited product diversification and cyclicality in the end-user industry.

Precision Camshafts Financial Snapshot (2018-2022)

Rs m, consolidated FY18 FY19 FY20 FY21 FY22
Revenue 4,213 6,974 7,462 7,090 8,950
Growth (%) -4.7% 65.5% 7.0% -5.0% 26.2%
Operating Profit 1,044 1,427 1,332 873 1,329
OPM (%) 24.8% 20.5% 17.9% 12.3% 14.8%
Net Profit 461 115 350 23 460
NPM (%) 10.9% 1.7% 4.7% 0.3% 5.1%
Debt to Equity (x) 0.2 0.3 0.3 0.3 0.2
ROE (%) 5.5 1.3 4.2 -0.1 7.0
ROCE (%) 8.7 5.1 5.6 2.8 8.4
Data Source: Ace Equity

In the latest conference call, the company highlighted that its e-mobility subsidiary has registered significant growth in the latest quarter.

Another subsidiary is in the process of setting up its first electric vehicle (EV) plant in Solapur.

In addition to this, the company has also developed a new engine component for commercial vehicle braking systems, marking its foray into the non-camshaft segment.

So you see, it's not just Vijay Kedia's hype that has sent the stock through the roof. The market is starting to see the true potential of the company.

How Precision Camshafts Share Price has performed on the bourses

On a year to date basis, the stock is up 37%. Yesterday, the stock rallied 20% and today again it rallied another 15% on an intraday basis.

Since listing on the bourses in 2016, Precision Camshafts share price is down 16%.

Have a look at the table below to see how the company fares against its peers.

Comparative Analysis

Company Precision Camshafts Rajratan Global Ucal Fuel Hi-Tech Gears
ROE (%) 7.0 43.8 9.3 0.3
ROCE (%) 8.4 39.7 10.1 4.8
Latest EPS (Rs) 4.1 23.0 9.1 9.4
TTM PE (x) 31.2 33.7 12.8 26.8
TTM Price to book (x) 1.7 9.8 0.6 1.4
Dividend yield (%) 0.9 0.3 1.7 0.6
Industry PE 31.3
Industry PB 2.9
Data Source: Ace Equity

About Precision Camshafts

Part of the Precision Group, Precision Camshaft is in the automotive components business.

The company was incorporated in 1992. It manufacturers and supplies camshafts in India and globally.

It supplies more than 150 varieties of camshafts for passenger vehicles, tractors, light commercial vehicles and locomotive engine applications.

To know more, check out Precision Camshafts' financial factsheet and its latest quarterly results.

Investment in securities market are subject to market risks. Read all the related documents carefully before investing

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Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...

Yash Vora

Yash Vora is a financial writer with the Microcap Millionaires team at Equitymaster. He has followed the stock markets right from his early college days. So, Yash has a keen eye for the big market movers. His clear and crisp writeups offer sharp insights on market moving stocks, fund flows, economic data and IPOs. When not looking at stocks, Yash loves a game of table tennis or chess.


FAQs

Which are the top auto ancillary companies in India?

Based on marketcap, these are the top auto ancillary companies in India:

You can see the full list of auto ancillaries stocks here.

And to filter the best quality stocks from the auto ancillary sector, check out Equitymaster’s Indian stock screener. This screener also allows you to screen stocks based on your own criteria.

Which are the top gainers and top losers within the auto ancillaries’ sector today?

Within the Auto Ancillaries sector, the top gainers were AUTOMOTIVE STAMP (up 5.0%) and IP RINGS (up 5.0%). On the other hand, PRITIKA ENGINEERING COMPONENTS LTD. (down 5.0%) and PATTECH FITWELL TUBE COMPONENTS LTD. (down 5.0%) were among the top losers.

For more, check out our auto ancillaries sector report.

How should you value auto ancillaries’ companies?

Investing in stocks requires careful analysis of financial data to find out a company's true worth. However, an easier way to find out about a company's performance is to look at its financial ratios.

Two commonly used financial ratios used in the valuation of stocks are -

Price to Earnings Ratio (P/E) - It compares the company's stock price with its earnings per share. The higher the P/E ratio, the more expensive the stock.

Price to Book Value Ratio (P/BV) - It compares a firm's market capitalization to its book value. A high P/BV indicates markets believe the company's assets to be undervalued and vice versa.

To know more about the automobile sector's past and ongoing performance, have a look at the performance of the NIFTY Auto Index and BSE Auto Index.

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