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  • Jun 3, 2023 - Surprising Exit: Sumeet Nagar's Malabar India Fund Dumps 2 million Shares of this Leading Auto Ancillary Company

Surprising Exit: Sumeet Nagar's Malabar India Fund Dumps 2 million Shares of this Leading Auto Ancillary Company

Jun 3, 2023

Surprising Exit: Sumeet Nagars Malabar India Fund Dumps 2 million Shares of this Leading Auto Ancillary Company

Recently, there has been significant market activity surrounding auto ancillary company - JTEKT India - due to a notable bulk deal.

A bulk deal refers to a substantial transaction involving a large number of shares of a particular stock, often executed by institutional investors or high-net-worth individuals.

These deals can have a considerable impact on the stock's trading volume and price, attracting attention from market participants and analysts alike.

Data released on Friday showed that ace investor Sumeet Nagar's Malabar India fund sold over 2 million (m) shares of JTEKT India.

Who is Sumeet Nagar?

Sumeet Nagar is the co-founder of Malabar Ventures LLC. Malabar is a foreign portfolio investor (FPI) with a particular emphasis on India's small and mid-cap stocks.

His amazing track record in the smallcap and midcap space is no fluke.

He has a solid decision-making process on which stocks to buy, how much to buy, and, equally importantly, when to sell.

Why did Sumeet Nagar sell JTEKT India?

Data available on the exchanges shows that Sumeet Nagar's Malabar India fund sold 2,205,806 shares of JTEKT India via a block deal on 2 June 2023.

While we don't know the reasons why Sumeet Nagar turned bearish on the smallcap firm, there are some reasons we can guess...

The first reason could be profit booking.

In the past two weeks, share price of JTEKT India has seen a significant upmove after it posted good quarterly results.

For the quarter ended March 2023, the company posted a 13% growth in revenue at Rs 5.4 billion (bn). Meanwhile, profit spiked 90% to Rs 237 m.

chart

The other reason why Sumeet Nagar turned bearish could be rising costs. The company's material costs have been affected in recent quarters on the back of a rise in steel and aluminium prices.

In the latest concall, the company said it's getting difficult to pass on cost inflation to customers at raising commodity enrollment.

Due to this, the company's gross margins have come down to 29% from 34% earlier.

What next?

Although Sumeet Nagar's Malabar fund has sold a substantial stake, the company does have some long-term positives working in its favour.

It achieved annual sales of 245 million units, a YoY growth of 25,000 units which is also the highest in over a decade.

The company posted stellar growth in its FY23 numbers where the bottomline more than doubled while topline increased by 28%.

The company has also lined up a capex of over Rs 1.2 bn to increase capacity by 2025.

The key highlight for JTEKT India in FY23 was that it forayed into the constant velocity joints (CVJ) segment to increase product portfolio and gain market share.

The company is also working with select OEMs to develop a new electric SUV, which is likely to come out by October 2024.

How JTEKT India share price has moved recently

On a year-to-date (YTD) basis, JTEKT India share price has fallen around 12%.

In the past five days, the stock is up 6% while in the past one year the stock has rallied over 75%.

chart

Have a look at the table below to compare JTEKT India with its peers.

Comparative Analysis

Company JKEKT India LG Balakrishnan Munjal Auto Pricol Jupiter Wagons
ROE (%) 12.4 22.3 13.4 17.7 7.6
ROCE (%) 16.2 30.2 23.4 22.6 11.8
Latest EPS (Rs) 3.3 80.3 5.6 10.2 3.1
TTM PE (x) 39.3 9.8 8.9 23.2 42.9
TTM Price to book (x) 4.6 2.2 1.3 4.1 5.6
Dividend yield (%) 0.4 2 4 0 0
Industry PE 31.8
Industry PB 3.4
Data Source: Ace Equity, Equitymaster

About JTEKT India

JTEKT India is a leading manufacturer of steering systems and driveline products for passenger vehicle OEMs in India.

The company commands a market leadership position in the steering system segment in India. It generates over 90% of its revenues from passenger vehicle OEMs.

To know more, check out JTEKT India's 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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