Can This Little-Known Stock Become the Next MRF?

In June 2023, MRF Ltd became the first Indian company to cross Rs 100,000 per share mark in the Indian stock market.

MRF Ltd has been the biggest story of the Indian stock market. The share price of the company has gone up from Rs 2,910 in April 2005 to a high of Rs 150,000 in February 2024 delivering a CAGR of 23% over 19 years.

After MRF, this little-known company's share price is already the 2nd most expensive in the Indian market and also has the potential to reach the six-digit mark.

The company operates in various segments and supplies its products to a diverse category of industries from batteries and oil & lubricants to the auto industry to agricultural products and others.

Stock price of this company is also on an uptrend in the last one year and delivered 356% returns in the last one year.

The stock is Yamuna Syndicate Ltd (TYSL). The company is listed only on the Bombay Stock Exchange and has a market capitalisation of Rs 18.5 bn.

Established in 1955, the company is engaged in trading and manufacturing a wide variety of products, components and consumables related to the automotive industry, agro chemicals as well as industrial and consumer electricals.

TYSL is involved in the following products and services:

1. The company has two retail outlets for industrial and consumer electrical goods such as home appliances, energy efficient fans, lighting, switches, wires, etc. TYSL is an authorised dealer of Crompton Greaves Ltd, Larsen and Toubro Ltd, Versa Drives Private Limited, and Havells India Ltd.
2. The company has an automotive fuel retail outlet licensed by HPCL.
3. TTYSL is an authoriszed servo stockist (industrial) and distributor of Indian Oil for a wide range of industrial lubricants and greases.
4. The company is also a franchisee of Amara Raja Batteries for distribution of AMARON and QUANTA brand of automotive, inverter, and UPS batteries.
5. The company is an authorised distributor of Gulf Oil Lubricants India for their automotive lubricants and batteries.
6. They are also dealers for a wide range of agro chemicals through multiple sales outlets.

The company also holds 45% stake in ISGEC Heavy Engineering Limited (IHEL) out of the total 62.43% promoter holding of IHEL.

IHEL has an established market position in the EPC space and as a fabricator for equipment/ machinery in the capital goods sector.

Why Yamuna Syndicate Share Price is Rising

TYSL derives roughly 80% of its revenues from the auto ancillary segment of the business which comprises of batteries and oil and lubricants.

The Indian automobile industry posted a robust performance, with the domestic industry growing by 12.5% during the last financial year (FY24).

Companies supplying components and consumables related to the auto industry have been on a roll in the past one year.

The sustained uptrend in prices of auto ancillary companies has made investors wonder whether there's still steam left in this rally or whether the air will blow out soon?

#1 Strong Earnings Growth:

TYSL reported a 5% decline in its revenues for the quarter ended March 2024. In spite of a revenue decline, the company managed to post a profit after tax growth of 2,054% on the back of higher other income.

The company's board also recommended a final dividend of Rs 400 per share.

#2 Sector Tailwinds:

The entire auto ancillary sector has strong demand from the automobile original equipment manufacturers suggesting a strong demand for auto components and consumables.

Also, YSL is engaged in trading and manufacturing of agro chemicals, this year's stable monsoon forecast can give this business a boost in revenues and profitability.

TYSL: What Next?

Management guided that the overall economic scenario is somewhat uncertain owing to existing global geo-political situation and the inherent possibilities of disruption of supply chains, and related business.

Market conditions are likely to remain difficult, and they expect growing competition in the product segments currently handled by them.

Owing to the stagnation in several sectors of the economy, the demand situation will remain a cause for concern. Consequently, the prices are unlikely to look up significantly.

Yamuna Syndicate Share Price Performance:

Even though TYSL has always been high priced, it has still delivered returns of over 350% in the past 1 year.

This proves that a highly priced stock can still be an outperformer if the valuations are justified.

Today, the stock touched a new 52 week high at Rs 62,990 and closed at the highest point of the day.

TYSL has a 52-week low of Rs 12,751 touched on 28 July 2023.

However please note that investing in such little-known companies has its own downside.

Additionally, the volume in this counter is also very minimal at only around 200 shares per day and therefore the stock price movement can be equally sharp in both directions.

Remember the challenges before diving headfirst.

Happy Investing!

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...