Why Did Dolly Khanna Increase Stake in this Auto Ancillary Stock?

Every investor has a different strategy for picking stocks. Some prefer to invest based on fundamentals, some on technical analysis, and some on both.

But there is a group of investors who do not rely on any of these two factors and instead rely solely on the top investing gurus of India.

By top investing gurus, we mean Rakesh Jhunjhunwala, Sunil Singhania and the likes. These "gurus", who have been able to outperform the benchmark indices consistently over long periods of time, have a knack for making better investing decisions.

Of late, there's a lot of interest in following the top investing gurus of India and their investments, as they can provide insight into what is happening in the market.

One prominent guru investor that investors widely track is Dolly Khanna.

In the second quarter (July-Sept 2022), Dolly Khanna has increased exposure in an auto ancillary stock.

Let's find out why...

Who is Dolly Khanna?

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.

Why did Dolly Khanna increase stake in this auto ancillary stock?

Data revealed shows that Dolly Khanna increased her holding in Talbros Automotive Components by 0.12% in the September 2022 quarter.

According to the latest shareholding pattern for Talbros, Dolly Khanna owns 150,215 equity shares in the company, equivalent to a 1.22% stake. In the previous quarter, she held 1.10% stake.

Khanna has been holding a stake in Talbros Automotive since December 2020 quarter.

Apart from Dolly Khanna, the stock is also held by another investing guru Vijay Kedia. Data available with BSE showed Vijay Kedia held 280,000 shares of Talbros, or 2.27% stake as of September 2022. Kedia did not add exposure to Talbros in the recent quarter.

Strong backing from two investing gurus makes us wonder - Why are they betting on the auto component maker?

While we don't know the exact reason why Dolly Khanna and Vijay Kedia turned bullish on the company, here are few reasons we can guess.

As you know by now, the EV revolution is upon us. As the EV revolution picks up pace, automobile companies won't be the only ones benefitting.

Other players like battery makers, shock absorber manufacturers, automotive lighting companies, and other auto component markers will also gain from this transition.

Talbros Automotive caters to a wide range of products including gaskets, heat shield, forgings, chassis, suspension systems, anti-vibrating components, and hoses. So it has no threats to India's push for EVs. Instead, it's beneficial for the company.

The company is diversifying its products with additions of critical suspension components supply to EVs.

In July 2021, the company invested in a battery manufacturer startup Lohum Cleantech.

Besides, the company has a robust distribution network. That is why it has marquee customers such as Bajaj Auto, Ashok Leyland, Escorts Group, Force Motors, Hero MotoCorp, Honda, Hyundai, John Deere, M&M, Maruti Suzuki, TAFE, Daimler India, Tata Motors, Simpsons, among others.

On the financial front, the company delivered its highest ever operating profit and net profit in financial year 2022.

Financial Snapshot

Rs m, consolidated	FY18	FY19	FY20	FY21	FY22
Revenues	3,930	4,828	3,853	4,442	5,772
Growth (%)	21%	23%	-20%	15%	30%
Operating Profit	471	581	431	646	832
OPM (%)	12%	12%	11%	15%	14%
Net Profit	229	264	122	391	449
NPM (%)	6%	5%	3%	9%	8%
Total Debt	1,243	1,551	1,535	1,028	890
Debt to Equity (x)	0.69	0.78	0.78	0.42	0.29
Dividend per share (Rs)	1.5	1.8	0.5	2.0	2.5

Data Source: Ace Equity

Apart from financials, the company has a strong order book, which should keep revenues in check going forward. In July this year, the company received multi-year orders of up to Rs 4 bn from both domestic and international customers across all divisions and segments.

It also received orders from a new international customer, allowing it to enter the agri, construction, and off-road segments.

If the company keeps up the pace, it could see its market share increase.

How the stock has performed on the bourses

Shares of the Talbros Automotive surged 9% in intraday trade yesterday after news about Dolly Khanna picking additional stake spread out.

The stock ended 6% higher at Rs 494 on the BSE.

In the past one year, shares of the company have gained 77%.

Talbros Automotive has a 52-week high quote of Rs 655 touched on 18 January 2022 and a 52-week low quote of Rs 254 touched on 25 October 2021.

Here's a table comparing Talbros Automotive with its peers on various metrics for financial year 2022.

Comparative Analysis

Company	Talbros Auto	Banco Products	Fiem Ind	GNA Axles	Precision Camshafts
ROE (%)	16.3	16.9	15.7	16.0	7.0
ROCE (%)	18.4	24.9	21.4	17.2	8.4
Latest EPS (Rs)	37.9	19.7	85.4	40.2	4.6
TTM PE (x)	13.1	9.3	16.8	16.6	25.5
TTM Price to book (x)	2.0	1.3	2.8	2.3	1.6
Dividend yield (%)	0.5	10.9	1.4	0.8	1.0
Industry PE (x)	40.8
Industry PB (x)	3.0

Data Source: Ace Equity, Equitymaster

About the company

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

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...