Vijay Kedia Buys Almost 1% Stake in this Underperforming Auto Ancillary Stock

One of the top auto ancillary companies in India, particularly operating in the camshafts segment - Precision Camshafts recently filed its shareholding pattern for the quarter ended September 2024.

In a surprising stance, ace investor Vijay Kedia has doubled down his investment in the company.

Data from the BSE showed that Vijay Kedia now holds 2.1% stake in Precision Camshafts.

In the most recent quarter, he added 0.94% stake in the company.

Prior to this in the June 2024 quarter, Vijay Kedia held about 1.16% of this company.

Kedia had initially acquired 1,683,502 shares of the company on 15 March 2023, a 1.05% stake. He added the remaining 0.11% in June 2023. And now, he has yet again added more of the same company.

Before we move on to understand the seasoned investor's bold bet, let's look at who Vijay Kedia is.

Who is Vijay Kedia?

Vijay Kishanlal Kedia is an Indian investor and trader based out of Mumbai. 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 the 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.

Why is Vijay Kedia Doubling Down on Precision Camshafts?

As we mentioned above, as of September 2024, Vijay Kedia holds over 2% stake in Precision Camshafts.

Every quarter, companies must report the names of shareholders holding over 1% stake, as part of their filings.

Kedia recently doubled down in this counter.

While we do not know for sure why exactly Vijay Kedia bought into this counter, there are some explanations...

Strong Quarterly Earnings

One reason why Kedia has reiterated his faith in the company could be in anticipation of the company's upcoming results.

For the first quarter ended June 2024, the company's net profit increased to Rs 18 crores from Rs 15 crores in the sequential quarter.

The company's subsidiary Memco showed significant improvement during the quarter.

Another subsidiary Emoss faced challenges due to geopolitical instability and economic recession in Europe.

The company's management reiterated an optimistic outlook about the domestic camshaft business, citing strong growth potential correlated with the performance of major OEMs including Maruti, Tata, Mahindra, Hyundai.

Electric Vehicle (EV) Focus

The other reason behind Kedia's bullish stance could be Precision Camshafts' increased focus towards EVs.

The company has initiated commercial deployment of electric LCVs in India, with confirmed orders for three variants offering different ranges on a single charge (70 km, 100 km, and 250 km).

It has started deliveries in major cities including Pune, Mumbai, Hyderabad, Kolkata, and Delhi, with plans to expand further.

A Close Look at Financials

In the past 5 years, the company has seen decent growth, driven by a combination of improved realisations and sales due to better demand from the end-user segment.

Financial Snapshot

Rs m, consolidated	FY20	FY21	FY22	FY23	FY24
Net Sales	7,462	7,090	8,950	10,801	10,311
Growth (%)	7%	-5%	26%	21%	-5%
Operating Profit	1,332	873	1,329	1,437	1,318
OPM (%)	18%	12%	15%	13%	13%
Net Profit	350	23	460	463	404
Net Margin (%)	5%	0%	5%	4%	4%
ROE (%)	4.2	-0.1	7.0	6.6	5.5
ROCE (%)	5.6	2.8	8.4	8.4	8.3
Dividend (Rs)	1.0	1.0	1.1	1.0	1.0
Debt to Equity (x)	0.3	0.3	0.2	0.1	0.1

Data Source: Ace Equity

The company has consistently paid out dividends. It holds about Rs 250 crores in cash on its balance sheet and is almost debt free.

What Next?

As part of its growth strategy, Precision Camshafts has planned a capital expenditure for the camshaft business. It will spend around Rs 70 to Rs 80 crores over the next 6 to 12 months, focused on setting up new machining lines and expanding capacity.

The management has promised to get one more plant operational by the end of FY25.

The company is exploring talks with truck and bus makers for a tie-up that could see the company provide electric vehicle solutions for the domestic market.

Precision Camshafts is making the EV push through its fully-acquired Dutch subsidiary Emoss, which specialises in the retro fitment of electric drive systems onto fossil-fuel-powered trucks or buses.

It remains to be seen how the company performs in the September 2024 quarter.

How Precision Camshafts Share Price has Performed Recently

In the past 5 days, Precision Camshafts share price has rallied 18%.

In a month, the stock price is down 2%. In 2024 so far, it's down 3% while in the past 1 year, Precision Camshafts shares have fallen 6%.

Yesterday, the stock price ended over 7% higher after it was revealed that Kedia has added more stake in the company.

Precision Camshafts has a 52-week low of Rs 289 touched on 20 October 2023 and a 52-week low of Rs 173 touched on 5 June 2024.

Here's a table comparing Precision Camshafts with its peers -

Comparative Analysis

Company	Precision Cam.	Hi-Tech Gears	Rajratan Global	Sundaram Clayton	Talbros Auto
ROE (%)	5.5	27.9	15.6	-17.4	24.3
ROCE (%)	8.3	22.3	17.6	-2.1	29.7
Latest EPS (Rs)	5.1	63.5	14.7	-54.6	18.3
TTM PE (x)	50.6	13.3	38.5	0.0	17.3
TTM Price to book (x)	3.2	3.3	5.7	5.5	3.5
Dividend yield (%)	0.4	0.6	0.4	0.2	0.2
Industry PE	40.8
Industry PB	4.9

Data Source: Equitymaster

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.

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...