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Why Munjal Auto Share Price is Rising

Nov 24, 2023

Why Munjal Auto Share Price is Rising

The auto ancillary sector is the heart of the automobile industry. Whenever the demand swings for the automobile sector, the fortunes of auto ancillary companies swings along with it.

According to a report by the press information bureau (PIB) of the Government of India, as of February 2023, the contribution of the automotive sector to the GDP has risen to about 7.1% from mere 2.8% in 1992.

So, it's safe to say that along with the automotive sector, the auto ancillary sector has also seen a significant rise. We don't have the recent data, however, as of 2022, the auto ancillary sector contributed 2.3% to the total GDP.

Today, let's look at an auto ancillary stock which has gained more than 50% in the past one month.

The company is none other than Munjal Auto Industries.

#1 Robust Q2 Results

The primary reason behind the rally is the strong quarterly results reported by the company.

The company's net profit increased by 79% to Rs 138 million in the recent quarter from Rs 77 million during the same time a year ago.

Net sales saw a modest growth to Rs 5.5 billion (bn) .

The earnings before interest, tax, depreciation and amortisation (EBITDA) recorded an improvement of 50% from Rs 288 million in September 2022 to Rs 432 million.

Moreover, the earning per share (EPS) also increased by 45% to Rs 1.40 from Rs 0.8 year on year (YoY).

#2 Strong Growth Prospects

The auto ancillary sector is poised for growth and post Covid, the auto sector has seen a strong pent-up demand which will indeed benefit the companies who are involved in auto components manufacturing.

If we look at some data, the demand for motorcycles and scooters has remained weak in the last few years.

However, this year we saw a significant revival in this segment due to a change in consumer preferences in the rural market which account for almost 55% of two-wheeler sales in the country. The sales of two wheelers in August 2023 touched a one year high.

Moreover, the production of two-wheelers by original equipment manufacturers in August 2023 also saw a 3% uptick.

Now, as sales are in the fast lane, Munjal Auto stands to benefit from it. It manufactures exhaust systems which are called mufflers, fuel tanks and rims for two and three wheelers.

Moreover, the company's vast client base which includes Hero Moto Corp, Tata Motors, Bajaj Auto, and Royal Enfield, gives it the edge to benefit from the rising demand.

What's Next?

As Munjal Auto is a part of Hero group of companies, a majority of its manufacturing is done for HeroMoto Corp, which is the leader in the Indian two wheeler industry.

This expertise and established relationship could help the company grow well in the future.

In addition to its role as a key supplier, Munjal Auto has entered into technical collaborations as well. One such collaboration is with Lafranconi Italy SPA which focuses on exhaust systems for two-wheelers.

Another partnership is with Samsung Industries Limited in South Korea. This company specialises in fuel tanks for passenger vehicles.

These strategic and technical collaborations not only enable Munjal Auto to sustain a robust presence in the business with its original equipment manufacturer partners but also provide access to cutting-edge technology.

How Shares of Munjal Auto have Performed Recently

Over the past one month, Munjal Auto share price has surged by 52%. In 2023 so far, the shares have rallied 65%.

The company touched its 52-week high of Rs 80 on 23 November 2023 and its 52-week low of Rs 35.6 on 29 March 2023.

chart

About Munjal Auto Industries

Munjal Auto is a leading auto ancillary company belonging to the Hero Group. The company claims to be the largest manufacturer of exhaust systems in the world.

The company generates a majority of its revenue by manufacturing auto components. However, they have also diversified their business in manufacturing windmill blades, moulds and other parts for wind energy.

To make this business successful, the company acquired a 68% stake in Indutch Composites Technology which manufactures highly-engineered moulds and components for original equipment manufacturers in the wind energy space.

For more details about the company, you can have a look at the Munjal Auto Industries fact sheet and quarterly results on our website.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

You can also compare Munjal Auto with its competitors.

Munjal Auto vs Craftsman Automation

Munjal Auto vs Samvardhana Motherson

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

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