Bank on Sundram Fasteners for latest Diwali Bonanza

Sundram Fasteners Limited is a flagship company of the US $6 billion TVS Group, headquartered in Chennai. The company is a manufacturer of automotive and engineering components and is the first Indian company to be ISO 9000 certified. All operations of Sundram fasteners are ISO 9000, IS 14001 & TS 16949 certified. Analysts are positive on the stock and suggest including it in the portfolio this Diwali.

Why Buy?

Sundram Fasteners share price has surged 78% as compared to 3% rise in the Sensex and 5% rise inNifty in past one year.

The company has shown a track record of leadership for over 40 years with a varied product line, world-class facilities across four countries and a motivated team of talented people. The company has become a preferred supplier to leading customers in the automotive and industrial segments worldwide.

Its product range consists of high-tensile fasteners, cold extruded parts, powder metal components, hot forged components, gear shifters, radiator caps, automotive pumps, gears and couplings, hubs and shafts, tappets and iron powder. Over the years, Sundram Fasteners has gained cutting-edge technological competencies in forging, close-tolerance machining, heat treatment, metal forming, surface finishing and assembly. Manufacturing locations are supported by engineering and design personnel working on innovative product design and development. Perceiving the Global nature of business and the need to provide quality products to blue-chip customers, the company has set-up a supply chain logistic network extending across several continents.

 

Behind the Industry curtains:

The Indian auto-components industry has witnessed a vigorous growth over the last few years. Some of the factors attributable to this include an upbeat end-user market, enhanced consumer sentiment and return of adequate liquidity in the financial system. The auto-components industry accounts for almost 7% of India’s Gross Domestic Product (GDP) and retains as many as 19 million people, both directly and indirectly. A steady government framework, large domestic market, increased purchasing power, and an ever rising development in infrastructure have made India a favorable destination for investment.

 

The Indian auto-components industry can be largely classified into the organized and unorganized sectors. The organized sector provides to the original equipment manufacturers (OEMs) and consists of high-value precision instruments, while the unorganized sector consists of low-valued products and looks mostly after the aftermarket category. 

Over the last decade, the automotive components industry has grown three times to US$ 40 billion in 2015 while exports have scaled even faster to US$ 11 billion. This has been driven by strong growth in the domestic market and escalating globalization, including exports, of several Indian suppliers.

 

ICRA Limited has projected the growth 0f 8-10% for the Indian Auto Component industry in FY 2017-18, based on higher localization by Original Equipment Manufacturers (OEM), higher component content per vehicle, and rising exports from India. According to the Automotive Component Manufacturers Association of India (ACMA), the Indian auto-components industry is projected to register a turnover of US$ 100 billion by 2020 supported by strong exports ranging between US$ 80- US$ 100 billion by 2026, from the current US$ 11.2 billion.

The Quarterly blast:

• Company’s revenue has jumped by 2.01% QoQ from Rs. 688.03 crs to Rs. 701.88 crs and 12.91% YoY in Q1FY17.
• The operating profit margin is 15.76% in quarter ended June16.
• Net profit margin was at 10.76% for June 16 Quarter.
• Operating Profit Jumped 35.68% QoQ and 68.28% in YoY.
• Net Profit jumped 78.64% YoY.

 

Road Ahead 

The quickly globalizing world is opening up newer routes for the transportation industry, especially while it makes a move towards electric, electronic and hybrid cars, which are set to be more efficient, safe and reliable modes of transportation. Over the next ten years, this will lead to newer directions and opportunities for auto-component manufacturers, who would be required to adapt to the change through the systematic research and development.

The Indian auto-components industry is set to turn out to be the third largest in the world by 2025. Indian auto-component makers are well placed to benefit from the globalization of the sector as exports potential could be increased up to four times to US$ 40 billion by 2020.

To read the Research Report on the stock Kindly visit Sundram Fasteners Research Report.