[aravind.anand]

BPCL is announcing a 1:2 bonus, and seems to be a good buy.

Logic: with the approved daily change in fuel prices, these Oil giants are not expected to suffer losses at all, while they can choose to enjoy profits by delaying rate cuts too !

Also, with Automotive sales hitting record highs with each passing month, Fuel consumption is also set to increase.

IMHO, till the time we see some solid push for Electric / alternate fuel vehicles, one can safely invest in these...

[ECM]

All gyan is in this video!

https://www.youtube.com/watch?v=h-xFu78sTWY

[GTO]

Experts,

What auto stocks are worth picking up? I already have a number of them in my portfolio. Always look at fundamentals & for the long-term (I rarely sell any stock in less than 2 - 5 years).

Wise to invest at this time in Maruti? MRF? Bajaj Auto? Any spare part manufacturers?

Many thanks in advance!

[SmartCat]

Originally Posted by GTO

Wise to invest at this time in Maruti? MRF? Bajaj Auto? Any spare part manufacturers?

A 15 page report on auto stocks from HDFC Securities -
http://old.hdfcsec.com/Share-Market-...eports/3023074



'Neutral' rating on Maruti (because of high valuations) and Hero Honda (growth concerns) but BUY on everything else.

[hserus]

I'm picking up stocks in a few well known names in auto ancillaries that are oem as well as sell their own products

Much more consistent market than the auto majors and generally, cheaper to buy

Mindaind
Sundrmbrak
Sundrmfast

All on NSE

Originally Posted by GTO

Experts,

What auto stocks are worth picking up? I already have a number of them in my portfolio. Always look at fundamentals & for the long-term (I rarely sell any stock in less than 2 - 5 years).

Wise to invest at this time in Maruti? MRF? Bajaj Auto? Any spare part manufacturers?

Many thanks in advance!

[ECM]

Originally Posted by GTO

Experts,

What auto stocks are worth picking up? I already have a number of them in my portfolio. Always look at fundamentals & for the long-term (I rarely sell any stock in less than 2 - 5 years).

Wise to invest at this time in Maruti? MRF? Bajaj Auto? Any spare part manufacturers?

Many thanks in advance!

Ans is NO,this answer came from my market experience since 1989.All bull market start with valuation-bottom picking and end with a scam,here I can't write much but google central banks and stock market and you will find an answer.

[Nonstop-driver]

Originally Posted by smartcat

A 15 page report on auto stocks from HDFC Securities -

Thanks for sharing this. The report, however, does not cover auto ancillary sector which I believe is more lucrative than auto majors. Ancillaries like Motherson, Minda, Lumax have a global footprint and are up-to-date with latest technologies and trends. They have a long way to go, even if Indian auto sector grows slower than expected. Good stocks in this space with reasonable valuations can be a good investment.

In addition, in the auto major space, I believe Maruti can still go a long way despite higher valuations if you are looking at the next 5 years or so.

[SmartCat]

Originally Posted by Nonstop-driver

Thanks for sharing this. The report, however, does not cover auto ancillary sector which I believe is more lucrative than auto majors. Ancillaries like Motherson, Minda, Lumax have a global footprint and are up-to-date with latest technologies and trends. They have a long way to go, even if Indian auto sector grows slower than expected. Good stocks in this space with reasonable valuations can be a good investment.

Only problem with auto ancillary sector is the commoditized nature of the business. They do not have too much pricing power. So they will always have 'reasonable valuations' (in PE ratio terms). There are few exceptions like battery/tyre makers or large companies like Motherson or Bosch though.

I found an interesting company called PPAP Automotive.
http://www.ppapco.in

They make door rubber beadings and plastic railings that prevent rainwater from getting inside the cabin!



I have not invested in this company yet - just looking.

[Nonstop-driver]

Originally Posted by smartcat

I found an interesting company called PPAP Automotive.
http://www.ppapco.in

Fascinating. They are suppliers to the market movers - MSL, Creta, Fortuner, Crysta Although it is also at its lifetime high currently.

Here's Mar '17 con-call transcript to understand the operations better.

March 2017 Conf Call Notes
Exports
Currently exports contribute to 10% of sales and products are exported to Japan, Europe, Venezuela, Brazil etc. The exports are not directly done by us but by our customers (Nissan, Toyota, Honda, Renault).
Customers
The revenue split from various customers is as follows

It seems that Hyundai wants to localize parts for their models to remain competitive. Currently these parts are supplied by their Korean vendors who export these parts to India. So Hyundai is testing waters with Indian vendors. We have got business for their two models, namely Eon and Creta. For Eon, we have commitment of products for entire production.
Hyundai is second largest seller of passenger cars in India and with acquisition of Kia and its entry into India, they are looking to sell 1 million cars per year. Hyundai remains an important customer to enable/accelerate growth story of the company.
We deliver 7000 Rs worth of products per model in Honda. The cost of sealing products supplied to MS per car is 1200 Rs.
Company is supplying products SML Isuzu in LCV segment and to Suzuki Motors in 2 wheeler segment.
Injection Molded Products is a tough business with a lot of competition. The location of plant w. r. t. customer is very important in this business. Shipping these parts from Noida location to MS was noncompetitive. Now company is in the process of setting of plants in Patherdi, RJ and Gujarat. With these plants, the company is looking to sell injection molded parts to MS as they are competitive.
Rubber Sealing products are sold from JV. We are currently supplying three models of MS - Celerio, Baleno, Vitara. We are also supplying to two models of Toyoto - Fortunner and Crysta.
Tooling revenue is linked to launch of new car model and revenue is lumpy. As model launch schedules shift, the revenue recognition will also shift.
Margins
The rise in EBITDA margins are due to all round effort in all the departments and similar margins projection for FY18.
Capex and Capacity Utilization
The current consolidated capacity utilization (sealing + injection) is at 70%. The capacity utilization of sealing business is around 65-67%. The capacity utilization of JV is less than 40%. The company does not foresee any additional capex requirements in FY18-19 except for maintenance + ongoing capex (30-35 Cr). All the capex requirements and loan repayments would be met through internal accruals.
The plants at Chennai , Pathredi, Gujarat would be operational in FY18. Bulk of the capex is geared towards creating infrastructure. The company is looking to shift existing idle/freed up production machinery to these new locations.
The non-auto business is temporary in nature and aim is to fill up idle production capacity. The margins are much lower in non-auto business.

[Dry Ice]

Talking about the auto-sector, how is the outlook of the current management of Tata?

They were struggling in passenger division for long, and now the market share dropped in commercial segment. But the luxury marquees are contributing to their profits.

Does the current management look capable enough to stage a comeback in passenger/commercial division? I am kind of skeptical after the Cyrus Mistry episode.

The products they are coming up with, are good no doubt, but there is a lot of baggage on the brand. An average guy on the street still doesn't want to pick up a Tata. It is going to be a tough challenge to turn around this perception.

I see many researchers are recommending a 'buy' on them. I really wonder, what is it that they are able to see and we are missing.

[Nonstop-driver]

Originally Posted by Dry Ice

I see many researchers are recommending a 'buy' on them. I really wonder, what is it that they are able to see and we are missing.

Rover - JLR. Tata's Indian operations are only a fraction of what Rover - JLR bring to the party. The stock is also impacted by GBP's forex movement.
Source - Mar '17 results

[joslicx]

Originally Posted by Dry Ice

I see many researchers are recommending a 'buy' on them. I really wonder, what is it that they are able to see and we are missing.

Just look at their debt figures. And compare it to Maruti!

When you have a superbly run company like Maruti available to buy on the stock market, it hardly makes sense (at least from my perspective) to take a punt on Tata Motors. Their huge debt is a big risk.

[Dry Ice]

Originally Posted by Nonstop-driver

Rover - JLR. Tata's Indian operations are only a fraction of what Rover - JLR bring to the party. The stock is also impacted by GBP's forex movement.
Source - Mar '17 results

That's true but then I start to wonder, why are they putting money in the domestic market, shouldn't they look to invest more on JLR to increase the profits? Domestic market seems like a drag. Putting good money after bad money doesn't isn't right, right?

Originally Posted by joslicx

Just look at their debt figures. And compare it to Maruti!

When you have a suberbly run company like Maruti available to buy on the stock market, it hardly makes sense (at least from my perspective) to take a punt on Tata Motors. Their huge debt is a big risk.

I know! And agree. From my view - the products, competition, it's reputation etc - doesn't give the company any moat whatsoever! Auto sector with huge entry barriers is extremely likely to do well when economy booms. And given they have been in the business for a long time now, it is expected for them to be in the top 3 at least.

I am just curious about the buy recommendation I see everywhere for TML. I no way have the same intellectual capital as folks putting out these reports, but, something doesn't feel right about it.

Disc - already invested in Maruti. After owning it for 5 years, I was convinced it will continue to do well. A company which values a customer so much, is bound to have loyal customers. In fact, I am tempted to book some profits seeing the valuations.

[Nonstop-driver]

Originally Posted by Dry Ice

That's true but then I start to wonder, why are they putting money in the domestic market, shouldn't they look to invest more on JLR to increase the profits? Domestic market seems like a drag. Putting good money after bad money doesn't isn't right, right?

Operating margin on EBITDA basis on both businesses is similar, it's just that JLR is bigger numbers wise. Besides India is an important market for any auto-maker globally, so Tata must put more money in India I believe. Rather they should borrow design and technical knowledge from JLR and use it to turnaround Tata's brand perception in India. They're moving in the right direction, I hope they stay consistent.

On a related note, the day Maruti manages its own diesel engines, the current valuations will appear cheap, to put it lightly. The only bottleneck MSL has as on date is an engine of their own. They've already diversified in the accessories margin that should add a healthy percentage to their bottomline in FY18.

[joslicx]

Originally Posted by Dry Ice

I am just curious about the buy recommendation I see everywhere for TML. I no way have the same intellectual capital as folks putting out these reports, but, something doesn't feel right about it.

They are just doing their job! Their job is to make money for people who they work for (their customers). This recommendation must be somehow good for their customers. I wouldnt be surprised if here they had recommended their customers to exit Tata Motors! Any retail investors buying on these recommendations would be providing the exit opportunity to their real (paid) customers.

If you are a trader then these tips can sometimes help you to make some money. But these are not for serious investors. In fact, most of the times these are purely technical and short term. If you are an investor then it makes more sense to look at the company is some depth - its finances (low or zero debt, ROE more than 20% etc), its competition and its advantages vis-a-vis the competition, future prospects etc. The problem is, there are not many promising companies in India if you consider these things and the ones that are there are not going to be cheap, especially in this bull market. To give an example, Consider a company like Godrej Consumer Products. Now its a fantastic company with a 10 year CAGR of about 30% (which means your money has become 10X in 10 years! For comparison, Infosys returns for 10 years is just 6% CAGR!) Not only that, if you see the returns, they are almost linear (around the 30% mark!) look at the returns graph:



Isint it remarkable! Its 10 year, 5 year, 3 year, 1 year returns are all around the 30% mark! Its a very well run company for so many years now. If you look at fundamental ratios the Return to Equity is 25% and improving year on year. Debt to Equity is slightly high at 0.6 but when your RoE is that high it is manageable. Its making more money every year. The amazing thing is, you dont find analysts and people on money channels talking about it ever! But, if you look at shareholding pattern - theres tons of institutional investors invested in this company! By no means I am saying you should buy this company (its very very expensive at current price, but it was always expensive and will always be expensive!), but you can study it and it makes you think a company making such great returns for such long time and somehow the analysts dont deem necessary to talk about it!


Although, there is one story about Tata Motors that could be exciting for investors. The defense modernisation program of the Govt of India is a big opportunity and the Make in India emphasis is interesting for the likes of Tata Motors and Mahindra. So if things pan out well then these two companies (and their shareholders) can benefit a lot.

Disc - already invested in Maruti. After owning it for 5 years, I was convinced it will continue to do well. A company which values a customer so much, is bound to have loyal customers. In fact, I am tempted to book some profits seeing the valuations.

Now I feel jealous of you I started tracking Maruti few months back when it was at 4500 odd levels and (in my own limited wisdom) somehow it felt expensive. Well it went to 5000+ levels and then it felt expensive. It still went to 6000+ levels and then it definitely felt expensive. Well, it still went above 7000 level! It is one heck of a run. Missed it.