Sundram Fasteners is good investment

Sundram Fasteners is good investment

By Rajiv Kapoor | 1 October, 2016
Sundram Fasteners Limited, TVS Group, GDP, investment

Sundram Fasteners Limited is part of the US $6 billion TVS Group, headquartered in Chennai. The company has established a track record of leadership for over 40 years with a diversified product line, world-class facilities across four countries and a motivated team of talented people. Sundram Fasteners has become a supplier of choice to leading customers in the automotive and industrial segments worldwide. Their product range consists of high-tensile fasteners, powder metal components, cold extruded parts, hot forged components, radiator caps, automotive pumps, gear shifters, gears and couplings, hubs and shafts, tappets and iron powder. Over the years, Sundram Fasteners has acquired cutting-edge technological competencies in forging, metal forming, close-tolerance machining, heat treatment, surface finishing and assembly. Manufacturing locations are supported by engineering and design personnel working on new product design and development. Understanding the global nature of business and the need to provide quality products to bluechip customers, the company has established a supply chain logistic network spanning several continents. The Indian auto-components industry has experienced a healthy growth over the last few years. Some of the factors attributable to this include a buoyant end-user market, improved 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 employs as many as 19 million people, both directly and indirectly. A stable government framework, increased purchasing power, large domestic market, and an ever increasing development in infrastructure have made India a favourable destination for investment. The Indian auto-components industry can be broadly classified into the organised and unorganised sectors. The organised sector caters to the original equipment manufacturers (OEMs) and consists of high-value precision instruments, while the unorganised sector comprises low-valued products and caters mostly to the aftermarket category. 

The total income of the company for Q2FY17 is Rs 650 crore as against Rs 621 crore for the same period last year, while the net profit is Rs 51.74 crore as against Rs 42.29 crore for the same period last year. At the current market price of Rs 283, the stock P/E ratio is at 21.52 for FY17, while earning per share (EPS) of the company for earnings of FY17 is seen at Rs 14.30. The net sales and PAT of the company are expected to grow at a CAGR of 12% and 29% respectively over the next few years. The price to book value of the stock is expected to be at 5.11 times for FY17E. Most analysts are overweight in the Sundram Fasteners stock for medium term investment and even Indian mutual funds are logging in to the stock in their portfolio. We feel that the stock can be bought for a six-nine months’ time frame, with a 25% price appreciation.

Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.

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