Analysts’ Picks: Sona Koyo Steering
In an interview with CNBC-TV18, Surinder Kapur, Chairman of Sona Koyo Steering Systemsspoke about the latest happenings in his company and sector.
Below is a verbatim transcript of the interview
Q: Walk us as to what your capacity utilisation had fallen to in the worst of times which is around December-January? How much have you seen the pickup and what’s your capacity utilisation as we stand right now?
A: Our capacity utilisation is around 65-70% currently. Our company two-years ago made a massive expansion programme and therefore we expanded our capacity. We haven’t had – in sales terms– that much drop because we were mainly concentrated on the passenger car business and the utility vehicle business.
So we have seen our sales grow this year. We are growing at about 14-15% in our company while the industry is growing, the passenger car and utility vehicles growing also around 15-16%. So we are back on track – we had a loss year last year mainly because of commodity price not being recovered by customers and our foreign exchange loss due to imports from Japan. That era is over. We are now looking forward to the growth in the industry, which we will be able to cater to quite comfortably.
Q: What is the kind of debt you are sitting on and what is the annual interest outgo?
A: Our debt equity ratio right now is about 1.5. Normally, we have been operating at about 1.1 or so. We took on a debt of about Rs 300 crore last year, which is what we pay for currently. So whilst our margins have improved, our profit is also improving because we are able to pay for our interest payment quite easily
Angel neutral on Sona Koyo Steering Systems
Angel Broking has maintained its neutral rating on Sona Koyo Steering Systems in its September 16, 2009 research report.
"Sona Koyo is the largest manufacturer of steering systems in India, catering to passenger cars, utility vehicles and light commercial vehicles. The company has technical and financial collaboration with JTEKT Corporation, Japan, which is the largest producer of passenger-vehicle steering systems in the world. Overall, the Auto Industy is exhibiting a positive turnaround over the last few quarters. Hence, on increasing volumes and on improving operating leverage, we expect Sona Koyo to clock an EPS of Rs0.7 in FY2010E and Rs1.5 in FY2011E. At the CMP, the stock is trading at fair valuations of 10.8x FY2011E Earnings. Hence, we maintain a 'Neutral' view on the stock," says Angel Broking's research report.
Meanwhile, the BSE Sensex was down 8.92 points, or 0.05%, to 16,885.33.
On BSE, 51,108 shares were traded in the counter as against an average daily volume of 1.67 lakh shares in the past one quarter.
The stock had hit a 52-week high of Rs 18.15 on 22 October 2009 and a 52-week low of Rs 5.35 on 17 March 2009.
The stock had underperformed the market over the past one month till 17 December 2009, falling 2.74% as compared to the Sensex's 0.92% decline. It outperformed the market in past one quarter, gaining 3.84% as against 1.10% increase in the Sensex.
The small-cap auto component maker has an equity capital of Rs 19.87 crore. Face value per share is Rs 1.
The current price of Rs 16.70 discounts the company's Q2 September 2009, annualised EPS of Rs 0.75, by a PE multiple of 22.26.
Sona Koyo, which has long had an inorganic growth strategy, is a Tier-III supplier of aerospace components right now.
Sona Koyo's vice chairman and managing director, Sunjay Kapur was quoted by the media as saying that the company is currently in talks with a local Tier-II supplier that services Hindustan Aeronautics (HAL) and Boeing for supply of components.
He added that the company is not opposed to the idea of joint ventures or acquisitions to graduate from Tier-III to Tier-I as the firm has the expertise in engineering, manufacturing and forging partnerships.
Sona Koyo Steering Systems reported a net profit of Rs 3.71 crore in Q2 September 2009, compared with a net loss of Rs 7.32 crore in Q2 September 2008. Sales rose 12% to Rs 200.38 crore in Q2 September 2009 over Q2 September 2008.
| Share Price Movement | |||
| Period | Price in Rs | Gain/(Loss) | |
| in Rs | in % | ||
| 1 Week | 16.25 | (0.30) | (1.85) |
| 1 Month | 16.35 | (0.40) | (2.45) |
| 3 Months | 15.20 | 0.75 | 4.93 |
| 6 Months | 10.54 | 5.41 | 51.33 |
| 1 Year | 10.10 | 5.85 | 57.92 |
| Note: Based on previous day closing price source : moneycontrol.com,indiainfoline | |||
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