SONACOMS - LONG TERM INVESTMENT OPPORTUNITY
The journey of the company started in 1995 as Sona Okegawa Precision Forgings, which was a 75:25 joint venture between the Sona Group and Mitsubishi Materials and the pioneer of warm forged near net-shaped gears manufacturing technology. The Sona Group, after acquiring Thyssen Krupp’s forging business (which acquired BLW, the inventor of warm forging) and 25% stake of Mitsubishi, renamed the company to Sona BLW Precision Forgings, which became the largest manufacturer of forged gears. In 2019, Sona BLW acquired Comstar Automotive, a leading designer and manufacturer of starting and charging systems for automobiles and created a new identity. Company have strong financials and numbers are continuously increasing on YoY basis.
Sona Comstar is an Indian origin, global automotive systems & components manufacturer with 9 plants spread across India, China, Mexico, and the USA. The company is one of India’s leading automotive technology companies, designing, manufacturing and supplying highly engineered, mission critical automotive systems and components such as differential assemblies, differential gears, conventional and micro-hybrid starter motors, BSG systems, EV traction motors (BLDC and PMSM) and motor control units to automotive OEMs across US, Europe, India and China, across all vehicle categories such as conventional passenger vehicles, commercial vehicles, off-highway vehicles, electric cars, electric light commercial vehicles, and electric two & three wheelers.
Clients: The company have wonderful client base which includes Ampere Vehicles, Ashok Leyland, Daimler, Geely, Jaguar Land Rover, Mahindra Electric, Maruti Suzuki and Revolt Intellicorp.
FUNDAMENTALS:
> Established in the year 1995 and listed this year on June 24, it is a Large Cap company with a market cap of Rs.41,695 Cr.
> The ROCE and ROE is at 17.6% and 17% respectively which is very good in the industry.
> Price to Book Value ratio is 25.3 which is on higher side.
> Stock P/E is at hefty 208 which makes the valuation too costlier as compared to the industry P/E at just 25.3.
> OPM of the company is continuously growing and it is at 31.3% as per Mar 21 Balance Sheet which is amazing.
> Robust Topline and Bottomline, continuously increasing on YoY basis.
> Debts: The company have Debts of only Rs.126 Cr as per Mar 21 Balance Sheet which is much within the limit as compared to its Reserves.
> Reserves: It is Rs.1062 Cr as per Mar 21 Balance Sheet, more than 8 times as much of it’s borrowings. Continuously increasing.
> Promoters holding is intact and hold hefty 67.3% shares of the company this shows management’s trust on the company’s business and its growth.
> FIIs & DIIs are also heavily invested in the company, combined holding will be more than 26%, only 5.88% stocks are available to trade freely for retail investors.
> Cash Flows from Operating Activity growing rapidly on YOY basis since FY 2016, for March 21 it is at 216 Cr. This point talks about how much money the company is able to convert into cash out of total revenue, one of the very important aspect from long-term investing perspective.
TECHNICALS:
> The stock is in massive uptrend since its listing on June 24 this year. This shows the stock strength.
> It has more than doubled from the listing price of Rs.297 within 5 months of trading.
> Constantly trading above 50 DMAs and it’s too early to talk about 200 DMA.
Let’s look at the some of the impressive vital stats of the company:
> The company have manufacturing facilities at 9 global locations.
> This account for 13.7% sales to BEV market.
> Among top 10 global differential Bevel Gear suppliers.
> 75.4% product sales with end use in overseas markets.
> The company is among top 10 global starter motor suppliers for PV’s.
Investing in this company can also be considered as poxy play to Electric Vehicle theme.
Fresh Buy – At CMP 712
Old Buy – Hold
Target – 3X i.e. 2150
Risk Management Tip: Never invest more than 5% of your capital in any single stock.
Your likes and comments motivate us to bring more profitable studies like this.
Happy Investing!
ShareMktSchool
Sona Comstar is an Indian origin, global automotive systems & components manufacturer with 9 plants spread across India, China, Mexico, and the USA. The company is one of India’s leading automotive technology companies, designing, manufacturing and supplying highly engineered, mission critical automotive systems and components such as differential assemblies, differential gears, conventional and micro-hybrid starter motors, BSG systems, EV traction motors (BLDC and PMSM) and motor control units to automotive OEMs across US, Europe, India and China, across all vehicle categories such as conventional passenger vehicles, commercial vehicles, off-highway vehicles, electric cars, electric light commercial vehicles, and electric two & three wheelers.
Clients: The company have wonderful client base which includes Ampere Vehicles, Ashok Leyland, Daimler, Geely, Jaguar Land Rover, Mahindra Electric, Maruti Suzuki and Revolt Intellicorp.
FUNDAMENTALS:
> Established in the year 1995 and listed this year on June 24, it is a Large Cap company with a market cap of Rs.41,695 Cr.
> The ROCE and ROE is at 17.6% and 17% respectively which is very good in the industry.
> Price to Book Value ratio is 25.3 which is on higher side.
> Stock P/E is at hefty 208 which makes the valuation too costlier as compared to the industry P/E at just 25.3.
> OPM of the company is continuously growing and it is at 31.3% as per Mar 21 Balance Sheet which is amazing.
> Robust Topline and Bottomline, continuously increasing on YoY basis.
> Debts: The company have Debts of only Rs.126 Cr as per Mar 21 Balance Sheet which is much within the limit as compared to its Reserves.
> Reserves: It is Rs.1062 Cr as per Mar 21 Balance Sheet, more than 8 times as much of it’s borrowings. Continuously increasing.
> Promoters holding is intact and hold hefty 67.3% shares of the company this shows management’s trust on the company’s business and its growth.
> FIIs & DIIs are also heavily invested in the company, combined holding will be more than 26%, only 5.88% stocks are available to trade freely for retail investors.
> Cash Flows from Operating Activity growing rapidly on YOY basis since FY 2016, for March 21 it is at 216 Cr. This point talks about how much money the company is able to convert into cash out of total revenue, one of the very important aspect from long-term investing perspective.
TECHNICALS:
> The stock is in massive uptrend since its listing on June 24 this year. This shows the stock strength.
> It has more than doubled from the listing price of Rs.297 within 5 months of trading.
> Constantly trading above 50 DMAs and it’s too early to talk about 200 DMA.
Let’s look at the some of the impressive vital stats of the company:
> The company have manufacturing facilities at 9 global locations.
> This account for 13.7% sales to BEV market.
> Among top 10 global differential Bevel Gear suppliers.
> 75.4% product sales with end use in overseas markets.
> The company is among top 10 global starter motor suppliers for PV’s.
Investing in this company can also be considered as poxy play to Electric Vehicle theme.
Fresh Buy – At CMP 712
Old Buy – Hold
Target – 3X i.e. 2150
Risk Management Tip: Never invest more than 5% of your capital in any single stock.
Your likes and comments motivate us to bring more profitable studies like this.
Happy Investing!
ShareMktSchool
Comment:
Not falling and not even any sign of weakness in this bad sentiment about the market over new Omicron variant of Covid. This shows the confidence of the investors on this stock, accumulate as much you can. But please keep the risk management points in mind while doing do.