Stock Watch-India Nippon Electrical.
Jan.11-24,99
India Nippon Electrical
Electrifying performance
This TVS group company has one of the best balance-sheets in the auto- ancillary industry. The expected healthy growth of the two-wheeler segment and commissioning of a new plant will ensure its growth.
INDIA Nippon Electricals (INE) manufactures electrical components like flywheel magnetos, capacitor discharge ignition units/coils, flywheel generators, contact breakers/blinkers/flashers/regulators, etc, for two- wheelers and its main client is TVS Suzuki. It has a technical-cum- financial collaboration with Kokusan Denki, Japan (19% stake).
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India Nippon Electricals: Financials
Riding piggy back on TVS Suzuki
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9503 9603 9703 9803 9903(P)
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Sales 32.01 50.00 68.40 71.08 83.18
OPM (%) 16.1 15.3 19.9 20.7 22.9
OP 5.15 7.64 13.64 14.70 19.06
Interest 0.29 0.43 0.35 0.17 0.14
Gross Profit 4.86 7.21 13.29 14.53 18.92
Depreciation 0.55 0.78 2.25 2.25 2.23
Tax 1.29 2.22 4.39 4.80 5.80
Net Profit 3.02 4.21 6.65 7.48 10.89
EPS (Rs)* 15.3 21.3 33.6 37.8 55.0
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* On an equity of Rs 1.98 cr (P): Projections
Figures in Rs cr Source: Capitaline Ole
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Focus on two-wheelers and TVS Suzuki's excellent growth has helped INE to post excellent performance consistently. In the last five years, sales and net profit have increased at CAGRs of 33% and 43% respectively. As of Mar.'98, the company's return on capital employed (ROCE) and return on networth (RONW) are very healthy at 51.5% and 32.5% respectively. Debt- equity ratio is just 0.05. All these indicate the company's sound financial position.
INE follows conservative accounting practices as is indicated by its practice of providing for depreciation on additions to fixed assets for the full year instead of for the period of use. Moreover, it does not transfer depreciation on the revalued portion of assets to the revaluation reserve. Consequently, depreciation is higher than what would have been the case if the company had not revalued its assets or transferred the excess depreciation to revaluation reserve. In 9703, it had also depreciated the entire excess depreciation on revaluation effected in 9303.
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A good first-half
Moving against the industry trend
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9809 9709 Var.(%)
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Sales 41.59 32.47 28
OPM (%) 22.9 21.3
OP 9.53 6.94 37
INTEREST 0.07 (0.26) -
GROSS PROFIT 9.46 7.20 31
DEPRECIATION 1.12 0.72 56
TAX 2.90 2.70 7
NET PROFIT 5.44 3.78 44
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Figures in Rs cr
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In Mar.'98, the company commissioned a new unit at Pondicherry, enhancing its capacity from 28.5 lac units to 30 lac. The main advantage of this new facility is that it is situated in a tax-free zone. In the first-half 9809, sales has increased 28% to Rs 41.59 cr and net profit has shot up 44% to Rs 5.44 cr. For the full year 9903, sales and net profit of Rs 83.18 cr and Rs 10.89 cr can be comfortably expected. The EPS works out to Rs 55.
Confident of its prospects and to improve the scrip's liquidity, INE has announced a bonus in the ratio of 8 shares for every 5 held. The scrip is listed on the NSE and Chennai stock exchange.
Considering the company's reputed pedigree, excellent track record, good growth prospects and bonus announcement, investment in the scrip should fetch decent returns at the current price of Rs 486 (P/E: 8.8).
(Source:CapitalCorner) |
