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Strategies & Market Trends : India Coffee House -- Ignore unavailable to you. Want to Upgrade?

To: Mohan Marette who wrote (5748)	8/20/1999 5:15:00 PM
From: Mohan Marette	Respond to of 12475

BIMETAL BEARINGS - Good pedigree, good performance amalgamationsgroup.com Group companies amalgamationsgroup.com Group Companies-Engineering amalgamationsgroup.com This engine-part manufacturer of the Amalgamations group is one of the better auto ancillaries available at attractive valuations Controlled by the Chennai-based Amalgamations group (which includes listed companies like Amalgamation Repco and IP Rings, and closely-held companies like TAFE, India Pistons and Amco Batteries), Bimetal Bearings (BBL) is a leader in engine bearings: it is a supplier to almost all the automobile and engine manufacturers. It also manufactures bushings, washers, bimetal strips and alloy powders. The company has two plants in Chennai and one each in Coimbatore and Hosur. It should be noted that the company should be treated as manufacturer of engine parts and not as bearings. Unlike bearing manufacturers, the company does not suffer from any import threat/ smuggling and unfair competition from the unorganised sector. It has a very strong presence in OEM as well as replacement markets. Besides automobile manufacturers, it also supplies to leading diesel engine and compressor manufacturers. Even in FY 9903, which was one of the worst years for the automobile industry, BBL performed well. In FY 9903, commercial vehicle segment in the light, medium and heavy categories suffered a further setback (on top of an adverse FY 9803) with a decline of 11.5% in sales. The multi-utility segment registered a decline of 16% and so also the passenger car segment (a decline of 2%). The tractor industry also grew at just 1.6%. This coupled with pricing pressures had meant a highly adverse scenario. In spite of this BBL posted a 4% increase in sales to Rs 53.84 cr. This was due to higher sales in the replacement market and exports (up 98% to Rs 2.48 cr). In fact, the company has been making sustained efforts towards spreading its brand awareness and distribution reach in the replacement market and make inroads in the global markets. These efforts made over the last couple of years are now bearing fruits. Concerted efforts are also being made at cost reduction, rationalisation of workforce and process improvement. These have helped the company to limit the fall in its profit margins during the adverse times. It has also been continuously reducing its debt from a high of Rs 13.5 cr in FY 9603 to Rs 5.35 cr in FY 9903. With a debt-equity ratio of just 0.08:1, and cash and bank balances of Rs 8.4 cr as of Mar.'99, it should become almost debt-free company in the current year. This year has begun on an upbeat note with almost all segments of the automobile industry showing encouraging growth rates. Many auto ancillaries have posted excellent results. BBL is expected to be one of the best performers. This year it can comfortably report sales of Rs 64.62 cr and net profit of Rs 7.75 cr. The EPS works out to Rs 20.2. With a book value of over Rs 166 as of Mar.'99, and improving future prospects, a liberal bonus can also be expected. At Rs 170, the FY 9903 actual EPS (Rs 15.1) and FY 2000-03 projected EPS (Rs 20.2) are discounted only 11.3 and 8.4 times, respectively. The company's product line is considered to be one of more technology-intensive compared to other auto components. Hence, the engine-part manufacturers enjoys higher discounting on the bourses. The Amalgamation group is also a respected name and deserve better discounting. This, coupled with bonus prospects, make BBL scrip a sound investment choice. (Courtesy:Capitaline Corner)