Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Mohan Marette who wrote (5802)	8/24/1999 11:30:00 AM
From: Mohan Marette	Read Replies (2) \| Respond to of 12475

Wheels India on a roll. WHEELS INDIA On the roll A dominant position in the auto-ancillary industry and strong parents make this wheel-rim manufacturer a solid investment bet Wheels India is the largest manufacturer of automobile wheel rims in India. The company's product-mix includes wheels for all automobiles (except two-wheelers), air suspension kits for buses and also speciality wheels, mainly for exports. It has a strong presence in both the original equipment (OE) as well as the replacement markets. The company is an OE supplier to major commercial vehicle manufacturers such as Telco and Ashok Leyland, tractor manufacturers such as Mahindra & Mahindra and TAFE, and passenger car companies such as Hyundai, Mitsubishi Lancer, TELCO and Fiat Uno among others. Its biggest competitor is now the Pune-based Bharat Forge, which has given the majority shareholding in its wheels venture to its German collaborator, Lammerz Werke, the world leader in wheels. While WIL is one among the three suppliers to TELCO, it is the sole supplier to Ashok Leyland. A factor in favour of the company is that it is more cost-competitive when compared to the competition. Wheels India has developed and patented a process to manufacture commercial vehicle rims from hot-rolled plates instead of profile sections, providing significant cost advantages. Wheels India : Financials On an upswing 9603 9703 9803 9903 00-03(P) Sales 298.55 337.09 274.55 260.05 310.00 OPM(%) 12.90 13.60 12.20 12.00 13.00 OP 38.37 45.68 33.38 31.22 40.30 Interest 10.56 13.25 13.21 13.49 14.50 Gross Profit 27.81 32.43 20.17 17.73 25.80 Depreciation 4.20 4.90 6.97 8.70 11.00 PBT 23.61 27.53 13.20 9.03 14.80 Tax 10.40 11.00 2.15 1.00 3.00 Net Profit 13.21 16.53 11.05 8.03 11.80 EPS (Rs)* 13.40 16.7 11.20 8.10 12.00 * On an equity of Rs 9.87 cr Figures in Rs cr (P): Projections Source: Capitaline 2000 On the export front, the company concentrates on low-volume but high-profit (relatively) segments such as wire wheels and heavy wheels for construction equipment. This seems to be a major thrust area for the company; it has registered a 39% increase in exports, from Rs 28 cr in 9803 to Rs 39 cr in 9903. Wheels India, which exports 10% of its turnover, hopes to increase it to 30%. Recently, the TVS group increased its stake in the company by coming out with an open offer along with the other majority shareholder, Titan Europe. Consequently, TVS and Titan now control 49.69% and 35.90% of the equity of the company. Titan Europe's presence may help improve export sales. Titan is the market leader in agricultural wheels and off-the-road wheels the worldover. The company, which exports its wheels to manufacturers of earthmoving equipment such as Caterpillar Inc, can now access the latest technological developments in this area. Notably, earlier, Dunlop Holdings, a BTR Plc group company, held the 35.91% stake in Wheels India, while the TVS group held 45.51%. In line with BTR group's world-wide strategy of moving out of the non-core businesses, it sold off its stake (at Rs 138.40 per share) to Titan Europe whereupon Titan Europe had to come out with an open offer as per SEBI guidelines. Since the TVS group wanted to increase the stake and keep the ompany under their control, it took upon itself to buy whaterver shares were offered under the offer which, however, received a poor response. The open offer was at Rs 140. Though the company's last two years were very bad, with net sales falling from Rs 337.09 cr in FY 9703 to Rs 260.05 cr in FY 9903 and net profit dropping from Rs 16.53 cr to Rs 8.03 cr, it posted a strong recovery in the fourth quarter of last year ended Mar.'99, with a 66% growth in net profit on an 11% rise in sales. The recovery has gained strength in the first quarter of the current year, with sales up 27% to Rs 74.53 cr and net profit up 169% to Rs 2.39 cr. For the full year, it can comfortably report sales and net profit of Rs 310 cr and Rs 11.8 cr, respectively, giving an EPS of Rs 12. In view of the company's strong position in the automobile industry, which itself is in the high gear and increased exports prospects due to the change in collaborator as also highly professional and reputed Indian promoters, Wheels India offers a sound investment opportunity at Rs 198.00 (Courtesy:CapitaLine-EM) Closed at Rs 215.00 on NSE on 8/24/99 Book Value=Rs 71.00 Current P/E=19.69 (EPS=Rs 10.92)