Mehabe score: 3 G Factor: 4 Piotski Score: 2 The stock has a rating OBSERVE & HOLD. The mehabe team score is reflective of its fundamental and technical merits. A rating above 8 is considered good buy. The stock has a G-Factor of 4 and Piotski score of 2.
Description
Setco Automotive Limited (SAL), incorporated in 1982, is engaged in the manufacture of clutches for Medium and Heavy Commercial Vehicles (MHCV) and markets it under the brand name ‘LIPE Clutches’. SAL led by Mr. Harish Sheth, is the flagship company of the ‘Sheth Group’. SAL has 4 manufacturing facilities: 2 in India (Kalol – Gujarat, Sitarganj – Uttarakhand), 1 in UK (Haslingden – Lancashire) and 1 in USA (Paris – Tennessee). The product line of SAL also includes supply of hydraulics (pressure converters) and fully machined ferrous castings.
Main Points
Market Position
The Co. holds over 85% market share in supply to M&HCV. #Site:SETCOMain Symbol:SETCO
Stock trades at 21.4, above its 50dma 20.97. It also trades above its 200dma 17.27. The stock remains bullish on techicals
The 52 week high is at 25.20 and the 52week low is at 8.60
Price Chart
P/E Chart
Sales and Margin
Strengths
– Debtor days have improved from 60.64 to 38.23 days.
Weakness
– Stock is trading at 4.48 times its book value
– has low interest coverage ratio.
-The company has delivered a poor sales growth of -2.35% over past five years.
– has a low return on equity of -6.43% for last 3 years.
-Promoters have pledged 86.17% of their holding.
-Promoter holding has decreased over last 3 years: -4.29%
Competition
– The industry trades at a mean P/E of 29.4x. Minda Industries trades at the industry’s max P/E of 96.1x. SETCO trades at a P/E of x
– Industry’s mean G-Factor is 3.8 while the mean Piotski score is 7.0. SETCO has a G-Factor of 4 and Piotski scoreof 2.
– Average 1 month return for industry is 0.8%. The max 1- month return was given by Minda Industries: a return of 9.37 %
Quarterly Results
Sales for period ended Jun 2021 is Rs 71.0 cr compared to Rs 41.0 cr for period ended Jun 2020, a rise of 73.2%
Company reported negative operating profit of Rs -7.0 cr for period ended Jun 2021. For same period last year, operating profit was -10.0
The EPS for Jun 2021 was Rs -2.2 compared to Rs -5.15 for previous quarter ended Mar 2021 and Rs -2.18 for Jun 2020
Profit & Loss Statement
Profit&Loss Comments
Company reported sales of Rs 389.0 cr for period ended TTM vis-vis sales of Rs 359.0 cr for the period ended Mar 2021, a growth of 7.7%. The 3 year sales cagr stood at -16.2%.
Operating margins expanded to -2.0% for period ended TTM vis-vis -3.0% for period ended Mar 2021, expansion of 100.0 bps.
Net Profit reported at Rs -120.0 cr for period ended TTM vis-vis sales of Rs -120.0 cr for the period ended Mar 2021,
Balance Sheet Statement
Cash Flow Statement
Cash Flow comments
Sales Growth
Profit Growth Statement
Profit Growth Statement
Stock Price CAGR
Return of Equity
General Comments
– The company has worsened on its Return on Equity (RoE) metric. The RoE on Last Year basis was -29.0% compared to -6.0% over the last 3 Years. – The stock has given a return of 130% on a 1 Year basis vis-vis a return of -24% over the last 3 Years. – The compounded sales growth on a TTM bassis is -36% vis-vis a compounded sales growth of -6% over the last 3 Years. – The compounded profit growth on a TTM basis is -137% vis-vis a compounded profit growth of % over the last 3 Years.
Ratios
Shareholding Pattern
– FII shareholding has remained largely constant. The Jun 2021 fii holding stood at 0.07% vis-vis 0.07% for Mar 2021 – Public shareholding has remained largely constant. The Jun 2021 public holding stood at 40.61% vis-vis 40.61% for Mar 2021
Conclusion
– Debtor days have improved from 60.64 to 38.23 days. – Stock is trading at 4.48 times its book value
– has low interest coverage ratio.
-The company has delivered a poor sales growth of -2.35% over past five years.
– has a low return on equity of -6.43% for last 3 years.
-Promoters have pledged 86.17% of their holding.
-Promoter holding has decreased over last 3 years: -4.29%
Fundamentally, the stock remains weak on business fundamentals. Weak near term results have dampened and questioned business drivers. We suggest to wait for a upturn in business performance.
Technically, the stock trades above its 50 DMA 20.97 and is trading at 21.4 It has shown near term bullish momentum contrary to business fundamentals. We suggest to observe price action. However as investors, who like to avoid timing the markets, we suggest to avoid the stock
