Mehabe score: 4 G Factor: 4 Piotski Score: 4 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 4.
Description
Sundaram Brake Linings Ltd manufactures asbestos-free friction materials like brake linings, disc pads, etc for commercial vehicles, passenger cars, tractors, railways, and two-wheelers. #
It is a part of the TVS group with a 65.5% stake in the company #
Main Points
Product Portfolio
It manufactures asbestos-free friction material such as brake linings, disc pads, and clutch facings for the automobile industry. It also manufactures tractor linings and friction material for industrial applications, and trades in rivets #Site:SUNDRMBRAKMain Symbol:SUNDRMBRAK
Stock trades at 440.0, above its 50dma 403.53. It also trades above its 200dma 341.27. The stock remains bullish on techicals
The 52 week high is at 480.05 and the 52week low is at 185.00
Price Chart
P/E Chart
Sales and Margin
Strengths
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Weakness
– Though the company is reporting repeated profits, it is not paying out dividend
-The company has delivered a poor sales growth of 0.81% over past five years.
-Tax rate seems low
– has a low return on equity of 6.27% for last 3 years.
– might be capitalizing the interest cost
Competition
– The industry trades at a mean P/E of 33.5x. WABCO India trades at the industry’s max P/E of 134.97x. SUNDRMBRAK trades at a P/E of 28.8x
– Industry’s mean G-Factor is 4.0 while the mean Piotski score is 7.0. SUNDRMBRAK has a G-Factor of 4 and Piotski scoreof 4.
– Average 1 month return for industry is 0.7%. The max 1- month return was given by Minda Industries: a return of 9.94 %
Quarterly Results
Sales for period ended Mar 2021 is Rs 76.22 cr compared to Rs 60.59 cr for period ended Mar 2020, a rise of 25.8%
Operating Profits reported at Rs 2.99 cr for period ended Mar 2021 vis-vis 1.8 for period ended Mar 2020 .
Operating Margins expanded 95.2 bps for period ended Mar 2021 vis-vis Mar 2020 .
The EPS for Mar 2021 was Rs 4.55 compared to Rs 13.39 for previous quarter ended Dec 2020 and Rs 2.9 for Mar 2020
Profit & Loss Statement
Profit&Loss Comments
Company reported sales of Rs 237.0 cr for period ended Mar 2021 vis-vis sales of Rs 258.0 cr for the period ended Mar 2020, a fall of 8.9%. The 3 year sales cagr stood at -1.4%.
Operating margins expanded to 3.0% for period ended Mar 2021 vis-vis 2.0% for period ended Mar 2020, expansion of 100.0 bps.
Net Profit reported at Rs 6.0 cr for period ended Mar 2021 vis-vis sales of Rs 3.0 cr for the period ended Mar 2020, rising 50.0%.
Company recorded a healthy Net Profit CAGR of 14.5% over the last 3 years
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 had stable/constant Return on Equity (RoE) metric. The RoE on Last Year basis was 7.0% compared to 6.0% over the last 3 Years. – The stock has given a return of 99% on a 1 Year basis vis-vis a return of -0% over the last 3 Years. – The compounded sales growth on a TTM bassis is -8% vis-vis a compounded sales growth of -1% over the last 3 Years. – The compounded profit growth on a TTM basis is 139% vis-vis a compounded profit growth of 17% over the last 3 Years.
Ratios
Shareholding Pattern
– Public shareholding has remained largely constant. The Jun 2021 public holding stood at 34.46% vis-vis 34.46% for Mar 2021
Conclusion
– – Though the company is reporting repeated profits, it is not paying out dividend
-The company has delivered a poor sales growth of 0.81% over past five years.
-Tax rate seems low
– has a low return on equity of 6.27% for last 3 years.
– might be capitalizing the interest cost
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 403.53 and is trading at 440.0 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
