Gujarat Automotive Gears Ltd:
Established in 1973 Gujarat Automotive Gears Limited (GAGL), has today become a leading name in manufacture of auto and tractor components in domestic as well as international markets. With its head office in Baroda, the company has grown in magnitude and network both over the years. Marketed under the brand names of KAG, the products of GAGL serve the aftermarket and OEMs in India.
With consistent commitment on superior quality and robust performance of its products, GAGL has earned national and international acclaim and appreciation. Apart from this, a synergistic approach to design and execution, perfect manufacturing processes and prompt after-sales services, ensure matchless quality products & components.
Nearly four decades of industry presence and market leadership, the company has developed an organized network of reputed and loyal clientele not only India, but also in countries like Germany Italy, United Kingdom, Egypt, Sri Lanka, Singapore, Malaysia, Thailand ,Belgium, Dubai, Australia United States of America, etc.
The company hasn’t done too well in terms of growth mainly due to lack of growth the the automobile category itself. However over a long period of time ( 10 years), company has shown robust CAGR in both topline (15.6%) and bottomline (42%). This shows that the company will start reporting good numbers once the auto industry starts moving.
Fundamentally the company looks solid
Low on debt: Debt to equity: 0.29
Good leverage ratios: Altman Z Score: 4.26, Interest Coverage Ratio: 7.33
Good return ratios: ROCE3yr avg: 57.87%, Return on invested capital: 44.92%, Return on capital employed: 65.17%, Return on assets: 25.61%, Earnings yield: 19.57%
Good Valuation ratios: PEG Ratio: 0.26, Graham Number: ₹ 287.13, PE < 7.5
Promoter holding: 67.11%
What i like the most about this company is the ultra small equity base. It has only 35 lacs stocks among which 67% is held by the promoters. There are only 11 lacs stock floating in the market.
Obviously the company is volatile and thinly traded given the very low float. These stocks brings in a lot of scarcity premium with them. Any good news, or a good quarter will create huge demand in the market, with supplies drying up and send the price over the roof in no time.
I am expecting a good Q4 and Q1 given cars and tractors showing traction.
Negatives | Risks
I am not too sure how scalable is their business.
Very less known and illiquid, so not for conservative investors.
Through our social media handles (mainly Facebook and Twitter) we have discussed about different stocks that made us interested from time to time , but they couldn’t make the final cut to recommendations because we dint feel them to be good enough to go as a recommendation. However, there may be good merit in studying and following them. I am more than sure that over here too, we are leaving out few gems.
Now keeping a track of them was getting increasingly difficult as they tend to get lost below the recent discussions in social media. Also, many friends with their personal knowledge and conviction add lot of value to these discussions. In a way it helps all to understand the stock better and take a more informed decision. I know many friends who may have skipped a few recommendations but have bought from these discussed stocks based on their own convictions.
So, we thought, why not preserve all these discussions in one place? which can be convenient and can be referred to even in distant future!
Broadly with all of us chipping in, this has the potential to become a great resource to refer to in future for different stocks.
So, we have decided to dedicate this page (Our Watch list) in the blog as a discussion area for the stocks that we find interesting. Also, from many of the friends we get requests to look into different stocks and the list is really long. We will put our thoughts behind those stocks as well over here thanking the person behind the idea.
Overall we aim to make ‘Our Watchlist’ a great forum of discussion and place for learning about different stocks for retail investors over a period of time. Also, would request all readers to put their comment in the blog itself so that all the discussions under one stock thread remains in the same place.
As of now we have painstakingly culled out the stocks we discussed in the month of April 2016, and putting those in the following table, couldn’t go much back or in details…it is becoming a back breaking exercise.
From now on, we will have different blog posts for different stocks that we want to put into the watch list and as we find interesting picks from friends. Over a period of time hope to make it a robust stock discussion and learning forum.
Hope you all like the idea.