Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us    
Google
Web www.equitybulls.com
Research

| More

I-direct Instinct - Munjal Showa

Posted On: 2020-07-13 06:19:38


Munjal Showa (MSL) is a leading shock absorber (including front forks, struts) manufacturer domestically with a significant market share in the oligopolistic industry. It can be seen as a proxy play on volume & demand recovery at Hero MotoCorp (HMCL), with HMCL accounting for ~80% of its total sales (FY20). Part of the Hero Group (Munjal family), MSL was established in 1985 in technical collaboration with Showa Corporation (Japan), which also holds a 26% stake in the company.

Triggers

Anchor client HMCL leading recovery post Covid-19

MSL, being part of Hero Group, derives majority of its revenue from 2-W market leader HMCL (client mix - HMCL ~78%, HMSI ~7-8%, MSIL ~8%, Honda Cars ~5%). MSL commands ~95% wallet share at HMCL, ~25% of wallet share at MSIL, 100% of wallet share at Honda Cars. Our analysis of Vahan database shows 2-W segment clocked ~60% of pre-Covid retail sales in June - with HMCL sales back to ~60%+ of pre Covid levels (market share at ~40% vs. its wholesale market share at ~36%). This is driven by HMCL's rural stronghold (~50% of sales) & preference for motorcycles for social distancing needs. MSL by virtue of this trend should benefit in the near term.

Large cash balance, high dividend yield give margin of safety

Munjal Showa has a debt-free, cash rich balance sheet (cash & equivalents ~Rs. 300 crore i.e. ~50% of net worth, ~70% of present market cap) with consistent cash flow generation track record (present CFO & FCF yield at ~15% & ~10%, respectively) and healthy dividend payout (dividend yield ~4%). It is currently trading at inexpensive valuations (~10x P/E, ~2x EV/EBITDA, ~0.65x P/B) despite double digit RoIC.

Valuation & Outlook

We expect base case valuations to prevail at MSL and assign BUY rating, valuing the stock at Rs. 130 i.e. 4x EV/EBITDA with implied P/B at 0.8x FY20 numbers. However, we do not view MSL as a long term portfolio play, given the slow pace of client additions, muted margin profile vs. peers and parallel existence of Showa Corporation in Indian as well as exports markets.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_MunjalShowa_IDirectInstinct.pdf

Shares of MUNJAL SHOWA LTD. was last trading in BSE at Rs.100.05 as compared to the previous close of Rs. 103.05. The total number of shares traded during the day was 3815 in over 236 trades.

The stock hit an intraday high of Rs. 104.1 and intraday low of 99.5. The net turnover during the day was Rs. 385330.


Source: Equity Bulls

Click here to send ur comments or to feedback@equitybulls.com


Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only. www.equitybulls.com, its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. www.equitybulls.com or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.





Other Headlines:

Auto Sales Numbers - July 2020 - Acuité Ratings & Research

Preview on RBI Monetary Policy - Shanti Ekambaram, Group President - Consumer Banking, Kotak Mahindra Bank

Mahindra Logistics - Q1FY21 Result Update - ICICI Securities

RBI monetary policy - Views from Mr Mandar Pitale - Head, Treasury, SBM Bank India

Phoenix Mills - Q1FY21 Result Update - ICICI Securities

Alkem Laboratories - Gladiator Stocks - ICICI Securities

Ajanta Pharmaceuticals - Q1FY21 Result Update - ICICI Securities

Torrent Power - Quant Pick - ICICI Securities

Security & Intelligence Services - Q1FY21 Company Update - ICICI Securities

Torrent Pharmaceuticals - Q1FY21 Result Update - ICICI Securities

Covid Recovery Pulse - Average daily auto registrations, E-Way bill generation shows recovery signs - ICICI Securities

Bharti Airtel - Q1FY21 Result Update - ICICI Securities

Sagar Cement - Q1FY21 Result Update - ICICI Securities

Dabur India - Q1FY21 Result Update - ICICI Securities

Mastek Ltd - Q1FY21 Company Update - ICICI Securities

Dr Reddy's Laboratories - Q1FY21 Result Update - ICICI Securities

Kewal Kiran Clothing - Company Update - ICICI Securities

Maruti Suzuki India - Q1FY21 Result Update - ICICI Securities

State Bank of India - Collection efficiency trends allude to lower asset vulnerability - ICICI Securities

SRF Limited - Packaging film margin zooms - ICICI Securities

Karur Vysya Bank - Earnings improve, but concerns persist - ICICI Securities

Core Sector Output & Fiscal Deficit: Acuité Ratings & Research

Maintain ADD on Colgate Palmolive - Toothpaste returning to growth, beat in the margin - HDFC Securities

Pre-Monetary Policy View - Lakshmi Iyer, Chief Investment Officer - Debt & Head Products, Kotak Mahindra Asset Management Company

SBI - 1QFY21 - Angel Broking

State Bank of India - Q1FY21 Results - YES SECURITIES

Maintain BUY on CDSL - Market share gain impressive - HDFC Securities

REDUCE on RBL Bank - Near-term pain inevitable - HDFC Securities

Maintain BUY on Orient Cement - Healthy performance despite sharp volume decline - HDFC Securities

Pre-Monetary Policy View - Sudhakar Shanbhag, CIO, Kotak Mahindra Life Insurance Company Limited

Maintain BUY on Maruti Suzuki - Improving outlook - HDFC Securities

Maintain REDUCE on Dr. Reddy's Labs - Strong beat, positives in the price - HDFC Securities

Reliance Industries - 1QFY21 - Angel Broking

ADD on Interglobe Aviation - Delayed recovery - HDFC Securities

Views on Reliance Industries Q1FY21 Results: Mr. Deepak Jasani, Head Retail Research, HDFC Securities

HDFC Ltd - 1QFY21 - Angel Broking

Bharti Airtel - 1QFY21 - Angel Broking

Loan Moratorium & Impact on Banks & NBFCs - Acuité Ratings & Research

Maintain REDUCE on Hexaware Technologies - Protracted recovery path - HDFC Securities

ADD on IndusInd Bank - Equity raise an additional positive - HDFC Securities

Maintain ADD on Multi Commodity Exchange - Strong recovery in volume - HDFC Securities

Maintain REDUCE on Nestle India - Muted 2Q; hit by supply disruptions - HDFC Securities

Maintain BUY on Tech Mahindra - Recovery on the cards - HDFC Securities

Maintain BUY on UltraTech Cement - Well rounded performance! - HDFC Securities

Maintain ADD on United Spirits - Weak show; gradual recovery expected - HDFC Securities

Greenlam Industries - Exports continue to drive outperformance - ICICI Securities

InterGlobe Aviation - No qualms on survival is the investment thesis - ICICI Securities

Thermax - Tempered by global macro challenges - ICICI Securities

Kewal Kiran Clothing - Strong balance sheet to cushion downside - ICICI Securities

CEAT - Tight cost control supports performance - ICICI Securities







Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2019