The shares in the entire auto industry space — vehicle manufacturers and makers of auto components, including tyres and batteries — have put up a paradoxical show in 2012. While shares of many frontline vehicle manufacturers have gained by 50-70 per cent, in case of Eicher Motors the gain has been more than 100 per cent, the shares of auto component companies have moved in the opposite direction with many prominent stocks shedding 20-30 per cent in value.

This was despite the fact that the fortunes of the latter are closely linked to that of the vehicle producers and the component manufacturers also enjoy some cushion because of the strong after sales and export markets.

$115-b industry

According to Automotive Component Manufacturers Association of India (ACMA), the auto component industry's turnover last year (2011-2) was a staggering Rs 2,10,400 crore ($ 43.4 billion), a growth of 15.7 per cent over the previous year (in rupee terms). Its CAGR over the past 5 years has been 19 per cent and ACMA estimates that by 2020, it should be a $115-billion industry. Within the auto component sector itself, some of the shares of tyre and battery manufactures have done exceedingly well even while component makers' shares are languishing. There are some exceptions such as Wheels India, but these are due to other reasons such as the open offer made by a stake holder in the company.

Tata Motors on Monday closed at Rs 313 (all share price data pertains to NSE) , which is near its 52-week high of Rs 320.75 it had touched in April last year. After touching a 52-week low of Rs 178.80, it had a phenomenal run and had been keeping steady despite market turbulence. December 2012 has been a happy month for stocks such as Maruti, M&M, Bajaj Auto and Eicher Motors. Except Eicher Motors that had jumped by over 100 per cent in a year, the other auto majors have gained about 50-70 per cent. The odd man out appears to be Hero MotoCorp, among the automobile companies.But shares of some of the major auto component manufacturers have put up a different show. Amtek Auto’s shares were down from a year high of Rs 146.70 in February 2012 to Rs 88.10 on December 31 and Bharat Forge lost more than Rs 100 — from Rs 358.40 in May it has fallen to Rs 252.40 at the year-end and was just Rs 10 shy of its 52-week low of Rs 242.05 that it had touched in Dec 2011.

Automotive Axles was a major loser — it has gradually fallen from a high of Rs 560 in May 2012 to Rs 365 on Monday. Coimbatore based LGB had declined from a high of Rs 362 in April 2012 to Rs 242.25 and Pricol closed at Rs 17.20, down from Rs 24.75 it had touched in February last year.

The same was the case with the three Rane group shares — Rane Madras, Rane Brake Lining and Rane Engine Valve — that have missed out the rally enjoyed by the shares of vehicle manufacturing companies.

ZF Steering Gear, which is traded on the BSE, had crashed from a 52-week high of Rs 415 to Rs 282 levels by the end of 2012.

Travails

The travails of the auto component sector was mirrored by the Hinduja Foundries whose management had to withdraw the Rs 125 crore rights issue proposed early in 2012 due to falling share price (the issue was to be offered at Rs 75/ share including Rs 65 as premium) and now it has to be referred to BIFR for statutory reasons, though the promoters have assured that they would not allow the company to go sick.

Hinduja Foundries Ltd is a leader in the automotive casting sector and has a strong client base including Ashok Leyland, Hyundai, Maruti, Mahindra & Mahindra etc.

Tyre major MRF's shares soared to a fresh 52-week high of Rs 13,380 on Tuesday and in a year the stock has galloped from a low of Rs 6,871.10 (January 2, 2012) to the current levels. While Apollo Tyres at Rs 89.35 was off its yearly high of Rs 102.45 that it had touched in Sept 2012, JK Tyre touched a high of Rs 125.80 that was close to its 52-week high of Rs 130.45 it had reached on Oct 30, 2012. This stock has more than doubled in a year after touching a 52 week low of Rs 59.10 on Jan 2 last year. Exide and Amara Raja Batteries also were shining on investor interest.

Sunil Shah, Head- Research, Axis Securities, said component producers were under pressure as OEMs wanted to keep cost under control due to intense competition which has affected profitability of component makers. Sunil Shah said the tyre companies went through a bad patch in FY-2010 because of rising rubber prices. The scenario has improved significantly since then, rubber prices have softened and the pick up in auto demand has provided these companies with significant operating leverage which was the prime reason for their outperforming other component producers' shares.

> yegya.narayanan@thehindu.co.in

Related Topics
comment COMMENT NOW