Ashika Stock

Munjal Auto (Buy)

CMP: ₹106.35

Target: ₹155

Munjal Auto Industries is a leading auto component manufacturing company in India and is a part of the famous Hero Group of companies. The company primarily manufactures complete exhaust system for two wheelers and four wheelers, spoke rims for two wheelers, steel wheel rims for two wheelers and four wheelers, fuel tanks for four wheelers, seat frames for four wheelers and other automotive assemblies.

The company supplies about 75-80 per cent of products to HeroMoto Corp, the market leader in two wheeler industry in India. Thus the growth of MAIL is aligned with the performance of HeroMoto Corp. In the past couple of years, two wheelers sales remained insulated from slowdown in domestic auto sector due to its higher affordability, cost-effectiveness and easy convenience of public transport. Wide product portfolio, increasing cost competitiveness and sustain demand for two wheelers are the key catalysts for the scrip going ahead. Moreover, the company has delivered healthy returns to its shareholders over the period with consistent track record of paying dividend. On valuation front, the scrip is attractively valued at 5.6x of its FY16E earnings and hence we believe there is immense upside potential for the scrip.

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