Markets
BSE See NSE See 39,592.08
157.14 (0.4%)
collapse Related Readings collapse

Reversal Of Fortunes - Ucal Fuel Systems

By Sunil Damania | 7/18/2011 5:01 PM Monday

Ucal Fuel Systems, after incurring losses for few years (consolidated basis), is back in the black for FY 2010-11. The company reported a smart turnaround with consolidated net profit of Rs 19.25 crore against last year’s loss of Rs 23.76 crore. One of the reasons for the company to report improvement is that the improved performance of its US-based subsidiary Amtec Precision Products, which it acquired in 2005 for USD 25 million. Since acquisition by Ucal Fuel, Amtec reported losses due to the slowdown in the US economy. The subsidiary has improved performance for the FY 2010-11 and the management expects that it will continue to report growth. Recently, Amtec consolidated its manufacturing facility from three plants to two, to improve its operational efficiency.

Presently Ucal Fuel Systems’ (UFS) share price is quoting at Rs 85, giving a market cap of Rs 192 crore. For FY 2010-11, the company has declared a dividend of Rs 4 per share (the scrip is quoting cum dividend), giving a yield of almost five per cent. Its EV/EBDIT amounts to six times, suggesting a scope for capital appreciation. On the P/E front too, valuations are fairly good, with a number less than 10 times.

Ucal Fuel Systems is an auto-component company from Chennai serving the four- and two-wheeler industry. It also manufactures machined components,  though this does not contribute significantly to sales. In the four-wheeler segment, it manufactures Multi Point Fuel Injection (MPFI) sets consisting of Throttle Body and Delivery Pipe Assembly. It also manufactures Oil pumps, Vacuum pumps and Fuel pumps for four-wheelers. This is one area in which the company is expected to expend efforts in this fiscal, to drive revenue. The largest revenue for the company comes from two-wheeler carburettors, which accounts for almost one-third of the total revenue (standalone). They supply Air Suction Valves for two-wheelers, which is their third-highest revenue generator. Bajaj Auto is their biggest customer, contributing nearly 25 per cent of the consolidated revenue.

In a recent interview, the company’s CMD has suggested that they are looking at improving EBDIT margins to 20 per cent (15 per cent). The management is confident of achieving topline growth of 20 per cent in the current year. Our back of the envelope calculation tells us that the company should report consolidated sales of around Rs 700 crore for FY 2012. Based on this, we expect net profit of around Rs 30 crore. On its equity capital of Rs 22.11 crore, the estimated EPS works out to Rs 13.63 (FV Rs 10). The current share price discounts the same by six times.

On the flip side, the company's revenue may be impacted due to a slowdown in the auto industry, its major customer. While we are not bullish on four-wheeler sales growth, we believe that the two-wheeler industry should continue to do well. This may have a minimal impact on the company’s financial growth. Also, the present market cap is too low for a company with consolidated sales of Rs 607 crore.

From the current business environment and prospects, we are expecting the scrip to be around Rs 110 in the next 12 months. This means that the scrip has the potential to give you 25 per cent capital appreciation from the present level. With dollops of Dividend Yield added, it goes to the level of 30 per cent, which are quite good returns. Also, we don’t expect a substantial downside risk on the counter from the present level. One can buy the scrip at the present level.

 

Find More Articles on: Research, Fundamental Picks, DSIJ Magazine, Low Priced Scrip, Stock Recommendations, Product, Small Cap

news letter

More for the early bird.

Get the post-market reports and breakfast news right in your inbox. See latest »

DSIJ Mindshare

Ramco Systems to manage HR operations of Kuwait Food Company

Apurva Joshi / Article rating: 5.0

Ramco Systems has announced that Kuwait Food Company (Americana) K.S.C.C., which is one of the largest food companies in the Middle East, has chosen it to manage the HR operations. Ramco will be implementing its HR suite, including modules to automate core HR, leave, time & attendance, global payroll, talent management and performance management.

Ducon Infra partners with Sterling & Wilson to bid for large GFD projects

Apurva Joshi / Article rating: 5.0

Ducon Infratechnologies Limited has entered into a strategic tie-up with Sterling & Wilson Private Limited, a flagship group company of Shapoorji Pallonji Group, to jointly bid large-sized FGD tenders. Ducon is an emerging technology company providing solutions in the industrial, infrastructure and digital space to multiple business segments across varied industries.

12345678910Last

Tiger Logistics topline to grow by 10%--buoyant over infra sector status to logistics sector

Tiger Logistics topline to grow by 10%--buoyant over infra sector status to logistics sector

Logistics sector will play a vital role in making the concept of ‘Make in India’ a success. This will be further aided by some of the recent steps taken by Government of India such as granting of infra sector status to logistics sector.

Best and worst Performing Sector Funds of Year 2017

Best and worst Performing Sector Funds of Year 2017

As the year-end has approached most of you are eager to know the mutual fund movers and shakers of the year 2017. Read on to find the performance of various sector dedicated funds.

Markets may start positive, but volatility likely due to F&O expiry

Markets may start positive, but volatility likely due to F&O expiry

The start of the F&O expiry day is likely to be in the green, but volatility may creep in with the progress of the session. The SGX Nifty suggests that the Nifty could open at 10,525 with gains of 32 points at the opening bell. 

Pidilite announces buyback of Rs 500 crore

Pidilite announces buyback of Rs 500 crore

The buyback offer comprises purchase of up to 50,00,000 equity shares. The buyback offer size comprises 0.975 per cent of the total paid-up equity capital of the company.

Bank Nifty drags markets to close in the red

Bank Nifty drags markets to close in the red

The late session fall in Bank Nifty changed the direction of the market, leading to a marginal fall in the benchmark indices. Bank Nifty yet again resisted at its multiple point downward sloping trendline level at 25733.

Six major underperforming MF schemes having higher expense ratios

Six major underperforming MF schemes having higher expense ratios

Mutual funds with a large size of assets under management (AUMs) are supposed to have lower expense ratios. However, there are schemes with large AUMs but having higher expense ratios and generating lower returns. 

Nifty Pharma supports market; Sun Pharma at bullish reversal

Nifty Pharma supports market; Sun Pharma at bullish reversal

Nifty Pharma index has come in as the healer in an otherwise sluggish market. Index has given a consolidation breakout at the 9420 level today and if the it sustains 9420, followed by 9628 on the upside, it has a long way to go.

Ten stocks close to their 52-week low

Ten stocks close to their 52-week low

Following stocks are close to their 52-week low as at 12.35 p.m. on December 27.

Ten stocks close to their 52-week high

Ten stocks close to their 52-week high

The markets on December 27 opened gap down. BSE Sensex is trading at 34,068.15, up by 57.54 points and the Nifty is trading at 10,539.45, up by 7.95 points.

Five stocks with selling interest

Five stocks with selling interest

Overall volumes in futures & options currently stand at 62.75 lakh contracts with a turnover of Rs. 5,19,204.72 crore.