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Sundram Fasteners (SFL) is a part of the TVS Group, headquartered in Chennai, India. The product range consists of high-tensile fasteners, powder metal components, cold extruded parts, hot forged components, radiator caps, automotive pumps, gear shifters, gears and couplings, hubs and shafts, tappets and iron powder. Over the years, the company has acquired cutting-edge technological competencies in forging, metal forming, close-tolerance machining, heat treatment, surface finishing and assembly.
September 2016 quarter results
For the quarter ended September 2016, it registered a 12% growth in sales to Rs 738.21 crore.
OPM jumped 430 basis points to 18.9% which saw OP rising 45% to Rs 139.54 crore.
Other income fell 74% to Rs 1.96 crore and interest cost fell 49% to Rs 12.30 crore. Interest cost includes forex loss of Rs of Rs 3.53 crore against Rs 19.20 crore.
As depreciation grew 12% to Rs 24.71 crore, PBT jumped 82% to Rs 104.49 crore.
Tax provision grew 80% to Rs 27.56 crore. Finally, PAT ended up 82% to Rs 76.93 crore.
Six months results
For the six months ended September 2016, it registered a 12% growth in sales to Rs 1451.21 crore.
Export sales grew 11%to Rs 506.07 crore, while domestic sales (net of excise duties) grew 13% to Rs 919.94 crore.
OPM jumped 460 basis points to 18.9% which saw OP rising 48% to Rs 274.29 crore.
Other income fell 46% to Rs 7.17 crore. Other income includes forex gains of Rs 3.19 crore against 11.48 crore.
Interest cost fell 21% to Rs 26.56 crore. Interest cost includes forex loss of Rs of Rs 10.74 crore against Rs 23.84 crore.
As depreciation grew 9% to Rs 48.85 crore, PBT jumped 72% to Rs 206.05 crore.
EO loss stood at NIL against Rs 8.41 crore. Thus PBT after EO grew 85% to Rs 206.05 crore.
Tax provision grew 73% to Rs 53.57 crore. Finally, PAT ended up 89% to Rs 152.48 crore.
Profit margins grew due to volume growth
The EBITDA margin grew due to volume growth caused by market buoyancy, favorable product mix and specific cost reduction initiatives of the company.
The interest cost was contained due to better working capital management.
Automotive and automotive component are showing promising growth
In the opinion of the company, the automotive industry and hence the automotive component market has shown promising growth and will continue to do so due to good monsoon, robust economic growth and higher disposable income available due to recent pay commission hikes.
Investing in other automotive component verticals will bolster the profitability
The company is actively investing in other automotive component verticals which will bolster the profitability of the company. The continued prospects of sourcing of Indian automotive components by the USA also augur well for the export market.
Valuation
The share price trades at Rs 337.
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