Igarashi Motors India Ltd – The Wheel of Engineering

Igarashi Motors is in the business of auto components for automobiles. Igarashi is a full service electric motor supplier to the power train actuator application. The company manufactures and exports permanent magnet DC motors and armatures. Igarashi also deals in the production of micro motors and its accessories for the automotive sector. The company mainly produces motor, electric micrometers.Igarashi Motors India Ltd is one of the Multibagger Shares, identified by Dynamic Research based on technical and fundamental research.Igarashi share price has touched a 52 week high of Rs. 728 on 09 -Aug -2016 and a 52 week low of Rs.375 on 01 -Mar -2016, and is currently trading at Rs. 700.

Share HoldingThe promoters holding in the company stood at 85.85%, while Institutions and Non-Institutions held 2.47% and 11.68% respectively.

Financial AnalysisQuarterly ResultsFor the quarter ended June 2016, the total income from operations of Igarashi has reported a growth of 15.41% on Y-o-Y basis to Rs. 125.40 crores as against Rs. 108.66 crores during the same quarter last year. A boost up in total income from operations shows strong development in business.The operating profit of Igarashi on standalone has shown a growth of 26.76% Y-o-Y to Rs. 26.24 crores as against Rs. 20.70 crores during the same quarter last year; this is mainly due to higher net sales.The net profit of Igarashi has registered a growth of 21.57% Y-o-Y to Rs18.99 cr as against Rs 15.62 crores during the same quarter previous year.The earnings per share of the company have showed a growth of 21.57% Y-o-Y to Rs. 6.20 as against Rs. 5.10 crores during same period last year.

Annual Results For the year ended March 31, 2016 Igarashi on Standalone basis reported net sales of Rs. 444.98 cr compared to Rs. 385.08 crores FY2015.For the year ended March 31, 2016 Igarashi on Standalone basis reported net profit of Rs. 63.64 cr compared to profit of Rs. 48.95 crores FY2015.

Ratio AnalysisNameRatioCurrent Ratio1.87Quick Ratio1.64Dividend Yield%0.77Interest Coverage Ratio24.23Debt Equity Ratio0.08Return On Asset (%)20.5Return On Equity (%)21.61

The above ratio suggests that the company is operating with very optimal level of debt. Higher Interest Coverage Ratio implies that company can very easily pay interest on outstanding debt. The management is efficiently using its assets to generate earnings. The Company is generating very good returns with the money the share holders have invested;

Investment Rationale

• The current volume of 90 million vehicles per annum is expected to reach 125 Million by 2025 out of which, Internal Combustion and Hybrid Vehicles are expected to constitute more than 90%
• Big investments are being made in development of pure electric vehicles and industry is constantly assessing drivers to higher penetration of such vehicles in the Market.
• The global automotive market for electric motors is very large and they are large players out of Japan and China Igarashi play in a very niche space in what they call as the power train actuation space which principally addresses the engine, the exhaust and the turbo charger areas.
• The space that Igarashi play today is in the engine space and progressively over the next 3 to 4 years they will be expanding their play in the emission and the turbo charger space as well.
• Future trends in the global automobile industry indicate a significant investment in Hybrid and Electric Vehicles with emphasis on connectivity, electro mobility and automated driving.
• Actuation by electric motors to manifest Higher Fuel Efficiency, better Emission Control, Driving Safety and in-vehicle comfort are proliferating due to consumer preference and regulatory issues. This is leading to increasing usage of electric motors in vehicles, which is expected to increase from a level of 25 electric motors per vehicle to a level of 40 electric motors per vehicle in next 4 to 5 years.
• The vehicle volume from the current 75 Million vehicles per annum is expected to cross 110 Million by 2022.
• The Company saw a better growth in volumes compared to the previous years due to the new programs /new market launches.
• Over the last five years the company has been expanding their engineering bandwidth both in terms of the quantum as well as in terms of the depth of technology.

At CMP of Rs. 702.20 the stock is trading at a P/E of 32.39, the market cap of the company is 2166.47 crore. As per Dynamic Levels we recommend a buy on Igarashi Motors at CMP with a price target of Rs. 850.

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