From THE HINDU group of publications
Sunday, July 22, 2001


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CG Igarashi Motors: Buy

Recommendation: Buy

B. Krishnakumar

Trading at around Rs 31, the CG Igarashi Motors stock is a good investment option for a moderate risk portfolio with a long investment horizon.

The stock trades at a price earnings multiple of around four times its latest annualised earnings per share.

Also, the company is fundamentally sound and has managed to increase its overall market share. The stock is likely to perform better over the next few quarters, and fresh investments can be considered at current levels.

Earnings performance: The company's earnings performance for the quarter ended June 2001 has been fairly impressive. Sales revenues rose around 41 per cent to Rs 24.62 crore, over the corresponding previous period. The operating margins have remained stable at around 16 per cent. Post-tax earnings improved around 50 per cent to Rs 22.08 crore. On the equity base of Rs 11.9 crore, the annualised earnings per share work out to around Rs 7.

Business: CG Igarashi Motors manufactures permanent magnet micromotors. These motors find application in automobiles, power tools, household appliances and office equipment, among others.

Prospects: The prospects over the next few quarters seem fairly good. The company derives close to 90 per cent of its revenues from the automobile industry; its products are used in seats, windows and wipers.

Therefore, volumes in this segment are directly related to the offtake of automobiles. The industry's performance over the last few quarters has not been impressive, leading to a slump in offtake. Given this background, how has the company managed to maintain topline growth? By expanding its customer profile, thereby, leading to an increase in the overall market share. For instance, Igarashi has business interests with such clients as General Motors, Mazda, Renault and Peugeot.

Given that quite a few of its clients are global majors, Igarashi also forms as a sourcing base internationally. Overall, the company has managed to increase its market share and move up the value-chain by raising its productivity and efficiency.

Though the overall performance of the automobile industry has not been impressive, the company has managed to keep its head above water. It is likely to strengthen its position in the market. Thus, those with a long-term investment horizon can consider the stock.

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