SHRIPISTON has delivered a strong 9M-24 on the back of strong performances in the last 4 quarters. SHRIPISTON is a free cash flow compounder available at attractive free cashflow yields.
1. Manufacturer of automotive components
shrirampistons.com | NSE : SHRIPISTON
Shriram Pistons & Rings Ltd (SPRL) is the largest manufacturer of Pistons, Pins, Rings, and Engine Valves in India with a manufacturing unit in Ghaziabad and Rajasthan . Its products are marketed to almost all OEMs and Aftermarkets under the brands SPR and USHA.
SPR is the largest exporter of Pistons and Rings from India to marquee customers, including Perkins, Fiat Power Train, Cummins, Yanmar, BMW, Daimler, BRP Rotax, Kubota, Wabco, Cummins, etc.
Working to grow business model beyond IC engines
- Acquisition of 51% shares in EMF Innovations Private Limited, a electric motor design & manufacturing company
The Company aims to expand its presence in Electric Vehicle space to supply Electric Powertrain Components such as Motor & Controller covering all the vehicle segments from Two Wheelers, Three Wheelers, Passenger Vehicles, Commercial Vehicles and Buses.
- Acquisition of 62% shares in Takahata Precision India Private Limited, a precision injection moulded components manufacturing company
2. Strong Growth from FY21-23
82% PAT CAGR & 28% Revenue CAGR from FY21
- Became a Rs 2000+ cr company in FY22
- Unexciting yet solid growth from FY17-23
- Revenue CAGR = 8%
- PAT CAGR = 16%
- Free Cashflow (FCF) = 17%
3. A strong FY23: PAT up 80% and Revenue up 26% YoY
Company’s revenue from operations grew by 26% from Rs. 20,647 Million (previous year) to Rs. 26,050 Million (during the year)
Company’s exports registered growth of almost 21% from Rs. 4,010 Million to Rs. 4,841 Million. This was due to strengthening of relationship with the existing customers, range expansion and entering new markets & product segments.
4 Strong H1-24: PAT up 68% & Revenue up 15% YoY
Improvement in margin YoY and compared to FY23
5. Strong Q3-24: PAT up 44% & Revenue up 20% YoY
PAT down 5% & Revenue up 2% QoQ
6. Strong 9M-24: PAT up 44% & Revenue up 20% YoY
7. Business metrics are strong and consistent
The business has delivered returns consistently. Cash conversion has been strong.
Metrics are at an all time peak in FY23
8. Outlook
In the absence of any management commentary or public information on SHRIPISTON one is expecting the trend of 9M-24 continuing in the last quarter of FY24.
The real challenge is forming a view for FY25 in the absence of any public information about the prospects about the company. One can proceed by formulating a view on a quarter by quarter basis using the most recent quarterly results.
9. PAT growth of 44% & Revenue growth of 20% in 9M-24 at a PE of 17
10. So Wait and Watch
If one holds the stock then one may continue holding on to SHRIPISTON.
- Coverage of SHRIPISTON was initiated after Q1-24 results. The investment thesis has not changed after a strong Q3-24. The delivery of a strong 9M-24 has increased confidence in the management to deliver a stronger FY24 compared to FY23
- SHRIPISTON is in the middle of strong run delivering sequential growth quarter on quarter. One can ride through this phase of growth
- In the absence of information about SHRIPISTON hold on to it one quarter at a time.
Keep a watch on the impact of increased penetration of EV in 2W segment
In the coming years, the Company is expected to face challenges due to the increased penetration of electric vehicles in two wheeler segment. The management is working to overcome these headwinds in the coming year and are also working diligently to find further avenues of growth for the Company.
11. Or, join the ride
If I am looking to enter SHRIPISTON then
- SHRIPISTON has delivered PAT growth of 44% & Revenue growth of 20% in 9M-24 at a PE of 17 which makes the valuations fair.
- SHRIPISTON is a consistent free cash flow generator. It generated FCF of Rs 194 cr in H1-24 on its current market cap of Rs 7275 cr. This makes the free cash flow yield of 2.7% ( not annualized) which makes the valuations reasonable.
- One may consider SHRIPISTON to start looking expensive closer to a PE of 20 in the absence of any outlook on the company.
- The lack of any management commentary or public information is the biggest problem one faces in taking a call on SHRIPISTON.