Akar Auto Industries Ltd
(BSE Code: 530621) (CMP: Rs.43.80) (FV: Rs.5)
Incorporated in 1989, Aurangabad-based Akar Auto Industries Ltd (AAIL) manufactures and sells hand tools, auto leaf springs, parabolic springs and commercial automotive forgings. It offers spanners such as open-ended jaw, ring and combination spanners; carpenter/striking tools including pincers and tin cutters, striking tools, planes and T-bar cramps and saws; and leather tool aprons. It also provides automotive/construction tools comprising vices, chisels, clamps, hacksaws, lubricating tools, tubular box spanners, bearing pullers and punches; wrecking bars and nail pullers; pipes, wheels and filter wrenches; packaging products; electrical tools such as pliers, screw drivers; and electronic and surgical tools. It exports to Europe, USA, Japan, Australia and other countries worldwide. Its marquee clients include Ashok Leyland, Bajaj Auto, BHEL, Force Motors, Tata Motors, Mahindra & Mahindra, Kirloskar, Piaggio, Greaves, etc.
With an equity capital of Rs.5.39 crore and reserves of Rs.25.03 crore, AAIL’s share book value works out to Rs.26 and its P/BV is reasonable at 1.7x. The promoters hold 73.06% of the equity capital, which leaves 26.94% stake with the investing public. For Q2FY19, AAIL reported 44% higher PAT of Rs.1.41 crore on 33% higher sales of Rs.82.48 crore and an EPS of Rs.1.3. For H1FY19, it reported 55% higher PAT of Rs.2.46 crore on 40% higher sales of Rs.150.57 crore and an EPS of Rs.2.3. Its EPS has grown at 23% CAGR over the last five years! It paid 11% dividend for FY18. Its PEG (P/E to growth) ratio is just 0.5x, which is very attractive.
Currently, the stock trades at a P/E of 12x and is available at around 47% discount to its 52-week high of Rs.82.8. The stock looks attractive at the current level based on its performance parameters. Investors can buy this stock with a stop loss of Rs.33. On the upper side, it could zoom to Rs.75-80 in the medium-to-long term.