Austin Engineering Company
Austin Engineering is one of the safest bets in the current market with only a nominal risk of any major downfall. It has been a steady performer as far as its business is concerned. It has been consistently reporting a PAT of Rs.6-7 crore over the last 5 years even during a recession period. It has an excellent track record being a profit making company with good accumulated profits and has a sound business model. It is in this line of business for over three decades and enjoys a reputed brand name in the market. It has a wide marketing network with an established customer base. Its manufacturing plant in Patla, Gujarat, is built over 350,000 sq ft and manufactures over 3 million bearings. It has an employee strength of over 650 people. Despite being small in size, it claims to have the widest range of bearings, weighing from 50 gms to over 500 kgs in over 4000 variants. It is among a handful of customized bearing manufacturers worldwide producing bearings of 1800 mm diameter. The majority of its products are import substitutes. In fact being a quality producer, it exports to high-end markets like the USA & Europe. It has even incorporated a 100% subsidiary in the USA that acts as a marketing front. Historically, it has always been generating positive cash flows from operating activities. It has been paying dividend regularly since last seven years and declared 25% dividend for FY12. It is trading cum-dividend offering a yield of over 3% at CMP. Although the management has brought the company to this level, there are challenges to take it forward or to the next orbit because of which it may emerge as a strong takeover candidate. The stock is trading at good 40% discount to its book value of approx. Rs.128. The
valuation gap between other bearing manufacturers and this company is quite huge. For FY12, it reported a PAT of Rs.6.4 crore on total income of Rs.102 crore. At the current market cap of Rs.25 crore it is available at a P/E multiple of less than 4. Fundamentally, it’s a pure buy.
valuation gap between other bearing manufacturers and this company is quite huge. For FY12, it reported a PAT of Rs.6.4 crore on total income of Rs.102 crore. At the current market cap of Rs.25 crore it is available at a P/E multiple of less than 4. Fundamentally, it’s a pure buy.
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