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-   -   Guide: Investing in shares of the automotive sector (https://www.team-bhp.com/forum/indian-car-scene/187607-guide-investing-shares-automotive-sector-10.html)

sleepyhead148 26th October 2017 10:44

Re: Guide: Investing in shares of the automotive sector
 
Quote:

Originally Posted by smartcat (Post 4293849)
Oh? What changes in the past 3 months? There is nothing in the news.

I was referring to this particular article (Link). Couldn't understand the implications and the bigger picture here.

petroguzzler 31st October 2017 17:52

Re: Guide: Investing in shares of the automotive sector
 
An important parameter to note before investing substantial amounts in a firm would be to check it's Altman Z-score. The method might seem laborious, but it does provide vital information on risk management and leverage of any firm.

bhavik.1991 31st October 2017 18:54

Re: Guide: Investing in shares of the automotive sector
 
http://www.team-bhp.com/forum/indian...alerships.html

Do you guys think it is a good time to invest in MSIL stock for not so long term (1-2 years)? Or does it seem too risky given that the automative sector is shifting towards EV/autonomous vehicles internationally?

SmartCat 31st October 2017 19:45

Re: Guide: Investing in shares of the automotive sector
 
2 Attachment(s)
Quote:

Originally Posted by sleepyhead148 (Post 4293983)
I was referring to this particular article (Link). Couldn't understand the implications and the bigger picture here.

That's all gibberish. It is not even proper technical analysis. It is just random technical analysis terms put together by a software (automated content creator). The sole purpose of this website is to get advertising income. There are hundreds of such "automated" websites.

Quote:

Originally Posted by petroguzzler (Post 4297172)
An important parameter to note before investing substantial amounts in a firm would be to check it's Altman Z-score. The method might seem laborious, but it does provide vital information on risk management and leverage of any firm.

Or you could just check www.valueresearchonline.com for Altman Z-Score of all companies. :) No calculations needed.

Eg: Maruti Suzuki Vs Tata Motors

Attachment 1691229

Attachment 1691230


Quote:

Originally Posted by bhavik.1991 (Post 4297205)
Do you guys think it is a good time to invest in MSIL stock for not so long term (1-2 years)? Or does it seem too risky given that the automative sector is shifting towards EV/autonomous vehicles internationally?

For 1 to 2 year horizon, one cannot say. Because of high valuations & slowing profit growth, it could remain in a range for some time. However, money flow into mutual funds are robust and fund managers might be forced to buy high quality stocks like Maruti - so you will never know what will happen to its stock price in the next 1- 2 years.

But shift to EVs is not a risk, but possibly something that Maruti will take advantage of.

bhavik.1991 1st November 2017 10:15

Re: Guide: Investing in shares of the automotive sector
 
Quote:

Originally Posted by smartcat (Post 4297232)
But shift to EVs is not a risk, but possibly something that Maruti will take advantage of.

Pardon my ignorance but can you please provide more info regarding Maruti Suzuki's investments in EV related technologies? Or are they betting on Tesla who has a track record of letting other organizations use their patented technologies related to EVs?

selfdrive 1st November 2017 10:26

Re: Guide: Investing in shares of the automotive sector
 
M&M is investing into EV related technologies. No news from birdies in MSIL camp.
Disclaimer: I am not invested in either.
Perhaps we need to review the impact on sales of the recent ruling to include mandatory safety features. How this would impact the small car sales of MSIL, etc.

CrAzY dRiVeR 1st November 2017 21:00

Re: Guide: Investing in shares of the automotive sector
 
Quote:

Originally Posted by selfdrive (Post 4297464)
M&M is investing into EV related technologies. No news from birdies in MSIL camp.

Suzuki has tied up with Toshiba and Denso for production of automotive lithium ion battery packs in India.
http://www.team-bhp.com/forum/indian...cks-india.html

Suzuki has also announced a partnership with Toyota for the development of future EV vehicles -
https://auto.ndtv.com/news/maruti-su...tlined-1746386

vishal9999 3rd November 2017 20:46

Re: Guide: Investing in shares of the automotive sector
 
Quote:

Originally Posted by smartcat (Post 4293849)
If you believe a politician's word, companies in the following sectors will see "100% growth" :)


- PE of 10 and PBV of 1.5
- Dividend payout ratio of 25% and dividend yield of 2.21%
- Return on equity: 14%
- 15 to 20% sales and profit growth over the past 3 to 10 years. Very stable earnings profile.
- 35% revenue from toll projects & 65% revenue from construction projects

Hi smartcat,
Moneycontrol data of IRB shows PE of 28.87 and PBV of 3.42.
Is there something I am reading incorrectly?.

SmartCat 4th November 2017 00:41

Re: Guide: Investing in shares of the automotive sector
 
1 Attachment(s)
Interesting (but on expected lines) infographic from Ernst & Young report on EV adoption with respect to auto component companies.
http://www.team-bhp.com/forum/motorb...ion-india.html

Attachment 1692216



Quote:

Originally Posted by vishal9999 (Post 4299175)
Hi smartcat,
Moneycontrol data of IRB shows PE of 28.87 and PBV of 3.42.
Is there something I am reading incorrectly?.

That is standalone PE. When a company has subsidiaries, you need to look at the consoldiated PE. Use screener.in for standalone / consolidated numbers.

Meanwhile, here is one more article on how 'Bharatmala' affects certain stocks and sectors:
https://economictimes.indiatimes.com...w/61482245.cms

giri1.8 6th November 2017 23:24

Re: Guide: Investing in shares of the automotive sector
 
I am completely new to stock market, planning to make baby steps in investing in stocks as a form of assert. I am not looking for short-time gain as of now, initially will buy and sell just to understand how things work, later investment will be less but constant number of stocks per month.

Currently looking at Maruti Suzuki,TATA motors, Eicher (this one is too expensive but if it is worth will go for it), once race for electric cars starts I will divert my invest accordingly.

I have chosen these 3 companies with completely different future growth, wish my investment to grow in long term!

Any suggestions would be considered seriously :)

joslicx 7th November 2017 13:00

Re: Guide: Investing in shares of the automotive sector
 
Quote:

Originally Posted by giri1.8 (Post 4300890)

Any suggestions would be considered seriously :)

Well, this is not the best time to enter the market. NSE PE is around 26 which is very high. Historically, this kind of valuations resulted in sharp corrections. Nobody knows what could happen to our markets tomorrow but a correction is a good possibility.

I'd say, wait with your money for correction. If you still must invest now, Maruti would be very good. Fundamentally strong, market leader, zero debt company. That's the kind of companies one can own. Tata Motors has huge debt on its books. Few bad quarters can really cause big troubles for them.

giri1.8 7th November 2017 14:04

Re: Guide: Investing in shares of the automotive sector
 
Quote:

Originally Posted by joslicx (Post 4301154)
Well, this is not the best time to enter the market.

I'd say, wait with your money for correction.

Thanks for the suggestion ! With all the tension around the globe I am expecting huge fluctuation in the market! My intention was to be ready for any significant drop to make the purchase.

I guess I will hold on to my money till something significant happens.

SmartCat 7th November 2017 18:31

Re: Guide: Investing in shares of the automotive sector
 
Quote:

Originally Posted by joslicx (Post 4301154)
Well, this is not the best time to enter the market. NSE PE is around 26 which is very high. Historically, this kind of valuations resulted in sharp corrections. Nobody knows what could happen to our markets tomorrow but a correction is a good possibility.

It is a good habit to watch Nifty PE, P/BV and Dividend yield. Bookmark this page and visit it atleast once a month:
https://nifty-pe-ratio.com/

You will notice that in 2000 and 2008, PE/PBV were higher than average and dividend yield was low - as marked in RED.

But now, although PE is high & dividend yield is low, P/BV is still around average levels (marked in GREEN). This means market might not be overvalued after all, and that there are pockets of undervaluation. This can happen because of certain stocks like PSU Bank, Power and Commodities (metal, steel), which have lumpy earnings. For eg: State Bank of India has a PE of 127 but Price to book of only 1.5.


Quote:

Tata Motors has huge debt on its books. Few bad quarters can really cause big troubles for them.
You are right. That is why it trades at lower PE. But for now, because of JLR performance, interest payments are manageable. If you look at last 4 quarters results, Tata Motors had an operating profit of Rs. 27,000 Cr and interest payments of Rs. 5,100 cr.

Quote:

Originally Posted by giri1.8 (Post 4300890)
I am completely new to stock market, planning to make baby steps in investing in stocks as a form of asset. Any suggestions would be considered seriously

My only advise is - invest a fixed percentage of your monthly savings in stocks till you are 60. If you can save Rs. 20,000 per month now, put Rs. 10,000 in stocks and Rs. 10,000 in fixed deposits. Every single month without fail. Whether the markets go up or down. Don't look at how much you have "gained" or "lost".


Quote:

once race for electric cars starts I will divert my invest accordingly.
Right now we are talking about Electric Vehicles in "Indian Car Scene" forum in the form of news updates. When you see many electric vehicles in "Official Car Reviews" or "Initial Ownership Review" forum, that's when we (as stock market investors) need to re-assess the existing lot of automobile sector companies.

Not now.

joslicx 8th November 2017 08:33

Re: Guide: Investing in shares of the automotive sector
 
Quote:

Originally Posted by smartcat (Post 4301375)
It is a good habit to watch Nifty PE, P/BV and Dividend yield. Bookmark this page and visit it atleast once a month:
https://nifty-pe-ratio.com/

Yes you are right that there are so many parameters. What I have understood from all my readings is that all said and done, its the earnings that matter in the end! Right now we have seen a PE expansion in the market in this rally. Most of the stocks have risen a lot and are quoting at very high PEs. For example, Maruti is quoting at PE 33 which is much higher than its 5 year median (27). Motherson Sumi at PE 50! which is much much higher than its 5 year median (33). So there has been a substantial PE expansion. Pat Dorsey in his wonderful book The little book that builds wealth (its a very small book but worth a read) says that valuations like these warrant caution. He has given examples of Microsoft and Adobe to illustrate his point. Microsoft at PE 50 didnt make much money for its investors and eventually corrected to PE 15 or so (as stock price was largely stagnant over long time) while Adobe made more money as it enjoyed a PE expansion in the same time.

Moral of the story is PE is worth looking. One will have to be choosy in this market as valuations for most of the quality companies are very high. Even great companies could turn out to be value traps (for example the likes of Infosys, Wipro have hardly given any gains in last 10 years!)


Quote:


You are right. That is why it trades at lower PE. But for now, because of JLR performance, interest payments are manageable. If you look at last 4 quarters results, Tata Motors had an operating profit of Rs. 27,000 Cr and interest payments of Rs. 5,100 cr.

I am really wary of debt. Automobiles are cyclical. If, for any reason, the auto industry goes in a recession then the debt is going to really hit Tata hard. I'd anyday prefer Maruti over Tata (in cars as well :)

Latheesh 9th November 2017 10:07

Re: Guide: Investing in shares of the automotive sector
 
Sona Koyo is up ~ 13% today. What is cooking? or is it just pre result (qtr) run?


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