DYNAMATIC TECHNOLOGIES

Dynamatic Technologies, a Rs.1,650 crores company, designs and builds highly engineered products for automotive, aerospace, hydraulic and security applications at its state-of-the-art design, engineering and manufacturing facilities in Europe and India. 

 

We recommend this company due to following strong reasons:

 

1. Dynamatic Technologies is promoted by Mr. Udayant Malhotra, ex technocrat of Hindustan Aeronautics Ltd. He has built the company over past decade as a highly technology driven company. If we see the past events, number of Joint Venture announcements with world's leading companies and number of acquisitions in Europe, we can conclude that promoters are having a distinct passion to take this company into a technology driven, iconic company never ever born before and heard in a country like India particularly in the manufacturing field. 

2. Now some acquisition, tie ups and joint ventures with world's leading companies:

    - Bell Helicopter,as a single source supplier of major airframe assemblies for the BELL 407 GX

    - Airbus, to supply flap track beams for Airbus 330 aircraft series as a sole supplier

      - Boaing,the $85-billion aerospace and defence giant, wants to make India a global hub to make parts for its CH-47 Chinook  helicopters.Initially, Chinook’s ramps, pylons and electrical harnesses will be sourced from India.The ultimate goal will be to source sub-assemblies of more (aircraft) platforms

     - HAL and DRDO for its India army requirements

    -Aero Vironment USA, entered into pact with Dynamatic for manufacture of unarmed aeriel                vehicles (Drones). Aero Vironment has already delivered 24,000 UAVs in the USA and 24 other         leading companies and in India UAVs orders are likely to come from Ministry of Home and               Defence.      

    - BMW, Volkswagen, Mercedes, Ford, Nissan & Audi for auto parts

    - Hyundai India, single source supplier for its specific engine components

  -Mahindra & Mahindra, John Deere, Cummins, Escorts, Caterpiller. Catering to all tractor manufacturers in India with 65% market share.

3. Dynamatic Technology's main growth is coming from aerospace manufacturing because of orders from some leading companies of the world and the margins are very good in this area. Auto components main facilities are in Germany and the cost particularly manpower cost which is Rs. 220 crores annually, is very high. Dynamatic management is planning to shift iron casting and some other non critical operations to India and this will improve margins in coming years. Therefore, in the next 5 years turnover will increase substantially with improved margins.

4. Indian Govt is planning seriously for the first time to manufacture defense products and weapons  in India and already the foreign holding in defense sector has been increased from 26 to 49%. There is likelihood that this percentage will be further increased to 75-100% to facilitate fast implementation of the Govt plan. There is very less doubt that Dynamatic Technologies will be the Infosys of defence and aerospace manufacturing in India.   

5. The current market valuation of the company is Rs. 1,535 crores with annual turnover of Rs. 1,650 crores. Imagine, if turnover  increases manifold with increased margins, this company may command 3-4 times market valuation compared to its sales turnover. If turnover is Rs. 3,000 crores after 5 years, the market valuation God knows, of this company may be more than Rs. 10,000 crores.

6. Dynamatic Technologies is paying Rs.100 crores every year interest on its Rs. 450 crores debt. Management is trying to reduce the debts and in future it will be very much possible for this company to become debt free due to increased market valuation. Imagine, if this entire Rs. 100 crores interest is saved and company has extra profit of Rs. 200 crores annually after 5 years, the targeted valuation will be easily achieved. Page Industries( Jockey brand ) with Rs. 200 crores profit is valued more than Rs. 10,000 crores by the stock market.

7. Competition in the sector of defense and aerospace is going to be very limited and Dynamatic Technologies will be in better position to take advantage of the situation.

8. It is likely that Bell, Airbus and Boeing will give further structures to Dynamatic Technologies to built in future due to its dependability and lower costs. This aspect may create substantial orders for the company.  

Wabco India

WABCO INDIA
Changing the Indian commercial vehicles safety standards.

WABCO INDIA is a company owned by Mr. Warren Buffet making Automatic Manual Transmission System(AMT), ABS and Commercial Vehicles New Generation suspension system.

We recommend the stock due to the following strong reasons:

1. It is a Warren Buffet company in new technological areas of automotive parts like AMT, ABS and new generation suspension system for commercial vehicles.

2. At present in India, safety features like AMT and ABS are very rarely used and no body wants to incur extra cost of Rs. 1-2 lakhs on these features which can prevent accidents on the highways. Hence, we are buying this stock when there is no extra demand in the market.

3. Central Govt. is going to implement ABS compulsory w.e.f.  1st April,2015 and Tata Motors is going to provide AMT in all its trucks and commercial vehicles. These safety features will become compulsory in 1-2 years time and demand for these products will increase manifold.

4. WABCO INDIA is having monopoly in these products and it will be difficult for any new entrant to come in the market in near future.

5. Parent company is going to make India a sourcing hub for supplying it to  other countries and hence in future there will be a lot of export of these products from WABCO.

6. At present total commercial vehicle sale is 8 lakhs per year which is likely to increase to 14 lakhs by 2019. Imagine if Rs. 1 lakh worth of ABS, AMT is on one vehicle, 5 years later WABCO can increase its sale by Rs. 6000-7000 crores( 50% market share on 14 lakhs vehicles at 1 lakh per vehicle). It can give additional profit of Rs.700-1000 crores per year to WABCO after 5 years. These projections are on the conservative side and real picture may be better.

7. The stock will command high PE in next 5 years also because there will be lot of excitement, glamour and feeling of safety amongst investors with this stock. Whenever a new game changing product is introduced in the market, the real commercial value is realized after 5-10 years( take the example of internet, dot com industry etc.). Hence, in anticipation of bigger market sales the PE will remain very high even after 5 years.   

8. This stock is true replacement of fixed deposit because WABCO is much safer than fixed deposits. Imagine, if Arvind Kejriwal comes, fixed deposits will be unsafe( banks will feel pressure) and WABCO type of monopolistic companies shall be safer for investors. Its products will safeguard the lives of customers and its stock investment can take way the worries of investors.

Wockhardt

Wockhardt is a very old professionally managed company. Over the last 10 years, Sun Pharma, Lupin etc have become very big compared to Wockhardt. Sun Pharma is 20-25 times bigger and Lupin is 8-9 times bigger than Wockhardt. The total pharma industry is $975 billion worth and India holds only 2% value in terms of sales. So there is huge potential for Indian pharma and furthermore huge potential for Wockhardt. We recommend the script due to following strong reasons:

1. Wockhardt is facing problems with USFDA for import alerts issued to some of its plants which are likely to be resolved within the next 1 year. Therefore, currently it is available at a low price.

2. Before USFDA problems surfaced, Wockhardt was highly bullish and touched Rs 2300-2400 and that was due to increasing earning growth also with Price Earning ratio of less than 15 at that time. Current PE of Sun Pharma is around 25-30 and on earlier profits, Wockhardt PE is is less than 6. It means there is a scope of scripts increasing 5-6 times in price, once USFDA problems are resolved.

3. Wockhardt has come out with two new drugs discovery( not generic ) which has not been achieved by any pharma company in India. This new drug discovery will give huge rewards to shareholders in 3-4 years time when the drugs will hit the world market. It will be a matter of pride for India if that day comes and shareholders can expect PE to hit above 30.

4. USFDA has given fast approval for these two new drugs skipping first two stages and drugs will be tested straight for 3rd stage which is small number of patients world wide. The new drugs may have potential of hitting $2-3 billion in the next 3-5 years time period and it is possible that valuation of Wockhardt will jump by 4 times of new drugs sale of $2-3 billion with these two new drugs alone, Wockhardt market cap can be increased by a whooping Rs. 50,000 crores.

5. Wockhardt management is giving indication of utmost confidence by declaring interim and final dividends even though they are facing problems with USFDA and also buying company shares from the open market.

6. Wockhardt is not affected by the Modi-factor.

There may be short terms hiccups but in the long terms of 5 years, this stock is a real wealth creator.