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Denso India looks good for long term: Ranganathan
S Ranganathan, Head of Research at LKP Shares is of the view that Denso India is looking good for long term investment. It is a 63% Indian subsidiary of Denso Corporation of Japan who is world leaders in electrical parts.
S Ranganathan, Head of Research at LKP Shares is of the view that Denso India is looking good for long term investment.
Ranganathan told CNBC-TV18, "Denso India primarily is a 63% Indian subsidiary of Denso Corporation of Japan who is world leaders in electrical parts. Basically in electrical parts being a very import substitute item, there is a lot of technology involved and the products like alternators, starter motors, generators primarily these are ignition products, which go into the automobile industry. Denso India incidentally is a Tier-I supplier to Maruti Suzuki as well as the Hero Honda Group. The fact that despite operating in a highly competitive industry, where there are a lot of pricing pressures the fact that the have grown their net profits at a compounded growth rate of about 45% over the last 10-years goes to prove the fact that technology of course is their core strength and they have been able to grow their revenues at a CAGR of 15% over these 10-years."
He further added, "It is a full tax paying company, they have about Rs 100 crore of cash on their books, primarily is a debt-free company. So net of cash you are actually getting auto ancillary company at a price to earnings multiple of three-times with three-times EV/EBIDTA and if you compare the revenues to the market capitalisation the revenues are more than three-times it's present market capitalisation. So we do believe that there is lot of deep value in the stock for investors who are essentially long-term investors."
