Like MM Forgings from auto ancillary space: Mayuresh Joshi

Mayuresh Joshi of Angel Broking told CNBC-TV18, "The interest payments itself are not sufficing the kind of cash flows that Amtek Auto ought to make, the profitability takes a big hit. The erosion is quite evident in its numbers. So, staying away from this entire pack. Particularly in the auto ancillary space, MM Forgings is something that we like, they are increasing their capacity to 65,000 mt, exports is a big component to their top-line, nearly contributes 72 percent. The American medium to heavy commercial vehicles (MHCV) market is showing healthy signs of recovery. Valuations are not looking expensive, so we are assuming a 15 and a half percent top-line growth over the next couple of years margins to sustain at the current level. Clearly the bottomline should grow at a decent pace as well. So, MM Forgings is something that I like at this juncture from the auto ancillary space.""The acquisitions have to be on the right track and it should be value accretive in terms of earnings per share (EPS) earnings going up. The kind of acquisitions that the Amtek Group was making and what kind of value addition it will have in terms of earnings going forward, that is why we desisted from probably looking at these stocks even at the higher levels and even though the market was favouring these stocks at that point in time," he said."Our lack of understanding on why these acquisitions were made and whether they will really add to the earnings are now justifying our point. So, we have a very stock specific approach when it comes to auto ancillary space."