Auto Ancillary Sector Analysis

This analysis is done with the only purpose of screening out good companies. No suggestions are being made to directly go and invest in the top scoring companies of this analysis.

Let’s study some auto ancillary companies, we have selected the following companies for study and analysis: –

1. Bosch
2. Motherson Sumi
3. Exide Industries
4. Endurance
5. Wabco India
6. Amara Raja Battery
7. Varocc Engg.
8. Minda Industries

Sr. No.	Company Name	Market Cap (Rs. Crore)
1	Bosch	60,603
2	Motherson Sumi	53,290
3	Exide Industries	22,389
4	Endurance	16,569
5	Wabco India	12,884
6	Amara Raja Battery	12,662
7	Varocc Engg.	9,014
8	Minda Industries	8,469

The top 100 companies according to the market capitalization are called as the large cap companies. Companies from 101 to 250 (based on market capitalization) are the mid-cap companies and the rest, that is above 250 are the small cap companies.

Bosch and Motherson Sumi are the large cap companies. Exide Industries is a mid-cap company. And the rest of the companies, Endurance, Wabco India, Amara Raja Battery, Varocc Engg., Minda Industries, are all small cap companies.

The analysis of these companies is going to be based on 6 parameters. They are as follows: –

1. Price-to-Earnings (PE) Ratio
2. Return On Capital Employed (ROCE)
3. Return On Equity (ROE)
4. Debt-to-Equity (DE) Ratio
5. 5 Years Sales Growth
6. 5 Years Net Profit Growth

These parameters play an important role in the analysis of any company. This does not mean that one should be dependent only on these, but these parameters are crucial for initial screening.

First, we have given the companies their ranks and then accordingly we have assigned scores to those companies from 1 to 8, where 1 being the least and 8 being highest score. (total number of companies taken here are 8, that’s why the mentioned scoring card)

PE Ratio

Sr. No.	Company Name	PE Ratio	Rank	Score
1	Bosch	37.35	7	2
2	Motherson Sumi	31.02	5	4
3	Exide Industries	30.08	4	5
4	Endurance	36.05	6	3
5	Wabco India	41.43	8	1
6	Amara Raja Battery	26.59	3	6
7	Varocc Engg.	19.69	1	8
8	Minda Industries	26.46	2	7

PE ratio is nothing but what price an investor is paying for 1 rupee of earning.

The company which has the highest PE ratio has been given number 8 rank and the company which has the lowest PE ratio has been given number 1 rank.

But the company which has the highest PE ratio has been given the lowest score.

Wabco has the highest PE ratio and thus got number 8 rank and scored 1. Varocc Engineering has the lowest PE ratio and thus scored number 1 rank and a score of 8.

ROCE

Sr. No.	Company Name	ROCE	Rank	Score
1	Bosch	22.73	5	4
2	Motherson Sumi	19.86	7	2
3	Exide Industries	20.08	6	3
4	Endurance	23.06	4	5
5	Wabco India	25.69	1	8
6	Amara Raja Battery	24.92	2	7
7	Varocc Engg.	15.52	8	1
8	Minda Industries	24.48	3	6

The company which has the highest ROCE has the highest rank and has also been given the highest points. And the company which has the lowest ROCE has the lowest rank and has also been given the lowest score.

Here too, Wabco has the number 1 rank and scored 8 points. Varocc Engineering, here too, has the lowest rank and scored 1 point.

ROE

Sr. No.	Company Name	ROE	Rank	Score
1	Bosch	15.23	7	2
2	Motherson Sumi	18.96	3	6
3	Exide Industries	13.46	8	1
4	Endurance	20.74	2	7
5	Wabco India	18.29	4	5
6	Amara Raja Battery	16.73	6	3
7	Varocc Engg.	17.96	5	4
8	Minda Industries	26.03	1	8

ROE has been analyzed on the same basis as ROCE.

The company which has the highest ROE has the highest rank and has also been given the highest points. And the company which has the lowest ROE has the lowest rank and has also been given the lowest score.

Minda Industries ranked 1^st as it had the highest ROE and thus scored 8. Exide Industries ranked 8^th as it had the lowest ROE and thus scored 1.

DE Ratio

Sr. No.	Company Name	DE Ratio	Rank	Score
1	Bosch	0	1	8
2	Motherson Sumi	1.05	8	1
3	Exide Industries	0	1	8
4	Endurance	0.37	5	4
5	Wabco India	0	1	8
6	Amara Raja Battery	0.02	4	5
7	Varocc Engg.	0.42	6	3
8	Minda Industries	0.44	7	2

The company which has the highest DE ratio has the least score and the company with lowest DE ratio has the highest score.

Bosch, Exide Industries and Wabco being 0-debt companies have scored 8. Motherson Sumi has the highest DE ratio and has thus scored 1.

5 Years Growth – Sales & Profit

Sr. No.	Company Name	5 Years Sales Growth	Rank	Score
1	Bosch	6.19	7	2
2	Motherson Sumi	17.35	3	6
3	Exide Industries	8.84	6	3
4	Endurance	11.33	5	4
5	Wabco India	21.62	2	7
6	Amara Raja Battery	15.41	4	5
7	Varocc Engg.	0	8	1
8	Minda Industries	27.24	1	8

Sr. No.	Company Name	5 Years Net Profit Growth	Rank	Score
1	Bosch	9.46	6	3
2	Motherson Sumi	31.31	2	7
3	Exide Industries	5.91	7	2
4	Endurance	19.23	3	6
5	Wabco India	14.51	4	5
6	Amara Raja Battery	10.04	5	4
7	Varocc Engg.	0	8	1
8	Minda Industries	61.87	1	8

The company with the highest 5 Year CAGR in Sales and Net Profit get the highest rank and thus gets the highest score. And Vice-Versa.

Minda Industries has the scored 8 in both, as they have the highest 5 years sales & net profit growth. And Varocc Engineering has the scored 1 in both, as they have the lowest 5 years sales & net profit growth.

Final Standings

Rank	Company Name	Final Score
1	Minda Industries	39
2	Wabco India	34
3	Amara Raja Battery	30
4	Endurance	29
5	Motherson Sumi	26
6	Exide Industries	22
7	Bosch	21
8	Varocc Engg.	18

Minda Industries is on the 1^st position with 39 points, Wavco India on 2^nd with 34 points, Amara Raja Battery on 3^rd with 30 points and Varocc Engineering is on the last position, that is 8^th with 18 points.

Companies in the 1^st four positions are all small cap companies. Also, as Bosch has secured a lower rank does not mean that it is a bad company even after being a large cap and a blue-chip company. Its just that according to the parameters selected here, Bosch has scored less.

The point here is to focus on the fundamentals of the company. Here, we have analyzed the company based on their current fundamentals. Also, the qualitative analysis of these companies will provide with a better outlook towards them

And quantitative analysis along with qualitative analysis will give a better understanding of which company is worth investing from here on.

Note: –

• We are not, in any case, suggesting buying stocks of any of the companies mentioned above. We have just provided a study on these companies.
• All the data used is of Trailing Twelve Month (TTM)