Omax Auto - Rs 100.00

Omax Auto is a leading manufacturer of sheet metal and tubular metal components catering to the automotive sector. The company's product portfolio includes body frames, sprockets, electroplated tubular components, gear shafts, rocker arm shafts and piston rods. It is also one of the largest producer of sprockets in the country with a capacity to produce over 8 lakh units per month.. It has integrated facilities including a press shop, welding shop, paint shop and tool room for design and development of automotive components. Its domestic clients include all major two wheeler and passenger car manufacturers like Hero Honda, Maruti, TVS etc. and international clients like Tennneco, Delphi Automotives, Atlantis Global Service, Cummins Inc. to mention a few.

Visualising the huge outsourcing opportunity in coming years, the company will now concentrate on exports, which give better margins as well. To tap this growth story, Omax is incurring a capex of Rs.80 cr. over the next 12~18 months. This will be partly invested in the existing units entailing a capital outlay of Rs.20 cr. while the balance Rs.60 cr. is being spent on its Bangalore unit and the new unit at Gurgaon. Incidentally, both the Bangalore and Gurgaon units have commenced commercial production from Oct.2004. It is also setting up a export-oriented captive unit in Gurgaon to supply machine components for Tenneco an US automotive major. Moreover, it is in talks with 2/3 companies for acquisitions outside India and most likely in Europe. To fund its expansion, the company is raising money through a rights issue, preferential allotment and issue of convertible warrants which will dilute its equity going forward by Rs23.50 cr. from its current equity of Rs20.31 cr. It has bagged huge export orders specially from Delphi Automotives & Tenneco and is sitting on good orders in hand to be executed in next 2~3 yrs.

Considering the huge outsourcing opportunity ahead along with the healthy domestic market, the growth prospects for Omax Auto in the long-term picture appear excellent and it may report an sales of Rs600 cr. and NP of Rs22 cr. for FY05. This works out to an EPS of Rs11 on its current equity of Rs20.31 cr. But for FY06, it can post an EPS of more than Rs16. Hence investors are advised to accumulate it at sharp declines with a long term perspective of more than 2 years to get handsome returns