One investing approach is finding promising candidates in sectors / industries that are going through distress. One sector (of the many) that is going through stress currently is the automobile industry in India. So we thought it would be interesting to trawl the listed companies in the automobile sector to find out interesting candidates.
When we search, we keep an eye out for something that is really out of the ordinary. One way to expose yourself to serendipity is to randomly read annual reports of companies. When we begin work on a company, we start out with the latest annual report. Here are a couple of charts that piqued our interest in the annual report of Suprajit Engineering, an auto component company based out of India with a market cap of ~2300cr ($300 million).
First, it is uncommon for companies in India to show their evolution from 2002.
Second, there seems to be steady compensation for fragility, that reminded us of Apcotex. What was predominantly a 2-wheeler focused business supplying only to OEMs (Original Equipment Manufacturers) has evolved into a business that generates almost equal revenues from multiple segments. Also, what was primarily a domestic business, today generates around 40% of revenues globally.
Third is the table below. Once again, you hardly see any company compare themselves thus.
Basically, Rs. 100 would have become - a cool Rs 615 by 2019 if invested in the auto index in 2009, Rs 434 if invested in the BSE 500, Rs 398 if invested in the Sensex and a staggering Rs. 6,500 if invested in Suprajit.
This is, to put it mildly, a stunning out-performance. And Suprajit is in the auto component sector - a sector which doesn’t have a great history due to the extremely weak bargaining power with customers and high competition.
How did Suprajit achieve this then?
In this [ case study for our Members ], we have chronicled how the focused aggression, relentless execution, steady de-risking and prudent capital allocation of Ajith Kumar Rai and his team at Suprajit led to this stunning outcome.
If you enjoyed this excerpt, you should become an Intelligent Fanatics member. As a member, you get our current and future Intelligent Fanatics books, case studies, online courses for free, as well as the ability to participate here on our community. Join Us
Disclaimer: We may/may not have positions in the companies mentioned in the blog. This case study/article is not a stock recommendation. We are not SEBI registered investment advisors. Our Intelligent Fanatics Case Studies and Articles are meant to retell the stories and strategies used to create exceptional businesses so that we can learn from them.