Market price on the date of suggestion – 238 RS
GNA Axles is an 27 years old company engaged in manufacturing of automotive transmission components. The company has a large variety of Axle Shafts ranging from 1.5kg to 65kg & capacity to produce upto 165kg producing about 2 million Axle Shafts annually.
About Darkhorsestocks – DARKHORSESTOCKS are those which are fundamentally strong, have good growth potential and very few people know about. We suggest only one such idea every week on Sunday. So far majority of those stocks have delivered above 35% returns in over a year with some of them giving exceptional returns. For Whatsapp Updates Click here.
Established in 1993-1994 GNA is amongst the world’s leading manufacturers of automotive transmission components. The worlds top OE manufacturers are amongst its customers. The company employs over 2500 people across 3 locations in Mehtiana & Bundala, Punjab, North India. Its scale gives GNA Axles the manufacturing capability that OE customers demand, plus the flexibility and reliability to meet any production challenge.
GNA Axles works with its customers to engineer products that provide optimum performance to driveline systems in a wide range of automotive applications. Whatever the specification, it is likely the company might have done something similar before and if not, its engineers are equipped in terms of technical expertise to work, to customize and deliver accurate product solutions.
GNA Axle’s product reliability has been proven in every market, while product durability has passed tests in the most demanding environments. Consistently stepping up to the challenge of manufacturing products that are world-class, reliable and cost efficient the company has come a long way.
GNA has one of the largest integrated plants of its kind in the subcontinent of Asia. With an annual turnover exceeding $105 Million coming from 3 divisions GNA Axles Ltd (Axles Division), GNA Duraparts (Gears Division) and GNA Udyog Ltd (Propeller Shafts Division). GNA group is on a fast track towards growth and globalization. The company has a large customer base covering different sectors of the automotive industry and a diversified product range.
Customers
These plants are equipped with sophisticated facilities covering every aspect of auto parts production right from forging to heat treatment and machining. There are 8 horizontal upset forging machines with capabilities ranging from 2.5 inches to 13 inches.
Global Operations
GNA’s unrivalled expertise has helped it diversify across geographies and enhance visibility even amid challenges. Its focused and efficacious strategies are the strong catalyst that fortify its position domestically and globally with unique customer-centric solutions.
the company exports its products to the global oems and the top companies including dana limited (usa, mexico and australia), John deere (brazil and usa), Kubota corporation (Japan), meritor (sweden, Italy, brazil, usa, china and australia), and Zf (germany, usa), among others. the Indian oem and tier-I customers mainly include tafe, International tractors limited, escorts limited, John derre, automotive axles limited, mahindra & mahindra limited and cnh, among others.
Products portfolio includes
» Rear Axle Shafts
» Spindles
» Splined Shafts
Rear Axle Shafts
GNA primarily manufactures and supplies a varied range of high-quality rear axle shafts for on- highway and off-highway vehicles. The Company manufactures various axle shafts that range from 5 kg to 65 kg with a capacity to manufacture up to 165 kg input weight. Rear axle shafts contributed to 82.26% of the total revenue and 76.62% of the components manufactured in 2019-20
Spindles
GNA manufactures spindles to cater the needs of on- highway vehicular segments. Spindle acts as a part of axle housing assembly for an automobile contributing to 13.17% of the total revenue and 15.30% of components manufactured in 2019-20.
Other Shafts
The Company manufactures various other shafts including the drive shafts, power take-off shafts, hydraulic lift shafts and transmission shafts. These shafts are a part of transmission assembly for
any automobile. Other shafts contribute to 4.57% of the total revenue and 8.08% of components manufactured in 2019-20.
The product portfolio has wide range of applications which include
» Light & Heavy Commercial Vehicles
» Off-Highway Vehicle’s
» Rear Axle Shafts are manufactured with flanges up to 425 mm
» Large range of Splined Shafts are manufactured to meet a variety of transmission shaft requirements.
» Hollow Spindles are the choice of Heavy Commercial Vehicles like Volvo, Renault and Specialty Vehicles in Europe & North America
The company also has excellent facilities for, both, Cold and Drop Forging equipped with 6.25 tonnes pneumatic hammer supplemented by 1200 tonncs mechanical presses. Induction Heating Equipment provides uniform heat to ensure proper grain flow, smooth finish and closed tolerances for forged components. Its highly sophisticated Heat Treatment Shop equipped with battery of 24 induction hardening rnaLhincs, apart from Carburising, seal quench and Tempering furnaces to ensure enduring strength that can withstand most rigorous operating conditions.
Segment Analysis
Machine Shop
» CNC Vertical Machining Centers
» HMCs, CNC Turning Centers
» CNC Turnm ill Centers
» CNC Drill Tap Center
» Cold Spline Rolling GROB Machines
» ROTOFLO Rack Rolling Machines
» Gear Hobbers & Shavers
» Spline Hobbers, Gear Shapers
» Vertical & Horizontal Broaching Machines
» Surface Broaching Machines
» Automatic CO2 Welding Machines
» Continuous Paint Line
One of the key specialities of us at darkhorsestocks is that we try to present the stocks which are not very common or hardly few people actually know about. Most of the darkhorsestocks ideas are not covered by any of the brokerages or research house by presenting research reports .
Financials
Quaterly
- Net Sales at Rs 81.33 crore in June 2020 down 68.5%
- Quarterly Net Loss at Rs. 6.57 crore in June 2020 down 136.1%
- EBITDA stands at Rs. 6.00 crore in June 2020 down 85.48%
FY 2020
- Revenue from operations registered a decrease of 2%.
- Export sales increased by 7,275.43 Lacs.
- Domestic sales decreased by 27%.
- PBT decreased by 32%.
- Compounded sales growth over 3 and 5 year stands at 21% & 16%.
- Compounded profit growth over 3 and 5 year stands at 21% & 20%.
- Company has cash balance of 21cr as of march 2020.
Outlook
FY 2020 was a satisfactory year for GNA. It was not as spectacular as FY2019. But given the huge headwinds faced by all auto Industry in India throughout FY2020, GNA managed to do well on account of its exposure in the overseas markets which helped the Company to steer away in these turbulent times.
Promoter holding has been steadily rising over past few quarters.
Conclusion
Gna is one of the leading player in the axle shafts and Spindle manufacturing which includes Heavy commercial Vehicles as well as tractors. Due to significant strong presence of the company in the domestic market with the net market share of more than 60% along with high share in the major international commercial vehicle axle manufacturers which include companies like merit, Dana and American Axles as a result it places the company in a very good position to reap the benefits from the other revival which include both domestic as well as international markets such as USA and Europe.
It is believed that the gradual recovery will happen both in domestic as well as international markets from Q2FY21 and it could eventually continue in FY 22 as well which will improve the company’s topline and profitability growth from Fy 22 onwards. Overall it is expected that the earnings may bottom out in the FY 2021.
Furthermore company has recently forayed into new product line where it has started supplying to SUV manufacturers .Thus SUV is expected to start contributing meaningfully to the topline from FY22 on the back of new orders which as said by the management that the company is in last stage of negotiations.
The company has also taken strong measures for cost reduction which will to the operating profit margins in the coming time as well as company is also working aggressively in reducing its debt . Thus taking a long term view of about 2 years GNA Axles is worth exploring for returns in range of 20-35%.
Please note that above expressed are our own views. Users are requested to take their own decision regarding investments. No member of DARKHORSESTOCKS would be responsible for any loss.
GNA Axles was previously suggested in DARKHORSESTOCK on April 23, 2017 when the stock was trading at 223 Rs since then the stock had made all time high of 560 Rs giving 151% returns although during the time of suggestion it was given with an upside potential of 35% as a result we highly doubt if anyone would have earned such returns.
Please note that majority of the ideas suggested should be explored keeping in mind that they are going to take a deep dive down when the earnings for the FY 2021 are announced or maybe earlier. However most of the ideas are suggested with a view taking into account earning projections for FY 2022. Thus the time frame one should consider while exploring darkhorsestock ideas should be 2-3 years.
Is this monopoly product, What is GNA market share %, who are peers?
We have updated the segment breakup however we were not able to find the adequate market share information.
Yes and no for the monopoly.
The product is not a monopoly product but normally companies dont switch suppliers easily because of the size, dimensions and the products made are set accordingly. So it is very difficult to switch in short run.