Query Trends : Clutch Auto

Query : I have 100 Clutch Auto shares for Rs.134, Should I hold or book losses.? Nandan

Thebullishtrend : Clutch Auto share price closed yesterday at Rs.116. Clutch Auto produces over 20 lakh clutches at every year. It is India's leading manufacturers of Clutches having 60% market share. Clutch Auto's product portfolio consists more than 500 products, which includes 16 parented product and some under regulation process.

Clutch Auto acquired clutch divison of Pioneer Inc, to strengthen its position in US with Pioneer's clients and it will get the Pioneer brand name which will help to the company to penetrate easily in US markets. Clutch Auto is having leading Tractor and Commercial Vehicles companies in its fold and their increasing numbers will benefit to the company, it clients portfolio consists companies like Tata Motors, Maruti Suzuki, Ashok Leyland and Escorts.

Clutch Auto reported a 13% rise in net sales for Q1FY08, mainly supported by rising sales from domestic market. It achieved net sales of Rs 45.2 crore, with domestic sales contributing Rs 36 crore (up 15.6%) and export sales of Rs 9.2 crore (up 3.7%). Net profit growth was restricted to 8.2% due to higher interest expenses and depreciation provisions. The company reported net profit of Rs 3.7 crore, translating into an EPS of Rs 2.3 for quarter on diluted equity of Rs 16.3 crore.

During the quarter, 800,000 equity shares were allotted on conversion of warrants on preferential basis, increasing equity capital to Rs16.3 Crore,the company is planning to manufacture some of its products from its new plant at Haridwar (Uttaranchal), which attracts tax benefits, which would further curtail tax payments.The company is trying to enter into A and B segment vehicles. It also plans to focus on exports though export growth in past few months were gloomy, which is expected to pick up in coming months.

Though the profit margins for the first quarters were weak but while considering other facts, hold this scrip at current levels, but due to its focus on export markets may fetch the company turnover and profitability in coming months. Hence decide the scrip after the FEB'08 financial results.