Book Partial Profits - GS Auto International

GS Auto International (GSAI) is a Ludhiana-based company engaged in manufacturing and distribution of forged, machined and casted automotive suspension components for all types of commercial vehicles, including light and heavy commercial vehicles. It caters to both, the domestic market and the export market.

We had recommended GSAI at Rs 123 in our issue number 13 dated June 22, 2008 in the cover story on turnaround companies. We had recommended GSAI because of the company's improving financial performance and strategy that is suited to changing market condition. It concentrated more on the replacement market due to a slowdown in commercial vehicle sales and for the fact that the replacement market has better margin than OEM market.

At its current market price of Rs 176 (adjusted for split of Rs 10 to Rs 5) it has appreciated by 43 per cent though the total market has slipped by more than ten per cent in the same time period. We recommend our readers to book partial profits and can hold the balance for the next couple of quarters. After our recommendation, the company has posted very good quarterly results. For Q1FY09 the company posted topline of Rs 24.98 crore and bottomline of Rs 0.84 crore against Rs 19.1 crore and Rs 0.14 crore in Q1FY08. This led to a rise of 31 per cent in revenues and 495 per cent in profits. The company even improved its operational efficiency and profit margin. We feel that the company will post good yearly results because the reasons for its growth remain intact. It has remained aggressive in its expansion plan and the Board of the company has decided to raise Rs 50 crore for expansion plans so that they can cater better to their major customers such as TATA Motors and Ashok Leyland.