Recommendation From Auto Parts & Computer Hardware Sectors

The scrips in this column have been recommended with a 15-day investment horizon in mind and carry high risk. Therefore, investors are advised to take into account their risk appetite before investing, as fundamentals may or may not back the recommendations. 

SUNDRAM FASTENERS 

CMP - Rs 587
BSE CODE 500403
Volume 8024
Face Value Rs 1
Target Rs 682
Stoploss Rs 549 

Sundram Fasteners is an auto component company engaged in manufacturing of high tensile fasteners, motor vehicle parts and accessories. During FY17, the company reported 11.58% and 14.97% growth in domestic and exports sales to Rs 1837.89 crore and Rs 1044.11 crore, respectively. This was on the back of rise in sales of passenger vehicles, utility vehicles and two-wheelers. Going forward, the expectations of good monsoon and implementation of the Pay Commission recommendations may boost auto sales and thereby create demand for the company's products. The company posted a robust bottomline growth of 47%, keeping operating and non-operating costs at a bare minimum. Despite demonetisation and the GST, the company posted consistent topline and bottomline growth every quarter since December 2016. Transition to BS-IV norms and further change over to BS-VI by 2020 is expected to boost demand for the auto component makers. The company has low D/E ratio and high interest coverage. Further, FY17 has reported positive net cash flow for the first time after FY13. 

CEREBRA INTEGRATED 

CMP - Rs 62.25
BSE CODE 532413
Volume 310,826
Face Value Rs 10
Target Rs 65.90
Stoploss Rs 53.80 

This small-cap company derives maximum revenue from hardware and software trading and has forayed recently into e-waste management. Its FY17 domestic revenue stood at 58.5% of the total revenue. In hardware, it designs and manufactures motherboards, memory modules, servers, workstations, etc. Its software majorly includes BPO, expertise in financial services and its Middle-East subsidiary is in niche IT distribution service across the Middle East. It is seeking partnership with medical laboratory equipment manufacturers for recycling. Its clientele includes banks, PSUs, government agencies etc. The company has won order for automated driving test system from Karnataka Transport department. Its subsidiary, Cerebra Middle East FZCO has been appointed by Japan’s Canon to provide value added distribution service in UAE region. The company's topline has grown by 5.2%, while its bottomline has grown from Rs 1.65 crore to Rs 11.25 crore.