cse.alpha wrote:weakening due to higher interest rates and weaker currency, and threat of increased import duties is also a very real concern.
Sector valuations are relatively cheap, but this possibly is a reflection of the sector's somewhat cloudy future and may be warranted.
Your prediction may come true. Let's wait and see next two quarters. See what Tilak de Zoysa, deputy chairman of Associated Motorways says,
Mar 08, 2012 (LBO) - Sri Lanka's automobile sales are expected to dip in 2012 with pent up demand being met and rapidly rising interest rates, Tilak de Zoysa, deputy chairman of Associated Motorways, the island's largest auto dealer said.
Sri Lanka's rupee also dipped from 110 to around 120 rupees in the second week of February pushing up the price of imported cars.
The above facts mentioned might get to be true. But when we compare DIMO with other motor companies special things needs to be noted.
a) The volume drops can be more specially in direct retail driven passenger vehicles. ( DIMO exposure to passenger vehicle is much less
in revenue and market share ( Ex: Nano is 2% or so in revenue).
b) For DIMO their greatest revenue is in TATA commercial vehicle I read. They control a very large market in Sri Lanka with TATA
brand. They wish to expand. At this time there are Tax incentives to Buses, lorries, trucks . Now there trying to get into the Benz Van
and Buses, truck which are higher priced but higher performance. With more and more better roads and express ways coming in,
and expansions to North , this segment might have some long term future if they can convince and promote well
c) DIMO Batta has a name itself in SL. More potential for revenue if they aremarketed well.
d) Their MERC Car sales are for rich people. For them money might be no object. But sale might have impact if taxes get increased.
e) Though minimal, DIMO has diversification to other sectors. Construction equipment, vehicle parts, Lighting/power tools, Bio Med equipment. Out of the above Construction and Agri equipment ( Like Komatsu and Mahindra ) can be benefited if they choose to expand on those
ALso company is controlled by 4 families. Bad side if there is an internal issue, it can impact DIMO ( like what happened to HUNT) . Good side is these 4 families might be worried about take over. So share price falling too low is dangerous to them.
In essence , unless there is some huge crisis in policy changes , I see DIMO earning Rs 50 per quarter for the next few. So Rs 1000 is still bargain for company with NAV 800 and PE of 5 ( assuming 2012 financail year earnign is Rs 200 , even counting a big drop in revenue and profits)
As CSe.Alpha mentioned the segment and the discounted prices now reflect somewhat the future outlook and mentality. But I think DIMO was the worst hit amongst the motor companies even with relatively higher performance . We saw, UML,SMOT, COLO , ASHo all having run. DIMO after hitting Rs 1800 last year neven had a proper run and now tardes at Rs 1000.
This might be due mainly due to higher priced share and lesser retail intrest ( need Rs100,000 to buy 100 share stil)
I see someone selling/collecting at RS 1000-1040 these days.
DIMO is still certainly an enigma in any account.
( SOme of the above ideas come from various material I researched and read)
Ps : This is not a buy sell recommendation. Prices can com down if market goes negative or there can be upside if any news or buying comes.