The stock had earlier zoomed from Rs 177 to above Rs 300 on announcement of encouraging first quarter results. However, the scrip could not sustain the gains and started its southward journey. The stock fell to Rs 237-level, but expectations of good performance in the first half again send the scrip in the orbit. The scrip touched the Rs 300-mark on Monday and closed the day at a lower level of Rs 290. Marketmen expect the stock to cross the Rs 350-mark soon.

Thanks to Sundaram Clayton's strategy to focus on replacement market (to reduce its dependence on the original equipment customers in the commercial vehicle segment) and higher exposure to the car segment have helped the company improve its net sales by 54 per cent from Rs 66.16 crore to Rs 101.73 crore in the first-half. This shift helped the company get the best of both the worlds. On one hand, the company's sales improved in the replacement market and on the other, its share improved in the original equipment (OE) market. Moreover, the margins in the replacement market are around 30 per cent higher than those in the OEM segment.

Higher proportion of high margin sales coupled with proportionately lower increase in the expenditure led to operating profit increasing by 72 per cent to Rs 14.29 crore in the first-half. The operating profit margin improved from 12.56 per cent to 14.05 per cent. Sundaram Clayton had to bear an interest burden of Rs 14 lakh in the six month ended September 30, 1999 as compared to an interest income of Rs 20 lakh in the first-half of the previous fiscal.

Depreciation cost increased to Rs 3.8 crore, thanks to capacity additions during the first-half and the fourth quarter of last fiscal. The company's new foundry near Hosur commenced production in January this year. The company has invested Rs 12 crore to set up a 1100 tonne per annum foundry at Hosur. The company's provision for taxation more than doubled from Rs 1.2 crore in last year's first half to Rs 2.96 crore in the first-half. The higher depreciation and tax provision slowed down the growth in net profit to 57 per cent, while the profit at the operational level increased by 72 per cent. Net profit grew from Rs 4.7 crore to Rs 7.38 crore. However, net profit margin improved from 7.1 to 7.25 per cent. Annualised earnings per share work out to Rs 7.78. Normally, the second half is better for the company and thus analysts expect the company to report an EPS of Rs 10 for the full fiscal. The main growth is likely to come from the castings segment.

According to marketmen, the company has some good enquiries for castings from the export markets and also from a host of players like Tata Cummins, Volvo, Honda, Maruti, TVS-Suzuki, Visteon and Delphi. The company also plans to prop up exports. The company is targeting an export turnover of Rs 20-25 crore in the next two years.

As for future, the company plans to invest Rs 27 crore to boost its foundry business.