1 Auto Ancillary And 1 SFB Stock To Turn Ex-Bonus Soon: Should You Buy Them?

Bonus shares for an investor does not increase the investment value and instead they for their holding in a scrip get additional shares as specified by the company. So, in a way their holding in the scrip.

Likewise, 2 of the stocks 1 auto ancillary counter and the other AU Small Finance Bank are going to issue bonus shares.

Minda Industries

Minda Industries is a mid-cap auto ancillary concern. The company is a supplier of automotive solutions to original equipment manufacturers. The Company offers a range of products across various verticals of auto components, such as switching systems, acoustic systems and alloy wheels.

The business of the company looks positive and brokerage firm KR Choksey suggest that the company's business is " focused towards premiumization across segments and robust order wins during the year. We estimate Minda Industries' revenue to grow at ~27.3% between FY22-24E on account of growth in EV space and incremental demand across all the segments. Accordingly, we estimate PAT to grow at around 61% over the
FY22-24E with expected recovery in margins with normalized input costs (excluding rise in aluminum prices). We expect input costs pressures to be continued over the first 2 quarters of FY23. Our EPS estimates stand at INR 21.4 / INR 32.3 for FY23E / FY24E, respectively. We maintain our target price of INR 1,180/share (36.5 PE to FY24E EPS) and change our recommendation to BUY from ACCUMULATE with an upside of 33%".

Also, the stock is significantly down from its 52-week high price of Rs. 1257.4, i.e. is available at a discount of over 31%.

So, considering the huge potential ahead for the company given the EV push and anticipated incremental demand across sectors, the stock shall be a good buy ahead of the ex-bonus date which for the stock is falling on July 7, 2022.

AU Small Finance Bank

The small finance bank trading close to its 52-week high and is just at a gap of over 13%. For the stock, Motilal Oswal has a 'Buy' on the stock. Motilal on the stock maintains that the bank "delivered a robust performance with 9% earnings beat led by 43%
YoY NII growth, stable margins and double-digit sequential business growth. Asset quality improved sharply with GNPA/NNPA ratio declining 62bp/79bp
QoQ to 1.98%/0.5%, respectively, driven by robust collection efficiencies and healthy reductions. The restructured portfolio declined to 2.5% of loans (from
3.1% in 3QFY22), while PCR improved sharply by 2,420bp QoQ to 75% as the bank prudently revised its provisioning policy to reinforce its balance sheet.
AUBANK further announced a bonus issue of 1:1 and recommended a dividend of INR1 per share (pre-bonus issue). We raise our FY23E/FY24E PAT by ~6%/10% and estimate AUBANK to deliver 37% earnings CAGR over FY22-24. We expect an RoA/RoE of 2.1%/ 21.0% in FY24, respectively. Maintain BUY with a TP of INR1,625.".

Also, asset quality wise, the bank's net NPAs have improved significantly and are indeed lower than the pre-Covid level.

Conclusion

So, good potential upside in the 2 counters and an additional bonus share, one can buy into these stocks at current levels.