We had first recommended to Buy Setco Automative on 27-Mar-2014 at Rs. 80. The theme of demand for Setco products by its OEM and after market consumers played out well and the stock increased from Rs. 80 to Rs. 226, giving a 182% returns over less than 2 years.

This happened on back of its operating profit increasing from Rs. 10 crores to more than Rs. 60 crores led by sales increase and revival in margins. However, the profits for the company has not increased in the same proportion due to higher interest cost and higher depreciation mainly led by increase in fixed assets and working capital requirements.

At Rs. 226, the stock is quite richly valued at 30+ times and we therefore think that it is better to book profits here. We recommend an EXIT at Rs. 226 from Setco. 
 

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