Honeywell Auto (HONAUT)

FairStock Score: 45/100 — MIXED

Score breakdown: P/E: 0/3 · ROCE: 1/2 · Growth: 0/2 · Dividend: 0/1

Key Financials

Strengths

• Very low leverage (D/E 0.02) and Altman Z of 4.80 indicate strong financial stability.
• Promoter holding of 75% aligns management interests with minority shareholders.
• Piotroski F-Score of 7/9 suggests decent overall fundamental health.
• Sales growth of 14.65% and ROCE of 18.40% reflect demand and reasonable capital efficiency.
• Positive free cash flow of ₹418 Cr provides internal funding flexibility.

Concerns

• Profit fell 5.02% despite 14.65% sales growth, implying margin compression needs explanation.
• Valuation is very expensive: P/E of 53.40 and P/B of 7.15 versus a DCF value of ₹3,736.74.
• Margin of safety is -303.24%, and the Graham Number of ₹7,681.62 is far below the current price.
• Dividend yield of only 0.34% means investors earn negligible income while waiting.

AI Analysis

At ₹32,650, Honeywell Automation is a good business but not a good investment at this price. Let me start with the balance sheet: debt-to-equity of 0.02 means financial risk is negligible, and Altman Z of 4.80 signals no near-term distress. Promoters holding 75% is a genuine plus, because their interests are aligned with mine. ROCE of 18.40% shows decent capital use, while ROE of 12.51% is respectable but not remarkable for a franchise with a 53.4 P/E. Sales grew 14.65%, which tells me demand exists. But my excitement stops there: profit fell 5.02%. Any time revenue increases and earnings decrease, I want to know whether this is a cyclical squeeze or a permanent loss of pricing power. The Piotroski score of 7/9 and free cash flow of ₹418 crore keep me from calling it a weak company. The FairStock score of 46/100 calls it mixed, and I agree. The problem is valuation. Graham taught me to pay with a margin of safety. Here the Graham Number is just ₹7,681.62, and the DCF value is ₹3,736.74. The current price is over eight times the DCF estimate and more than four times the Graham anchor. Price-to-book of 7.15 is far above what a 12.51% ROE can support over the long run. Dividend yield of 0.34% means I earn almost nothing while waiting. With a margin of safety of -303.24%, this is a great company at the wrong price. I would keep it on my watch list, not in my portfolio. If future earnings grow into this valuation, or the price falls substantially, the risk-reward will improve. For now, discipline says pass.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer