Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Expectations surpassed…
Automotive Axle (AAL) reported its Q2SY11 numbers that were above
our estimates. The topline for Q2FY11 was reported at | 278.1 crore (Idirect
estimate: | 198.9 crore), a huge 55% QoQ jump driven by strong
core business growth and also due to the consolidation of sales (| 52
crore) from the recently purchased brake manufacturing facilities from
Kalyani Global Engineering Pvt Ltd. EBITDA margins have commendably
been maintained at 12.5% QoQ even as raw material costs have
increased 100 bps QoQ as portion to net sales. On the bottomline front,
the company reported | 18.4 crore (I-direct estimate: | 11.6 crore). This
was ~84.2% QoQ jump mainly due to a strong operating performance
and higher topline growth.
Key highlights for the quarter
The domestic commercial vehicle (CV) segment has witnessed a robust
Q2SY11 with 25.8% QoQ growth due to strong year end buying across
various CV segments. The main drivers of the segment continue to
remain domestic sales to likes of Tata Motors and Ashok Leyland. The
company is providing ~10% and ~70% of the respective requirements in
terms of axle housings. AAL has purchased brake manufacturing facilities
at Mysore from Kalyani Global for a total consideration of | 14.6 crore.
The exports business has maintained the traction gained in Q1SY11 with
sales of | 10 crore, a rise of 47.4% YoY. The main positive in Q2SY11
results remain the margin maintenance even in the wake of rising
commodity prices.
Valuation
The CV segment continues to show positive volume growth. We believe
domestic volume growth would remain positive with the investment cycle
pick-up in H2FY12. Hence, we maintain our positive outlook on AAL’s
business though input costs headwinds remain in the near term.
However, input price rise remains an overhang on profits and margins,
going forward. The stock is trading at | 420, 10.7x SY11E EPS of | 39.3
and 8.4x SY12E EPS of | 52.5. We have valued the business at 9.5x
SY12E EPS of | 50.3 to arrive at a valuation of | 477. This implies 14%
upside. Hence, we maintain our BUY rating on the stock.
Management Outlook
The management continues to remain positive on the outlook for growth
in SY11-12 as the ordering from OEMs like Tata Motors and Ashok
Leyland continues to remain robust as they look for stronger sales targets
for the same. The management expects H2SY11-H1SY12 to continue on
the volume traction developed in H1SY11 on the back of a pick-up of the
industrial and infrastructure related activities. The company has seen
capacity utilisation of ~70% in H1SY11. AAL expects to improve
utilisation levels, going forward, with increasing volumes in SY11. The
company has purchased brake manufacturing facilities from Kalyani
Global Engineering Pvt Ltd for a consideration of | 14.6 crore in Q2SY11.
The entry into brake manufacturing is a positive one as it increases the
content per vehicle sold by AAL through its JV partner Meritor. It would
help in increasing value per car and help improve margins.
Outlook & Valuations
Outlook
Automotive Axle (a Kalyani Group company) with its JV partner Arvin
Meritor is in a unique position as a complete solutions supplier in the axle
related business to both major domestic CV makers of India. The
domestic demand scenario has remained strong in FY11. However, even
as the base effect catches up with the PV and two-wheeler segment, we
believe the ramp up in infrastructure development and other industrial
activities would help CV players to outperform in growth terms in the
sector in FY12E.
The entry into the brake manufacturing business would support higher
content per vehicle for AAL. Hence, this would also accelerate the growth
of topline and bottomline for the company.
We expect the company to continue its strong core business performance
and gain incrementally from the brake business purchased in Q2SY11. It
is expected to achieve CAGR of 29% and 34% in FY10-12E on the topline
and PAT front, respectively. On downside risks, steel prices could
continue to trend upwards. Further exorbitant rise of the same remains an
overhang for the margins and profitability.
Valuation
The CV segment continues to show positive volume growth. We believe
domestic volume growth would remain positive with an investment cycle
pick-up in H2FY12. Hence, we maintain our positive outlook on AAL’s
business though input costs headwinds remain in the near term.
However, input price rise remains an overhang on profits and margins,
going forward. The stock is trading at | 420, 10.7x SY11E EPS of | 39.3
and 8.4x SY12E EPS of | 50.3. We have valued the business at 9.5x
SY12E EPS of | 52.5 to arrive at a valuation of | 477 that implies a 14%
upside. Hence, we maintain our BUY rating on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Expectations surpassed…
Automotive Axle (AAL) reported its Q2SY11 numbers that were above
our estimates. The topline for Q2FY11 was reported at | 278.1 crore (Idirect
estimate: | 198.9 crore), a huge 55% QoQ jump driven by strong
core business growth and also due to the consolidation of sales (| 52
crore) from the recently purchased brake manufacturing facilities from
Kalyani Global Engineering Pvt Ltd. EBITDA margins have commendably
been maintained at 12.5% QoQ even as raw material costs have
increased 100 bps QoQ as portion to net sales. On the bottomline front,
the company reported | 18.4 crore (I-direct estimate: | 11.6 crore). This
was ~84.2% QoQ jump mainly due to a strong operating performance
and higher topline growth.
Key highlights for the quarter
The domestic commercial vehicle (CV) segment has witnessed a robust
Q2SY11 with 25.8% QoQ growth due to strong year end buying across
various CV segments. The main drivers of the segment continue to
remain domestic sales to likes of Tata Motors and Ashok Leyland. The
company is providing ~10% and ~70% of the respective requirements in
terms of axle housings. AAL has purchased brake manufacturing facilities
at Mysore from Kalyani Global for a total consideration of | 14.6 crore.
The exports business has maintained the traction gained in Q1SY11 with
sales of | 10 crore, a rise of 47.4% YoY. The main positive in Q2SY11
results remain the margin maintenance even in the wake of rising
commodity prices.
Valuation
The CV segment continues to show positive volume growth. We believe
domestic volume growth would remain positive with the investment cycle
pick-up in H2FY12. Hence, we maintain our positive outlook on AAL’s
business though input costs headwinds remain in the near term.
However, input price rise remains an overhang on profits and margins,
going forward. The stock is trading at | 420, 10.7x SY11E EPS of | 39.3
and 8.4x SY12E EPS of | 52.5. We have valued the business at 9.5x
SY12E EPS of | 50.3 to arrive at a valuation of | 477. This implies 14%
upside. Hence, we maintain our BUY rating on the stock.
Management Outlook
The management continues to remain positive on the outlook for growth
in SY11-12 as the ordering from OEMs like Tata Motors and Ashok
Leyland continues to remain robust as they look for stronger sales targets
for the same. The management expects H2SY11-H1SY12 to continue on
the volume traction developed in H1SY11 on the back of a pick-up of the
industrial and infrastructure related activities. The company has seen
capacity utilisation of ~70% in H1SY11. AAL expects to improve
utilisation levels, going forward, with increasing volumes in SY11. The
company has purchased brake manufacturing facilities from Kalyani
Global Engineering Pvt Ltd for a consideration of | 14.6 crore in Q2SY11.
The entry into brake manufacturing is a positive one as it increases the
content per vehicle sold by AAL through its JV partner Meritor. It would
help in increasing value per car and help improve margins.
Outlook & Valuations
Outlook
Automotive Axle (a Kalyani Group company) with its JV partner Arvin
Meritor is in a unique position as a complete solutions supplier in the axle
related business to both major domestic CV makers of India. The
domestic demand scenario has remained strong in FY11. However, even
as the base effect catches up with the PV and two-wheeler segment, we
believe the ramp up in infrastructure development and other industrial
activities would help CV players to outperform in growth terms in the
sector in FY12E.
The entry into the brake manufacturing business would support higher
content per vehicle for AAL. Hence, this would also accelerate the growth
of topline and bottomline for the company.
We expect the company to continue its strong core business performance
and gain incrementally from the brake business purchased in Q2SY11. It
is expected to achieve CAGR of 29% and 34% in FY10-12E on the topline
and PAT front, respectively. On downside risks, steel prices could
continue to trend upwards. Further exorbitant rise of the same remains an
overhang for the margins and profitability.
Valuation
The CV segment continues to show positive volume growth. We believe
domestic volume growth would remain positive with an investment cycle
pick-up in H2FY12. Hence, we maintain our positive outlook on AAL’s
business though input costs headwinds remain in the near term.
However, input price rise remains an overhang on profits and margins,
going forward. The stock is trading at | 420, 10.7x SY11E EPS of | 39.3
and 8.4x SY12E EPS of | 50.3. We have valued the business at 9.5x
SY12E EPS of | 52.5 to arrive at a valuation of | 477 that implies a 14%
upside. Hence, we maintain our BUY rating on the stock.
No comments:
Post a Comment