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Result Review
Automotive Axles – 2QSY2011
Automotive Axles (AAL) reported robust 63.3% yoy and 55% qoq growth in net sales to
`278.1cr, largely driven by 64% and 47.4% yoy growth in domestic and export sales,
respectively. The top line continued to show strong growth, following healthy CV volumes,
which grew by 15.9% yoy and 22.3% qoq over January–March 2011. On the operating
front, rising input costs continued to hurt EBITDA margins, which fell by 209bp yoy to
12.5%. Noticeably, the 69bp decline in staff cost arrested further margin contraction. As a
result, net profit increased substantially by 46.3% yoy and 88.4% qoq to `18.4cr.
We expect positive traction in the CV segment to help the company sustain its performance
going ahead. We have revised our revenue estimates upwards, following strong
2QSY2011 numbers; however, we expect margins to remain under pressure due to the
constant increase in input costs. At `457, AAL is trading at 14.3x SY2011E and 13.1x
SY2012E earnings of `32 and `34.8, respectively, lower than its historical average of 14x.
Owing to the run-up in the stock price post 2QSY2011 results, we recommend Accumulate
on AAL with a target price of `488, at which level the stock would trade at 14x SY2012E
earnings (in line with its historical valuation).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Result Review
Automotive Axles – 2QSY2011
Automotive Axles (AAL) reported robust 63.3% yoy and 55% qoq growth in net sales to
`278.1cr, largely driven by 64% and 47.4% yoy growth in domestic and export sales,
respectively. The top line continued to show strong growth, following healthy CV volumes,
which grew by 15.9% yoy and 22.3% qoq over January–March 2011. On the operating
front, rising input costs continued to hurt EBITDA margins, which fell by 209bp yoy to
12.5%. Noticeably, the 69bp decline in staff cost arrested further margin contraction. As a
result, net profit increased substantially by 46.3% yoy and 88.4% qoq to `18.4cr.
We expect positive traction in the CV segment to help the company sustain its performance
going ahead. We have revised our revenue estimates upwards, following strong
2QSY2011 numbers; however, we expect margins to remain under pressure due to the
constant increase in input costs. At `457, AAL is trading at 14.3x SY2011E and 13.1x
SY2012E earnings of `32 and `34.8, respectively, lower than its historical average of 14x.
Owing to the run-up in the stock price post 2QSY2011 results, we recommend Accumulate
on AAL with a target price of `488, at which level the stock would trade at 14x SY2012E
earnings (in line with its historical valuation).
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