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M&HCV demand has witnessed a slowdown in recent times due to high
interest rates and slowdown in industrial activity; however, we believe M&HCV
demand is near its trough. With interest rates expected to cool down from CY2012,
we expect a pick-up in industrial activity, leading to a rebound in M&HCV sales.
Thus, we expect ALL’s volume growth to rebound to ~12% in FY2013E from flat
levels in FY2012E.
The new tax-free facility at Pantnagar is relatively more profitable, with profitability
estimated to be ~25% higher (cost savings of ~`35,000/vehicle) than that of existing
plants. ALL plans to ramp-up production to ~35,000 vehicles in FY2012 from
12,800 in FY2011. We expect these benefits to partially offset the impact of
raw-material cost pressures, enabling ALL to maintain its OPM at 10-11%.
Currently, the stock is trading at attractive levels of 9.7x FY2013E earnings.
We maintain our Buy recommendation with a target price of `32, valuing the
stock at 12x FY2013E earnings.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
M&HCV demand has witnessed a slowdown in recent times due to high
interest rates and slowdown in industrial activity; however, we believe M&HCV
demand is near its trough. With interest rates expected to cool down from CY2012,
we expect a pick-up in industrial activity, leading to a rebound in M&HCV sales.
Thus, we expect ALL’s volume growth to rebound to ~12% in FY2013E from flat
levels in FY2012E.
The new tax-free facility at Pantnagar is relatively more profitable, with profitability
estimated to be ~25% higher (cost savings of ~`35,000/vehicle) than that of existing
plants. ALL plans to ramp-up production to ~35,000 vehicles in FY2012 from
12,800 in FY2011. We expect these benefits to partially offset the impact of
raw-material cost pressures, enabling ALL to maintain its OPM at 10-11%.
Currently, the stock is trading at attractive levels of 9.7x FY2013E earnings.
We maintain our Buy recommendation with a target price of `32, valuing the
stock at 12x FY2013E earnings.
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