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E x p e c t a t i o n s s u r p a s s e d ; o u t l o o k c a u t i o u s ! ! !
Automotive Axle (AAL) announced its Q1SY12 results, which were
above our estimates. The topline surpassed our expectations clocking |
292.6 crore (up 4.1% QoQ) vs. our flat expectations (I-direct estimate: |
267.5 crore). The company witnessed a strong rebound on the EBITDA
margin front with margins shooting up ~372 bps QoQ to 12.7%.
However, we attribute the jump in margins to higher consumption of
finished goods inventory during the quarter, which is reflected in stock
adjustment to the tune of | 9.8 crore. Adjusting for this, the margins
came in line with our estimates at 9.3%. RM cost as a proportion of
sales dipped ~374 bps sequentially with employee and other expenses
hovering at similar levels. The company reported PAT of | 19.7 crore
reflecting a 69.3% QoQ and 102.0% YoY leap.
ƒ Key highlights for the quarter
The company reported a commendable sequential rise in topline despite
its key clients like Tata Motors (down 0.6% QoQ) and Ashok Leyland
(down 12.9% QoQ) posting sequential de-growth in the M&HCV category.
The revenue rise can be attributed to a combination of better product mix
coupled with robust sales from the recently purchased brake
manufacturing facilities at Mysore from Kalyani Global Engineering Pvt
Ltd. AAL currently caters to ~10% (Tata Motors) and ~70% (Ashok
Leyland) requirements in terms of axle housings. The margins surprised
positively. However, our outlook remains cautious and we would wait to
see if margin expansion pans out in the coming few quarters.
V a l u a t i o n
The domestic commercial vehicle segment has shown stiff resistance to
relentless macros and has grown 19.3% YTD. Going ahead, interest rate
cuts by the RBI could be a positive trigger. However, we remain cautious
on the margin expansion front. At the CMP of | 419, the stock is trading at
9.8x SY12E EPS of | 42.7 and 6.6x SY13E EPS of | 63.4. We have valued
the stock at 7x SY13E EPS of | 63.4 to arrive at target price of | 444
implying a 6% potential upside. We have a HOLD rating on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
E x p e c t a t i o n s s u r p a s s e d ; o u t l o o k c a u t i o u s ! ! !
Automotive Axle (AAL) announced its Q1SY12 results, which were
above our estimates. The topline surpassed our expectations clocking |
292.6 crore (up 4.1% QoQ) vs. our flat expectations (I-direct estimate: |
267.5 crore). The company witnessed a strong rebound on the EBITDA
margin front with margins shooting up ~372 bps QoQ to 12.7%.
However, we attribute the jump in margins to higher consumption of
finished goods inventory during the quarter, which is reflected in stock
adjustment to the tune of | 9.8 crore. Adjusting for this, the margins
came in line with our estimates at 9.3%. RM cost as a proportion of
sales dipped ~374 bps sequentially with employee and other expenses
hovering at similar levels. The company reported PAT of | 19.7 crore
reflecting a 69.3% QoQ and 102.0% YoY leap.
ƒ Key highlights for the quarter
The company reported a commendable sequential rise in topline despite
its key clients like Tata Motors (down 0.6% QoQ) and Ashok Leyland
(down 12.9% QoQ) posting sequential de-growth in the M&HCV category.
The revenue rise can be attributed to a combination of better product mix
coupled with robust sales from the recently purchased brake
manufacturing facilities at Mysore from Kalyani Global Engineering Pvt
Ltd. AAL currently caters to ~10% (Tata Motors) and ~70% (Ashok
Leyland) requirements in terms of axle housings. The margins surprised
positively. However, our outlook remains cautious and we would wait to
see if margin expansion pans out in the coming few quarters.
V a l u a t i o n
The domestic commercial vehicle segment has shown stiff resistance to
relentless macros and has grown 19.3% YTD. Going ahead, interest rate
cuts by the RBI could be a positive trigger. However, we remain cautious
on the margin expansion front. At the CMP of | 419, the stock is trading at
9.8x SY12E EPS of | 42.7 and 6.6x SY13E EPS of | 63.4. We have valued
the stock at 7x SY13E EPS of | 63.4 to arrive at target price of | 444
implying a 6% potential upside. We have a HOLD rating on the stock.
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