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Review
Automotive Axles – 4QSY2010
Automotive Axles (AAL) posted a weak set of results for 4QSY2010, with top-line and
bottom-line growth substantially lower than expected. Net sales grew by 75% yoy to `167cr
(`95cr), which was significantly lower than our estimates of `206cr. The M&HCV segment,
which contributes to ~95% of AAL’s revenue, grew by ~45% yoy during the quarter. Export
revenue increased by 135% during 4QSY2010.
On the operating front, AAL witnessed a 378bp decline in EBITDA margins to 11.7%
(15.5%) against our estimates of 14%. The decline can be attributed to 210bp and 251bp
increase in raw-material cost and other expenses, respectively. Raw-material cost
accounted for 71.6% (69.6%) of sales during the quarter. The decline in staff cost,
however, arrested the further drop in margins. Net profit during the quarter stood at `9.5cr
(`7cr), which came in below our estimates of `15.8cr, mainly because of lower-thanexpected
performance at the operating level.
Going ahead, we expect recovery in the commercial vehicle segment to help the company
report better performance; however, the stock is currently under review.
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