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Automotive Axle
S t e a d y p e r f o r m e r … b e a t s e s t i m a t e s …
Automotive Axle’s (AAL) Q3SY11 performance exceeded our estimates
with the topline at | 273.91 crore (I-direct estimate: | 213.1 crore). The
strong performance (up 39.6% YoY) was driven primarily by robust core
business growth and also due to strong sales to the tune of | 45.19
crore from the recently purchased brake manufacturing facilities from
Kalyani Global Engineering Pvt Ltd. During the period, the company
managed to maintain its EBITDA margins at 12.5% even when raw
material costs have been a challenge for the entire industry. RM costs,
as a portion of net sales, declined 190 bps QoQ. The company reported
a bottomline of | 17.8 crore (I-direct estimate: | 14.6 crore), a 19.6%
YoY rise mainly driven through better operational performance.
ƒ Key highlights for the quarter
Q3SY11 saw a robust growth in the domestic commercial vehicle (CV)
segment with 14.1% YoY growth driven by a large 22.1% up-tick in the
LCV space. The likes of Tata Motors and Ashok Leyland continued to be
key players in the CV segment. The company is currently providing ~10%
and ~70% of the respective requirements in terms of axle housings. AAL,
which had purchased brake manufacturing facilities at Mysore from
Kalyani Global for a total consideration of | 14.6 crore, reported sales of |
45.19 in the Q3SY11. The exports business continues to grow
exponentially (up 197% YoY) with sales of | 16.9 crore, a rise of 69%
QoQ. Margin maintenance can be considered the major positive during
the quarter even in the regime of rising commodity prices.
V a l u a t i o n
The CV space maintained its positive volume growth. We believe
domestic volume growth would remain positive with the investment cycle
pick-up in H2FY12. This affirms our optimistic outlook on AAL’s business
though headwinds like rising input costs and high interest rates exist in
the near term. The stock is currently trading at | 428, 10.1x SY11E EPS of
| 41.7 and 8.4x SY12E EPS of | 50.2. We have valued the business at 8x
SY13E EPS of | 60.9 to arrive at a valuation of | 487. This 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 �� ��
Automotive Axle
S t e a d y p e r f o r m e r … b e a t s e s t i m a t e s …
Automotive Axle’s (AAL) Q3SY11 performance exceeded our estimates
with the topline at | 273.91 crore (I-direct estimate: | 213.1 crore). The
strong performance (up 39.6% YoY) was driven primarily by robust core
business growth and also due to strong sales to the tune of | 45.19
crore from the recently purchased brake manufacturing facilities from
Kalyani Global Engineering Pvt Ltd. During the period, the company
managed to maintain its EBITDA margins at 12.5% even when raw
material costs have been a challenge for the entire industry. RM costs,
as a portion of net sales, declined 190 bps QoQ. The company reported
a bottomline of | 17.8 crore (I-direct estimate: | 14.6 crore), a 19.6%
YoY rise mainly driven through better operational performance.
ƒ Key highlights for the quarter
Q3SY11 saw a robust growth in the domestic commercial vehicle (CV)
segment with 14.1% YoY growth driven by a large 22.1% up-tick in the
LCV space. The likes of Tata Motors and Ashok Leyland continued to be
key players in the CV segment. The company is currently providing ~10%
and ~70% of the respective requirements in terms of axle housings. AAL,
which had purchased brake manufacturing facilities at Mysore from
Kalyani Global for a total consideration of | 14.6 crore, reported sales of |
45.19 in the Q3SY11. The exports business continues to grow
exponentially (up 197% YoY) with sales of | 16.9 crore, a rise of 69%
QoQ. Margin maintenance can be considered the major positive during
the quarter even in the regime of rising commodity prices.
V a l u a t i o n
The CV space maintained its positive volume growth. We believe
domestic volume growth would remain positive with the investment cycle
pick-up in H2FY12. This affirms our optimistic outlook on AAL’s business
though headwinds like rising input costs and high interest rates exist in
the near term. The stock is currently trading at | 428, 10.1x SY11E EPS of
| 41.7 and 8.4x SY12E EPS of | 50.2. We have valued the business at 8x
SY13E EPS of | 60.9 to arrive at a valuation of | 487. This implies a 14%
upside. Hence, we maintain our BUY rating on the stock.
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