Dear All,
Forwarding you the Result Update on Automotive Axles for 2QSY2011 with an Accumulate recommendation and a Target Price of Rs. 488. (12 months)
Automotive Axles (AAL) reported strong set of numbers for 2QSY2011, backed by healthy performance by the commercial vehicle (CV) segment. 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 following the constant increase in input costs. Owing to the run-up in the stock price post 2QSY2011 results, we recommend Accumulate on AAL.
Net sales up 63.3%; net profit increases 46.3%: AAL reported robust 63.3% yoy and 55% qoq growth in net sales to Rs.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 Rs.18.4cr.
Outlook and valuation: During SY2010–12E, we expect AAL to report a CAGR of ~18% in its top line, leading to a ~10% increase in the bottom line. At Rs.457, AAL is trading at 14.3x SY2011E and 13.1x SY2012E earnings of Rs.32 and Rs.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 Rs.488, at which level the stock would trade at 14x SY2012E earnings (in line with its historical valuation).
Kindly click on the following link to view the Report.
If you have any further queries, feel free to call us on 022 39357600, Extn: 6864 / 6865 or mail us at advisory@angelbroking.com
With best regards,
Fundamental Advisory Desk
Angel Broking
Akruti Star,6th Floor, Road No.7,MIDC, Andheri (E),Mumbai – 93.
Call : (91) (022) 39357600 Ext. 6864,6865
Website : www.angelbroking.com
Disclaimer: Ours is an advisory role. The final decision and consequences based on our information is solely yours. Moreover, in keeping with regulatory guidelines, we do not guarantee any returns on investments. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.
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