Automotive Axels
Amazing consistency in EPS/ Dividend growth for the last 6-7 years.
The extract from ICIC direct report provides further info
May 9, 2007
Automotive Axles
Current Price
Rs 575
Potential Upside
24.5%
Target Price
Rs 716
Time Frame
12 months
ICICIdirect Code: AUTAXL
Stock Data
Market Cap (Rs cr) 829.0
Shares Outstanding (crore) 1.51
52-week High (Rs) 684.0
52-week Low (Rs) 336.0
Average Volume 5,294
Absolute Return 3 mth (%) -5.9
Absolute Return 12 mth (%) -10.3
Sensex Return 3 mth (%) -4.1
Sensex Return 12 mth (%) 11.4
Performance
Automotive Axles Ltd (AAL) reported a whopping 57.1% growth in net sales to Rs 157.4 crore while net profit surged 41.8% to Rs 14.4 crore for the quarter ending March 31, 2007 (Q2FY07). EBITDA margins dipped marginally from 17.9% to 17.2%.
KEY HIGHLIGHTS
The strong volume growth from domestic OEMs and surging exports, up 210.5%, supported revenue growth for the company. Net sales were up by a strong 57.1% to Rs 157.4 crore
Raw material costs-to-sales ratio increased to 260 bps to 68.6%, mainly due to higher inventory. The effect of higher raw material costs has been mitigated by savings in operational and staff costs
Margins on exports declined, resulting in a dip in EBITDA margins to 17.2%
PBIT margins dipped 90 bps to 12.6% on domestic sales while it was down by 420 bps on exports
Interest expenses doubled from Rs 1.1 crore to Rs 2.1 crore while taxation provisions increased by 63.4% to Rs 7.6 crore, restricting net profit growth to 41.8%. AAL reported a net profit of Rs 14.4 crore, translating into an EPS of Rs 9.5 for the quarter
VALUATIONS
We had projected an EPS of Rs 37.5 for FY07 and the company has delivered an EPS of Rs 18.5 in the first six months. We are confident the company will achieve an estimated revenue growth of 26.7% (CAGR) and net profit growth of 25.7% over FY06-08E. We maintain our revenues estimates and reiterate our OUTPERFORMER rating with a target price of Rs 716. At the current price of Rs 575, the stock is trading at 15.3x FY07E EPS and 12.9x FY08E EPS.
HALF-YEARLY PERFORMANCE
ATTRACTIVE VALUATIONS
Net sales surged 50.5% to Rs 302.7 crore on the back of surging demand from domestic and
export market
Domestic gross sales grew 38.6% to Rs 300.6 crore while exports surged 277.7% to Rs 45.6
crore
Higher raw material costs pulled down EBITDA margins by 80 bps to 17.2% despite 43.6%
rise in EBITDA
Interest costs doubled to Rs 3.9 crore due to the funds raised to finance its capex plans
Capacity addition resulted into higher depreciation provisions, up 31.9%
Taxation provision was up 49.8% to Rs 14.5 crore
Net profit growth was restricted to 40.3% as against EBITDA growth of 43.6% due to higher interest, depreciation and tax provisioning. Net profit margin dipped by 70 bps to 9.2% We had projected an EPS of Rs 37.5 for FY07 and the company has delivered an EPS of Rs 18.5 in the first six months. Considering the strong volume growth from domestic OEMs and buoyant exports, we believe the company would achieve an estimated revenue growth of 26.7% (CAGR) and net profit growth of 25.7% over FY06-08E. We maintain our revenues estimates and continue to rate the stock an OUTPERFORMER with a price target of Rs 716. At the current price of Rs 575, the stock is trading at 15.3x FY07E EPS and 12.9x FY08E EPS.
looks a promising investment for the long run
Risk include the rising interest rate that can dampen the prospects of the auto industry and the rising rupee affecting profitability of the export busness