Automotive Axles - 4QFY2012 Result Update - Angel Broking

Automotive Axles (ATXL) reported sluggish set of numbers for 2QSY2012 primarily on account of subdued growth in the medium and heavy commercial vehicle segment (MHCV) which is the primary revenue driver for the company. Going ahead, we expect MHCV demand to pick-up with the likely easing of interest rates from CY2012, helping ATXL to report healthy performance. However, we believe that the stock is fairly valued at current levels and therefore offers limited upside potential. We maintain our Neutral rating on the stock.

Modest 2QSY2012 results: ATXL reported modest 6.3% yoy (1% qoq) growth in net sales to Rs.296cr in 2QSY2012 which was in-line with the growth in the MHCV segment which grew by 5.5% yoy. On the operating front, EBITDA margin remained stable at 12.5% on stable commodity prices. As a result, EBITDA grew by 5.8% yoy (down 0.9% qoq) to Rs.37cr. Led by higher other income (Rs.2cr as against Rs.0.1cr in 2QSY2011), net profit reported 4.6% yoy (down 2.5% qoq) growth to Rs.19cr.

Outlook and valuation: During SY2011-13E, we expect ATXL to report a strong ~17% and ~23% CAGR in its top line and bottom line, respectively, driven largely by volume growth on the back of the likely revival in MHCV demand. We believe that at current levels of Rs.498, ATXL is fairly valued at 8.7x its SY2013E earnings. Due to limited upside from current levels, we maintain our Neutral rating on the stock.

Source : Equity Bulls

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