Buy Fairfield Atlas - Sunidhi

The demand for FAL's (Fairfield Atlas) product is a derived demand and hence is dependent upon growth rate of its OEM customers. In the recent past the automobile industry has shown a positive growth rate, the tractor industry is also witnessing growth owing to a strong rural demand and liquidity.

As the Indian economy is projected to grow it will drive greater demand for the FAL's products in the domestic market as well as exports globally. The outlook of FAL as regards to the new business proposed to be commenced in the field of engineering and consulting is encouraging and in the long could be a potential revenue earner for FAL. With that development the outlook for the company's business continues to be positive.

With the growth of economy & various efforts and initiatives taken by the Government, sectors such as Infrastructure and power have picked up. With this, off-highway & construction vehicles sales also grew up by about 10% last year and are expected to maintain the momentum in coming years.

Fairfield Atlas has clarified to BSE that the promoters had sought permission from the Exchange to reduce their holding to 75% of the paid up capital of the Company by sale in the secondary market so as to comply with the limit prescribed In Clause 40A of the Listing Agreement.

FAL is consistently strengthening its market position in existing and certain niche segments which offer good contribution and where competition is minimal. It is committed to deliver quality engineered products on time, fully satisfying its customer requirements through a process of continuous improvement. Fairfield Atlas is an ISO/TS-16949:2002 certified.

At the CMP of Rs.131, the share is trading at a P/E of 8.9x on FY13E & 7.7x on FY14E. We recommend BUY with a target price of Rs.170 in the medium term. Slowdown in the automobile industry in the wake of high interest regime and slowing economy may affect the prospects of auto component industry.

Source : Equity Bulls

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