Automotive Axles - Q2SY13 Result Review - Angel Broking

Automotive Axles (ATXL) posted extremely weak results for 2QSY2013 on account of the continued slowdown in the medium and heavy commercial vehicle (MHCV) industry which impacted the sales and therefore the operating margins of the company. For 2QSY2013, top-line declined by 44.8% yoy (17.9% qoq) following a 33.8% yoy decline in the MHCV industry volume, which is the primary source of company's revenues. The operating margins deteriorated to 7.2% (down 524bp yoy and 206bp qoq) primarily due to drop in the utilization levels which resulted in a 320bp (70bp qoq) and a 190bp yoy (flat qoq) increase in employee and other expenditure as a percentage of sales respectively. Consequently operating profit and net profit fell sharply by 68.1% (36.1% qoq) and 86.9% yoy (58.6% qoq) to Rs. 12cr and Rs. 3cr respectively.

We believe the near term operating environment will remain challenging for the company as the MHCV segment is witnessing significant slowdown. At Rs. 280, the stock is trading at 11.8x SY2014 earnings. We maintain our Neutral rating on the stock.

Source : Equity Bulls

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