Alicon Castalloy Ltd. - Q1 FY15 Result Quick View - CMP Rs.146 - Maintain BUY - INVESt VISTa

ALICON CASTALLOY LTD. - CMP Rs.146, Maintain BUY

Alicon Castalloy Ltd. (ACL) released its Q1 FY15 performance on July 26, 2014. The top-line continued to be sluggish on account of extended slowdown in the four-wheelers, commercial vehicles in particular which has picked up some momentum only in July, 2014. Following are the highlights and excerpts of our conversation with the Management following the results.

Q1 FY15 Result Highlights (Standalone)

During Q1 FY15, the top-line registered a moderate growth of 0.4% YoY to 1,040.1 mn. The growth from two-wheelers was largely offset by the continued lacklustre performance from the four-wheelers. In addition, the EBITDA margin witnessed some pressure primarily on account of escalated raw material costs as a percentage of revenue. The company also had to dealt with increased wage-rate by the state government which restricted the improvement in profitability while offsetting the impact of cost-savings. For the quarter ended June 30, 2014, the company recorded a profit after tax of Rs.30.1 mn as compared to Rs.40.8 mn in Q1 FY14. The Q1 FY15 earnings per share stood at Rs.2.74. Going forward, the Management expects the improvement in four-wheelers demand would scale up company's top-line and profitability.

Q1 FY15 Result Highlights (Consolidated)

During Q1 FY15, the top-line de-grew 2.2% YoY to 1,264.1 mn with Illichmann Castalloy contributing Rs.224.0 mn. On the consolidated level also, the EBITDA margin witnessed a reduction on account of increase in employee costs and other expenses, as a percentage of revenue. The EBITDA margin stood at 8.4% in Q1 FY15 as compared to 9.0% in Q1 FY14. The effective tax rate which has come down during the quarter is expected to correct at the previous levels during the rest of the year. The consolidated bottom-line stood at Rs.33.9 mn in Q1 FY15 as compared to Rs. 45.4 mn in Q1 FY14 as the net margin fell from 3.5% to 2.7%.

Other Updates

During the quarter, the company has received new orders from Tata Motors Jaguar, Daimler USA and Wabco. Commenting on the performance of the company's European subsidiary Illichmann Castalloy, the Management stated that though the top-line growth is not visible but the acquisition has helped the company to extend their presence and include some international OEMs in their clientele as mentioned earlier. In addition, the company is working on new products which would be launched during the current fiscal. The Management also stated that the company might go for some capacity expansion during the current year to cater to the expected increase in demand.

During our previous update, Q4 FY14 Result Update dated May 12, 2014, we had changed our rating from HOLD to BUY at the then prevailing price of Rs.131 with the increased target of Rs.189 which was eventually met on July 04, 2014. The stock price witnessed some pressure following the Q1 FY15 performance. Nevertheless, we maintain our previous estimates for the company and retain our positive outlook for the company, going forward. Accordingly, we continue to foresee a good potential upside from current levels with the long term horizon.

Shares of Alicon Castalloy Limited was last trading in BSE at Rs.152.4 as compared to the previous close of Rs. 139.1. The total number of shares traded during the day was 28668 in over 1102 trades.

The stock hit an intraday high of Rs. 154 and intraday low of 140. The net turnover during the day was Rs. 4268322.

Source : Equity Bulls

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