Sushil Finance is bullish on Alicon Castalloy and has recommended buy rating on the stock with a target of Rs 85 in its October 5, 2011 research report........
Sushil Finance is bullish on Alicon Castalloy and has recommended buy rating on the stock with a target of Rs 85 in its October 5, 2011 research report.
“Alicon Castalloy Limited is a joint venture between Rai and Associates, India and Enkei Corporation (Japan) which is the largest manufacturer of alloy wheels in the world. ACL currently leads the Indian market in manufacturing cylinder heads for two wheelers and four wheelers. The Company is single source supplier of many critical engine parts to some of India’s largest OEMs. As the auto industry grows at double digit the demand for auto components remains robust. Going forward, we also expect increased contribution from the European subsidiaries and higher capacity utilization. With introduction of newer products, the margins are also likely to improve going forward.”
“ACL expects topline growth of 25.0%-30.0% during FY12 on Standalone basis. The European subsidiary of the company has achieved break even in the last fiscal. Going forward, it is expected to contribute Euro 11-14 mn to the topline. The operating margins have been under pressure on account of consistent rise in the commodity prices. The EBIDTA margins on consolidated basis are expected to be around 11.0-12.0%. The current order book constitutes majority demand from Domestic markets. The company has added new customers like M&M and Harley Davidson during FY11. Majority of growth for FY12 is expected to be driven by orders from new customers. Along with new customers the Company is also looking constantly at developing newer products. During FY11, ACL developed 112 new products for which development costs were incurred during FY11. The benefits from the same are likely to be witnessed in current and forthcoming years.”
“ACL will be able to get the expertise of its Llichman subsidiaries for the Non Automotive castings. Subsidiaries are mainly focused on Non Automotive business. The Company has enough capacity at the moment to cater to the Non Auto demand. Going forward, ACL plans to increase share of Non Auto business. As Non Auto segment commands higher margin than automotive castings, the overall margins for ACL are expected to improve going forward. During FY 2011, ACL operated at capacity utilization of 60.0%-65.0%. The utilization was slightly affected as its customer Maruti Suzuki Ltd shifted some of its Aluminum casting products to plastic products for its vehicles. However with addition of newer customers, ACL was able to maintain its growth momentum. For FY12 ACL expects capacity utilization at rate of 70.0%-75.0%. Peak capacity utilization during any particular year is unlikely to cross 80.0% due to seasonal factors involved. ACL would look at setting up plants at Bangalore and Pantnagar in next two years time after analyzing the demand scenario and capacity utilization during the coming years.”
“At CMP of Rs.54, the stock discounts the FY12E & FY13E EPS of Rs.17.6 & Rs.21.3 by 3.1x & 2.5x respectively. We maintain our BUY rating at current levels for target price of Rs 85 (4.0x FY13E EPS),” says Sushil Finance research report.
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Sushil Finance is bullish on Alicon Castalloy and has recommended buy rating on the stock with a target of Rs 85 in its October 5, 2011 research report.
“Alicon Castalloy Limited is a joint venture between Rai and Associates, India and Enkei Corporation (Japan) which is the largest manufacturer of alloy wheels in the world. ACL currently leads the Indian market in manufacturing cylinder heads for two wheelers and four wheelers. The Company is single source supplier of many critical engine parts to some of India’s largest OEMs. As the auto industry grows at double digit the demand for auto components remains robust. Going forward, we also expect increased contribution from the European subsidiaries and higher capacity utilization. With introduction of newer products, the margins are also likely to improve going forward.”
“ACL expects topline growth of 25.0%-30.0% during FY12 on Standalone basis. The European subsidiary of the company has achieved break even in the last fiscal. Going forward, it is expected to contribute Euro 11-14 mn to the topline. The operating margins have been under pressure on account of consistent rise in the commodity prices. The EBIDTA margins on consolidated basis are expected to be around 11.0-12.0%. The current order book constitutes majority demand from Domestic markets. The company has added new customers like M&M and Harley Davidson during FY11. Majority of growth for FY12 is expected to be driven by orders from new customers. Along with new customers the Company is also looking constantly at developing newer products. During FY11, ACL developed 112 new products for which development costs were incurred during FY11. The benefits from the same are likely to be witnessed in current and forthcoming years.”
“ACL will be able to get the expertise of its Llichman subsidiaries for the Non Automotive castings. Subsidiaries are mainly focused on Non Automotive business. The Company has enough capacity at the moment to cater to the Non Auto demand. Going forward, ACL plans to increase share of Non Auto business. As Non Auto segment commands higher margin than automotive castings, the overall margins for ACL are expected to improve going forward. During FY 2011, ACL operated at capacity utilization of 60.0%-65.0%. The utilization was slightly affected as its customer Maruti Suzuki Ltd shifted some of its Aluminum casting products to plastic products for its vehicles. However with addition of newer customers, ACL was able to maintain its growth momentum. For FY12 ACL expects capacity utilization at rate of 70.0%-75.0%. Peak capacity utilization during any particular year is unlikely to cross 80.0% due to seasonal factors involved. ACL would look at setting up plants at Bangalore and Pantnagar in next two years time after analyzing the demand scenario and capacity utilization during the coming years.”
“At CMP of Rs.54, the stock discounts the FY12E & FY13E EPS of Rs.17.6 & Rs.21.3 by 3.1x & 2.5x respectively. We maintain our BUY rating at current levels for target price of Rs 85 (4.0x FY13E EPS),” says Sushil Finance research report.
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