HDFC Securities’ take on Asahi India Glass
The company has presence across the entire value chain of architectural and automotive glass. For the company with the pick-up in real estate business, there has been logged an increase in revenue share of the float glass business that commands a higher margin.
Asahi with a market share of 74% dominates the Indian passenger car glass market and in the architectural glass segment is the 2nd leading manufacturer in the country.
Triggers for future price performance
– Investments in the affordable infra space by the government and increasing volumes in the real estate will drive the company’s growth going ahead.
– Asahi is gearing up to lower down its debt. In the first half of Fy22 it has reduced its borrowing by Rs. 157 crore to Rs 1099 crore.
– The company is considering further expansion opportunities including a greenfield solar plant in partnership with Vishakha group for setting up India’s largest solar glass manufacturing plant at the most competitive costs. The project is progressing well on schedule and it should commission the first green-field plant at Mundra, Gujarat within the next 15-18 months.
– Asahi India will be a key beneficiary of growth in passenger vehicles production in India, coupled with rise in content led by premiumisation and rising share of SUVs.
– Asahi’s content per vehicle will rise with the improving segment mix and rise in penetration of value added glasses like IR and UV shield glasses
Valuation & Recommendation:
“The brokerage expects PAT CAGR of 51% over FY21-24E, led by EBITDA margin improvement on cost savings, import restrictions on float glass and reduction in net debt. Revenue is expected to grow at 19% CAGR driven by higher share of float glass business. We expect RoE to improve from ~10% in FY21 to ~21% in FY24. AIS faces no threat from the advent of Electric Vehicles. Its presence in high value architectural segment will help grow revenues and maintain high margin”, says the report. “We feel investors can buy the stock in the band of Rs 490-495 and add on dips to Rs 437-442 (32x Sep-23E EPS) for a base case fair value of Rs 538 (32.5x Sept23E EPS) and bull case fair value of Rs 581 (35x Sep-23E EPS)”, adds the brokerage.
Q2fy22 result update:
Revenues of the company climbed 25% during the quarter to Rs. 797 crore owing to robust gains in the float glass business. Both automotive glass as well as float glass recorded revenue growth of 13.7 percent and 37.5% yoy, respectively.
Consolidated EBITDA increased 52.9% yoy to Rs 187cr while margin expanded to 23.5% led by improved margin in the Float Glass business, offset partially by higher power & fuel expenses. Reported PAT increased by 117.7% yoy to Rs 81cr. The company has generated a positive free cash flow of around Rs 210cr in H1FY22 which it has utilized for lowering its debt.
The stock mentioned above is taken from the report of HDFC Securities. Readers should not construe it to be an investment advice in the listed scrip. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.
Original news source Credit: www.goodreturns.in