HDFC Securities’ perspective on Asahi India Glass
The company is present across the entire architectural and automotive glass value chain. For the company with the resumption of real estate business, there has been an increase in the revenue share of the float glass business which commands a higher margin.
Asahi, with a market share of 74%, dominates the Indian passenger car glass market and is the country’s 2nd largest manufacturer in the architectural glass segment.
Triggers for future price performance
– Investments in the infra-affordable space by the government and increasing volumes in real estate will drive the growth of the company in the future.
– Asahi is preparing to reduce her debt. In the first half of fiscal 22, it reduced its borrowing from Rs. 157 crore to Rs 1,099 crore.
– The company is considering new expansion opportunities, including a new solar plant in partnership with the Vishakha group to set up India’s largest solar glass manufacturing plant at the most competitive costs. The project is progressing well on schedule and it is expected to commission the first production plant in Mundra, Gujarat, within the next 15-18 months.
– Asahi India will be one of the main beneficiaries of the growth in passenger vehicle production in India, coupled with an increase in content driven by premiumisation and the growing share of SUVs.
– Asahi content per vehicle will increase with improved segment mix and increased penetration of value-added eyewear such as IR and UV protective eyewear
Assessment and recommendation:
âThe brokerage firm expects a 51% CAGR PAT in fiscal year 21-24E, thanks to improved EBITDA margin on cost savings, float glass import restrictions and reduction of net debt. Revenue is expected to increase 19% CAGR thanks to a higher share of float glass. We expect RoE to decrease from around 10% in FY 21 to around 21% in FY 24. AIS is not threatened by the advent of electric vehicles. report. âWe believe investors can buy the stock in the Rs 490-495 band and add declines to Rs 437-442 (32x Sep-23E EPS) for a basic fair value of Rs 538 (32.5x Sept23E EPS) ) and a bullish fair value case of Rs 581 (35x Sep-23E EPS) “, adds the brokerage.
Update of Q2fy22 results:
The company’s revenue climbed 25% in the quarter to Rs. 797 crore due to solid gains in the float glass business. Auto glass and float glass both saw revenue growth of 13.7% and 37.5% year-on-year, respectively.
Consolidated EBITDA increased 52.9% yoy to Rs 187cr while margin increased to 23.5% thanks to improved margin in Float Glass business partially offset by higher expenses electricity and fuel. The reported PAT rose 117.7% year-on-year to Rs 81cr. The company generated positive free cash flow of around Rs 210cr at S1FY22 which it used to reduce its debt.
The above mentioned action is taken from the HDFC Securities report. Readers should not interpret it as investment advice in the script listed. Investing in stocks presents a risk of financial loss. Investors should therefore exercise caution. Greynium Information Technologies, the author and the brokerage are not responsible for any losses caused as a result of decisions based on the article.