ASK Automotive Ltd Inventory Evaluation December

ASK Automotive Ltd – Driving security by innovation

Based in 1988, ASK Automotive Ltd. is a number one auto-ancillary firm in India, specializing in superior braking methods (ABS) for 2-wheelers and precision aluminium lightweighting options. A market chief in 2-wheeler ABS, together with brake sneakers and disc brake pads, ASK serves OEMs, OES, and IAM segments. With 17 manufacturing services throughout India, it exports to over 12 nations and employs 7,000+ folks. The corporate companions with high manufacturers like Honda, Hero MotoCorp, Suzuki, TVS, Yamaha, Bajaj, Royal Enfield, Ola, and Ather.

Merchandise and Companies

ASK Automotive Ltd. affords merchandise throughout three key segments:

• Superior Braking Programs (ABS):
  Brake sneakers, brake pads, brake panel assemblies, clutch plates, clutch sneakers, brake linings, disc brake pads, and brake liners.
• Aluminium Light-weight Precision Options (ALPS):
  Crank circumstances, engine covers, pillion grips, ECU our bodies, throttle our bodies, and electrical motor housings.
• Security Management Cables:
  Entrance brake cables, rear brake cable assemblies, throttle cables, speedometer cable assemblies, and equipment shift cables.

Subsidiaries: As of FY24, the corporate has 1 subsidiary and 1 three way partnership. 

Progress Methods

• Market Management: Dominates India’s 2-wheeler ABS market with a ~50% share and can also be a high producer of ALPS and security management cables, serving main OEMs with powertrain-agnostic merchandise, together with EV options.
• Growth Plans: Establishing an 18th manufacturing plant in Bengaluru at an estimated price of ₹200 crore, anticipated to be operational by Q4FY25 to cater to South India’s OEMs.
• Export Progress: Secured ₹75 crore in export orders throughout Q2FY25 and is concentrated on increasing its international footprint regardless of momentary disruptions in US operations.
• Renewable Vitality Focus: Creating a 9.9 MWp mega solar energy plant in Sirsa, Haryana, for in-house consumption, reinforcing its dedication to sustainability.
• EV Sector Push: Advancing light-weight aluminium merchandise for EVs with a powerful pipeline of modern options tailor-made for EV OEMs.
• Diversification: Getting into area of interest markets like 2-wheeler high-pressure die-cast (HPDC) alloy wheels to broaden product choices and market attain.

Monetary Efficiency

Q2FY25

• Income Progress: Recorded ₹976 crore in income, a 22% YoY enhance from ₹798 crore in Q2FY24.
• Section Efficiency:

Superior Braking Programs (ABS): Achieved 18% YoY progress, sustaining market management.

ALPS: Witnessed 27% YoY progress.

Security Management Cables: Improved by 18% YoY.

• EBITDA Progress: Elevated by 51% YoY to ₹119 crore from ₹79 crore, with EBITDA margin rising from 10% to 12%.
• Web Revenue: Surged by 63% YoY to ₹67 crore in comparison with ₹41 crore in Q2FY24.

FY24

• Income Progress: Achieved ₹2,995 crore in income, marking a 17% YoY enhance over FY23.
• Working Revenue: Recorded ₹311 crore, reflecting a 25% YoY progress.
• Web Revenue: Posted ₹174 crore, a big 41% YoY enhance.
• Growth: Efficiently commenced operations at a brand new manufacturing plant in Karoli, Rajasthan.

Monetary Efficiency (FY21-24)

• Income & PAT Progress: The corporate has achieved a income and PAT CAGR of 25% and 23%, respectively, over the 3-year interval from FY21-24.
• Robust Return Ratios: Common ROE and ROCE stand at 19% and 20%, respectively, for the FY21-24 interval.
• Capital Construction: The corporate maintains a powerful capital construction with a debt-to-equity ratio of 0.43.

Trade outlook 

• Rising Demand: India’s auto parts trade has grown considerably, pushed by growing incomes, infrastructure investments, and manufacturing incentives.
• Two-Wheeler Section Dominance: The 2-wheeler market, propelled by a rising center class, led the trade with 23.85 million items bought in FY24.
• OEM Progress: The surge in car demand has fueled the expansion of unique gear producers (OEMs) and auto element producers.
• World Attraction: India’s automotive manufacturing experience has boosted worldwide demand for its automobiles and parts.
• Localization Enhance: The growing presence of worldwide OEMs in India has accelerated the localization of their parts.

Progress Drivers

• Demographic Benefit: Growth of the working inhabitants and a rising center class are fueling demand.
• FDI Assist: 100% FDI below the automated route boosts investments within the auto parts sector.
• Future Potential: The Indian auto parts trade is projected to achieve US$ 200 billion by FY26, highlighting strong progress alternatives.

Aggressive Benefit

ASK Automotive stands out amongst opponents like Endurance Applied sciences Ltd. and Uno Minda Ltd., showcasing regular income progress, superior return ratios, and strong earnings potential. Its monetary stability and environment friendly capital utilization underline its capability to ship constant earnings and returns, setting it aside within the auto parts trade.

Outlook

• Karoli Plant Ramp-Up: Manufacturing on the new facility has achieved constructive EBITDA margins, with full capability utilization anticipated in 1-2 years.
• Funding Plans: CAPEX steerage set at ₹250-300 crore for FY25, alongside a focused 25% ROE.
• Progress Drivers: Growth supported by economies of scale, new orders, shopper acquisitions, elevated manufacturing at new services, and value optimization efforts.
• Sustainability Dedication: The nearing completion of a photo voltaic plant aligns with sustainability targets, providing a 5-year payback interval.
• Debt Discount: Actively engaged on decreasing the debt ratio to strengthen the capital construction.
• Recognition: A latest score improve from CRISIL underscores the corporate’s strong enterprise mannequin and progress potential.

Valuation

ASK Automotive’s market management, strategic give attention to the EV sector, export growth, and product diversification place it for sustained progress. These elements drive our constructive outlook, resulting in a BUY suggestion with a goal value (TP) of ₹548, representing 47x FY26E EPS.

Dangers

• Trade Threat: Roughly 80% of the corporate’s income comes from India’s 2-wheeler automotive sector. Any adversarial adjustments on this trade may negatively have an effect on the corporate’s operations and monetary well being.
• Uncooked Materials Worth Volatility: Disruptions within the provide or fluctuations within the costs of key supplies, notably aluminium, may put strain on the corporate’s margins.

Observe: Please word that this isn’t a suggestion and is meant just for instructional functions. So, kindly seek the advice of your monetary advisor earlier than investing.

Recap of our earlier suggestions (As on 29 November 2024)

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