Autoline Industries Ltd (Rs 119)
(BSE Code – 532797, NSE Code- AUTOIND)
(P/E - 9, Market Cap - Rs145 cr, Equity - Rs12.2 cr)
Autoline Industries (AIL) supplies complex sheet metal assemblies and sub-assemblies to Tata Motors, Bajaj Auto, Kinetic Engineering, Mahindra & Mahindra, Walker Exhaust and Fiat India. Tata Motors, which buys components for passenger cars and commercial vehicles, is Autoline's largest customer. AIL, which has five facilities in Pune, is a design engineering and manufacturing solutions provider focused on sheet metal assemblies and formed tubular products. AIL had come with an IPO in January 2007 at Rs 225 per share. Funds raised through the IPO have been used to upgrade and expand Autoline's Chakan facility in Pune; set up another manufacturing facility at the same location; relocate and consolidate a couple of smaller units; establish a corporate office; fund acquisitions, and provide long-term working-capital resources. The equity capital of the company is Rs 12.22 cr. of which promoters’ hold 26.62%, FII/Mutual funds hold 1.82%, corporate bodies hold 16.65% and the public holds 54.91%
The Indian automobile ancillary sector is transforming itself from a low -volume, highly fragmented one into a competitive industry, and backed by competitive strengths, technology and transition up the value chain. Despite a relatively small share of Asia in the global pie, India is now amongst one of the most preferred destinations and has come to occupy the image of an exporting hub for most of the major global OEM players. Almost all the big auto manufacturers of the world are either already or are in the process of outsourcing from India. AIL has realized the potential of component manufacture business. It owns in-house design engineering, rapid prototyping and mass manufacturing capabilities. AIL had an in-house CAD/CAE/CAM facility and decided to scale up the capabilities of this facility by acquiring a design engineering software company (a majority stake 51%) in Autoline Dimensions Software Pvt. Ltd. (Formerly known as Dimensions Engineering Software Services Pvt. Ltd.), which has expertise in design engineering services. Further it plans to expand capacities by setting up another plant at Chakan (Unit –II). AIL has taken efforts to shift from low margin products to high margin products. Autoline Dimension would be one of the future growth driver providing a boost to AIL’s revenue.
For FY09, AIL has reported net profit of Rs 4.68 cr. on net sales of Rs 350 cr. on consolidated basis.. On a equity of 12.2 cr., the EPS stood at Rs 3.84 and the dividend declared was 10%. From a turnover of Rs 51 cr. in FY-2004, Autoline's revenues scaled up to Rs 350 cr. in FY09. For the half year ended September 2009, the figures are net sales of Rs 198.23 cr. and net profit of Rs 6.67 cr. (up 68%) on consolidated basis. The EPS for first half stands at Rs 5.5. On Oct. 28, 2009, Autoline Industries USA, a wholly owned subsidiary of Autoline Industries announced that it has received orders to manufacture brake and clutch pedal assemblies from 2 US automakers. The new business will bolster the sales of US unit by US$ 40 Million over the next 4 year period
AIL, should be able to post a top-line of around Rs.400 cr., and PAT of Rs. 16-17 cr., giving an EPS of Rs.13-14 for FY10. The share is presently trading at Rs. 119, which discounts FY10E earnings by 8.8 times. In view of the improved results and good medium term prospects, Investors can start accumulating the stock at current levels and add more on declines for decent returns of 40%-50% over the next 6-8 months.
Latest Developments- Autoline Industries has drawn up a Rs 255 cr. brownfield expansion. This will be funded through internal accruals and term loans. The expansion will add another 1,000 employees to its 2,000-strong workforce. It will involve an additional 40 acres to the existing 100 and is expected to be over by 2011. The company has sought mega status (which translates into concessions in stamp duty and electricity tariff) for the project from the Maharashtra Government. Approval could be granted by January. The project is also eligible for industry promotion subsidy. The expansion plan involves ramping up the production line, creating a tool room and adding prototyping/designing facilities at three sites in Pune district. Autoline wants to become a complete designing, engineering and manufacturing entity for mechanical assembly systems in automobiles. The idea is to make components based on designs provided by carmakers. At present, the company has orders for designing and manufacturing pedal assemblies for Volkswagen whose facility is also at Chakan. It supplies the same part to Tata Motors for its Indica and Ace models.
Source: Internet (Valuenotes by Sanjay Chhabria)
