Tuesday, July 6, 2010

Stock Idea: Autoline Industries Ltd

Autoline Industries Ltd (Rs 128)
(BSE Code- 532797 NSE Code- AUTOIND)
(P/E- 7.6, Market Cap - 156 cr., FY10 Sales- Rs451 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 post-issue equity capital of the company is Rs 12.22 cr. of which promoters hold 26.62%, FII/Mutual funds hold 1.82%, Bodies corporate hold 16.65% and 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 the Q4 ended March 2010, AIL has posted net profit of Rs 8.82 cr.(against loss of 0.72 cr.) on net sales of Rs 145 cr.(up 82%) on consolidated basis. For FY10, AIL has reported net profit of Rs 20.6 cr. (up 340%). on net sales of Rs 451 cr. (up 29%). on consolidated basis.. On a equity of 12.2 cr., the EPS is Rs 16.9 and the dividend declared is 20%. 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 topline of around Rs. 600 cr., and PAT of Rs. 27-Rs 28 cr., giving an EPS of Rs. 22-23 for FY11. At the current market price of Rs 128, the stock trades at 7.6 times FY10 earnings and at 5.7 times its FY11E earning(Rs 22- Rs 23). 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 50%-60% over the next 8-12 months. Accumulate
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)

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