Buy Alicon Castalloy; target Rs 90: Sunidhi Securities

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Buy Alicon Castalloy; target Rs 90: Sunidhi Securities

Sunidhi Securities is bullish on Alicon Castalloy and has recommended buy rating on the stock with a target price of Rs 90 in its January 20, 2012 research report.

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Sunidhi Securities is bullish on Alicon Castalloy and has recommended buy rating on the stock with a target price of Rs 90 in its January 20, 2012 research report.

"Alicon Castalloy, during FY11, sales on consolidated basis advanced by 65.1% to Rs 346.3 crore but net profit rose by 14.2% to Rs 15.3 crore. OP and NP margin stood at 12.1% and 4.4% against 17.3% and 6.3% respectively in the corresponding period last year. EPS stood at Rs 13.9. A dividend of 20% was paid.  The debt-equity ratio as on FY11 stood at 1.3:1 whereas the value of the gross block, including Rs 13 crore added in H1FY12 works out to Rs 204 crore.  During Q2FY12, sales on consolidated basis advanced 42.7% to Rs 119.4 crore and net profit rose 23% to Rs 4.2 crore. (YoY). OPM and NPM stood at 9.5% and 3.5% compared to 12.9% and 4.0% respectively in Q2FY11."

"During FY09, ACL set up new plant for Honda Manifold at Pune facilities, purchased 12 acres new land at Pathredi Rajasthan and also completed the expansion of existing plants. The entire expansion was funded through internal accruals and term loan.  ACL has successfully established a European operation through the acquisition of 'Illichmann Castalloy-GmbH' in Austria & Illichmann Castalloy s. r.o' in Slovakia in May 2010. 'Illichmann' has a strong brand name in the European market along with a rich history of being a reputed supplier of aluminium components to some of the most prestigious customers in the industry. This acquisition gives Alicon a technological edge and a full product range to serve the high-end segments of the auto & non-auto industry both globally & domestically.  During FY10, ACL incurred Capex of Rs 22.2 crore and expected to spend another Rs 32.7 crore in FY11-12. Plans for the new plant are under finalization which is expected to come up at Pantnagar, Uttaranchal and Bangalore in Tamil Nadu."

"Backed by strong economic growth and new model launches, the Indian automobile industry has registered a 26.2 per cent growth in vehicle sales during 2010-11. During FY10 also automobile industry had registered a 26.4% growth in sales making it the second fastest growing market in the world after China. As per industry estimates, India's passenger vehicle sector will grow to around 90 lakh units and the commercial vehicle segment will exceed 22 lakh units a year by 2020. The Indian two wheeler industry's growth rate remains intact. The period April 2010 to March 2011 has witnessed growth of 26.8% over the same period last year. During FY11, scooter segment has advanced by 32%. Three wheelers (goods) have shown a growth of 2% whereas three-wheelers (passengers) segment has grown by healthy 20%. According to ACMA's report, the two-and-three wheelers are expected to double to 22 million units by 2015 and reach 30 million units by 2020, driven by low penetration level, expanding rural sales and growth in exports."

"A huge proposed investment in the infrastructure like roads, railway and power generation will have multiple effects over other the growth of other industries. This increase will translate into increased demand for castings. Leveraging ACL's experience and technology, it will be able to offer wide range of industrial castings. Due to technical expertise from Enkei, Japan, ACL currently leads the Indian market in manufacturing cylinder heads for two wheelers and 4 wheelers. It has the distinction of being a single source supplier of many critical engine parts to some of India's largest OEMs. Today, ACL is one of the largest integrated aluminium casting manufacturing group in India offering end to end solutions across the entire value chain and delivers best-in-class Gravity & Low Pressure casting experience to its customers at the most optimal costs. ACL is having expertise into the Designing, Validation, Engineering, Casting and Machining, Assembly of Aluminium Components along with its European global foot prints in Austria & Slovakia. Currently, ACL is entering into an exciting phase of scaling up business activities in both domestic and international markets. It is therefore, stand committed to introduce and offer new products and services all across valued customer chain, utilizing the best technology and infrastructure."

"The main objective of ACL is to improve capacity utilization and productivity at all its facilities at the most optimum cost. In addition, it shall be increasing capacities by way of addition of plant, machinery & equipments and putting up plants at new locations e.g. Bangalore and Pantnagar during the coming years.  The improving outlook for the auto component industry owing to the expansion of the auto sector, outsourcing opportunity coupled with increased offtake of vehicles due to easy finance schemes give strong visibility to revenue in the coming years. At the CMP of Rs 63, the share is trading at a P/E of 3.9x on FY12E. We recommend BUY with a target price of Rs 90 at which the share will trade at a P/E of 5.5," says Sunidhi Securities research report.

Non-Institutions holding more than 90% in Indian cos

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