Buy Alicon Castalloy; target Rs 80: Sunidhi Securities

Sunidhi Securities is bullish on Alicon Castalloy (ACL) and has recommended buy rating on the stock with a target price of Rs 80 in its March 15, 2013  research report.

"ACL currently supplies products to various Tier I / Tier II suppliers of global OEMs in Europe and USA. Some of ACL’s customers are Ashok Leyland, Maruti Suzuki, Mahindra & Mahindra, Tata Motors, Honda Siel Cars, Bajaj Auto, Reva, Greaves Cotton, Hero MotorCorp, Honda Scooter and Motorcycle Company. International customers include BMW, Audi, Fiat, Volvo, KTM, Ingersoll-Rand, John Deere, Behr Group, GE, Knorr Bremse, ZF Group, Atlas Copco, Piaggio and GWK Group."

"During Q3FY13, sales on consolidated basis advanced 15.3% to Rs 127.2 crore and net profit rose 72.4% to Rs 5.0 crore. (YoY). OPM and NPM stood at 11.2% and 3.9% compared to 10.3% and 2.6% respectively in Q2FY11. Q3FY13 EPS stands at Rs 4.5. During 9MFY13, sales on consolidated basis advanced 10.3% to Rs 371.1 crore and net profit was flat at Rs 11.1 crore. (YoY). OPM and NPM stood at 10.2% and 3.0% compared to 10.3% and 3.3% respectively in 9MFY12. 9MFY13 EPS stands at Rs 10.1 Vs Rs 10.0 in 9MFY12."

"During FY12, sales on consolidated basis advanced by 35.3% to Rs 468.7 crore but net profit fell by 5.9% to Rs 14.4 crore. OP and NP margin stood at 10.7% and 3.1% Vs 12.2% and 4.4% respectively in the corresponding period last year. EPS stood at Rs 13.1. A dividend of 27.5% was paid. With the consolidated debts of Rs 101.3 crore, the debt-equity ratio as on FY12 stood at 1.3:1 whereas the value of the gross block including capital work in progress stood at Rs 229.8 crore Vs Rs 191.4 crore in FY11."

"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. At the CMP of Rs 61, the share is trading at a P/E of 4.1x on FY13E & 3.8x on FY14E. We recommend BUY with a target price of Rs 80 in the medium-to-long term," says Sunidhi Securities research report.

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment

Read More