Dolat Capital is bullish on Asahi India Glass has recommended buy rating on the stock with a target price of Rs 220 in its research report dated June 25, 2020.
Dolat Capital's research report on Asahi India Glass
Asahi India Glass (AIS) posted decent numbers in 4Q amid challenging conditions. Revenue fell by 17% YoY to Rs. 5.9bn led by 16% de-growth in Automotive glass division to Rs.3.5bn and 24% de-growth in Architecture glass division to Rs. 2.3bn led by slowdown in PVs and real estate segment along with negative impact of lockdown. Operating profit de-grew by 26% YoY to Rs. 893mn with a contraction in margin to 14.9% (-167bps YoY / -195 bps QoQ ) due to negative operating leverage and weaker product mix . PAT grew 11.7% YoY due to deferred tax adjustment. EBIT margin for automotive glass contracted by 395bps QoQ to 9.5% and 52bps QoQ to 10.9% for Architecture glass. In FY20 revenue de-grew by 9% to Rs. 26.4bn and EBITDA margin stood at 16.5%. Net debt/Equity stands at 1.1x. The company would be key beneficiary of revival in volume of PV segment. MSIL is poised for quicker recovery than other peers due to its rural suited product portfolio and market leadership in the entry level segment. Asahi would be the key beneficiary of uptick in volume of MSIL (current share of business from MSIL is above 90%).
As most of capex has already been incurred, AIS is likely to generate strong free cash flow in FY21-23E. This should help repay debt. We forecast a 59% CAGR in earning in FY21-23E, driven by a 23% increase in EBITDA, and benefits from the fall in interest rates and tax. At CMP, the stock is trading at 24/19x for FY22/FY23E earning (versus 5 years’ historical average of 38x). We value the stock Rs220 (based on 25x of Sept 22E EPS), and recommend BUY.
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