Asahi India Glass’ (Asahi) Q4FY20 results were below estimates as revenues declined ~16% YoY to Rs5.9bn while EBITDA margins shrunk 167bps to 15.7%. We expect steep drop in revenues (~45%) in H1FY21 due to impact of lockdown in Q1FY21 and gradual utilisation ramp-up in Q2FY21. However, the positive levers of: 1) sustainable cost reduction measures (labour, breakeven reduction), and 2) reduction in power and fuel costs, is likely aid margins rebound in H2FY21 and likely to be sustained in FY22. As per management the sales pickup post reopening has been strong yet we remain cautious on sustenance of this pent-up demand.
OutlookWe believe Asahi remains a strong proxy play of PV demand due to its dominant market share (>70%), with capex cycle behind us we expect strong FCF generation (FY20/FY21E/FY22E:Rs1.3bn/Rs3.3bn/4.4bn). Maintain BUY.
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