Buy Asahi India Glass; target of Rs 264: Dolat Capital

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26 Aug, 2025 12:21

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Asahi India Glass (AIS) posted inline numbers in 1Q. Revenue de-grew by 68% YoY to Rs.2.28bn (Vs. est. Rs.2.11bn) led by 53% YoY fall in Architecture glass division to Rs.1.37bn, and 80% YoY de-growth in Automotive glass division to Rs.839mn due to lockdown. EBITDA loss stood at Rs.310mn. (vs est. Rs.-83mn) due to negative operating leverage and one off Rs.300mn for furnace maintenance cost. We expect the company would be a key beneficiary of revival in volume of Automotive and Architectural glass segment from 2Q. Moreover, strong traction in aftermarket business will also aid profitability. In Automotive glass business, AIS would be the key beneficiary of uptick in volume of MSIL (current share of business from MSIL is above 90%). Architectural glass business has also shown strong recovery from July onwards, benefiting from reduced import in India from Asian countries. Prices are also firmed due to supply constraint. As most of the capex has already been incurred (~Rs.12bn over FY18-20), AIS is likely to generate strong free cash flow of Rs.11.8bn over FY21-23E (~20% of current EV) which would help to repay debt. We forecast a 110% CAGR in earning in FY21-23E, driven by 20% increase in Revenue, 300bps margin expansion and benefits from the fall in interest and tax.

At CMP, the stock is trading at 21/15x for FY22/FY23E earning (versus 5 years' historical average of 38. We value the stock Rs.264 (based on 22x of FY23E EPS), and recommend BUY.

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