ASK Automotive Ltd Inventory Evaluation December

ASK Automotive Ltd – Driving security via innovation

Based in 1988, ASK Automotive Ltd. is a number one auto-ancillary firm in India, specializing in superior braking techniques (ABS) for 2-wheelers and precision aluminium lightweighting options. A market chief in 2-wheeler ABS, together with brake footwear and disc brake pads, ASK serves OEMs, OES, and IAM segments. With 17 manufacturing services throughout India, it exports to over 12 nations and employs 7,000+ folks. The corporate companions with prime manufacturers like Honda, Hero MotoCorp, Suzuki, TVS, Yamaha, Bajaj, Royal Enfield, Ola, and Ather.

Merchandise and Companies

ASK Automotive Ltd. presents merchandise throughout three key segments:

• Superior Braking Methods (ABS):
  Brake footwear, brake pads, brake panel assemblies, clutch plates, clutch footwear, brake linings, disc brake pads, and brake liners.
• Aluminium Light-weight Precision Options (ALPS):
  Crank circumstances, engine covers, pillion grips, ECU our bodies, throttle our bodies, and electrical motor housings.
• Security Management Cables:
  Entrance brake cables, rear brake cable assemblies, throttle cables, speedometer cable assemblies, and equipment shift cables.

Subsidiaries: As of FY24, the corporate has 1 subsidiary and 1 three way partnership. 

Progress Methods

• Market Management: Dominates India’s 2-wheeler ABS market with a ~50% share and can also be a prime producer of ALPS and security management cables, serving main OEMs with powertrain-agnostic merchandise, together with EV options.
• Enlargement Plans: Organising an 18th manufacturing plant in Bengaluru at an estimated value of ₹200 crore, anticipated to be operational by Q4FY25 to cater to South India’s OEMs.
• Export Progress: Secured ₹75 crore in export orders throughout Q2FY25 and is targeted on increasing its international footprint regardless of short-term disruptions in US operations.
• Renewable Power Focus: Creating a 9.9 MWp mega solar energy plant in Sirsa, Haryana, for in-house consumption, reinforcing its dedication to sustainability.
• EV Sector Push: Advancing light-weight aluminium merchandise for EVs with a robust pipeline of revolutionary options tailor-made for EV OEMs.
• Diversification: Coming into area of interest markets like 2-wheeler high-pressure die-cast (HPDC) alloy wheels to develop product choices and market attain.

Monetary Efficiency

Q2FY25

• Income Progress: Recorded ₹976 crore in income, a 22% YoY improve from ₹798 crore in Q2FY24.
• Phase Efficiency:

Superior Braking Methods (ABS): Achieved 18% YoY progress, sustaining market management.

ALPS: Witnessed 27% YoY progress.

Security Management Cables: Improved by 18% YoY.

• EBITDA Progress: Elevated by 51% YoY to ₹119 crore from ₹79 crore, with EBITDA margin rising from 10% to 12%.
• Internet Revenue: Surged by 63% YoY to ₹67 crore in comparison with ₹41 crore in Q2FY24.

FY24

• Income Progress: Achieved ₹2,995 crore in income, marking a 17% YoY improve over FY23.
• Working Revenue: Recorded ₹311 crore, reflecting a 25% YoY progress.
• Internet Revenue: Posted ₹174 crore, a major 41% YoY improve.
• Enlargement: Efficiently commenced operations at a brand new manufacturing plant in Karoli, Rajasthan.

Monetary Efficiency (FY21-24)

• Income & PAT Progress: The corporate has achieved a income and PAT CAGR of 25% and 23%, respectively, over the 3-year interval from FY21-24.
• Sturdy Return Ratios: Common ROE and ROCE stand at 19% and 20%, respectively, for the FY21-24 interval.
• Capital Construction: The corporate maintains a robust capital construction with a debt-to-equity ratio of 0.43.

Business outlook 

• Rising Demand: India’s auto parts trade has grown considerably, pushed by rising incomes, infrastructure investments, and manufacturing incentives.
• Two-Wheeler Phase Dominance: The 2-wheeler market, propelled by a rising center class, led the trade with 23.85 million items bought in FY24.
• OEM Progress: The surge in car demand has fueled the expansion of unique gear producers (OEMs) and auto part producers.
• International Enchantment: India’s automotive manufacturing experience has boosted worldwide demand for its automobiles and parts.
• Localization Enhance: The rising presence of world OEMs in India has accelerated the localization of their parts.

Progress Drivers

• Demographic Benefit: Enlargement of the working inhabitants and a rising center class are fueling demand.
• FDI Assist: 100% FDI underneath the automated route boosts investments within the auto parts sector.
• Future Potential: The Indian auto parts trade is projected to succeed in US$ 200 billion by FY26, highlighting strong progress alternatives.

Aggressive Benefit

ASK Automotive stands out amongst rivals like Endurance Applied sciences Ltd. and Uno Minda Ltd., showcasing regular income progress, superior return ratios, and strong earnings potential. Its monetary stability and environment friendly capital utilization underline its capacity to ship constant revenue and returns, setting it aside within the auto parts trade.

Outlook

• Karoli Plant Ramp-Up: Manufacturing on the new facility has achieved optimistic EBITDA margins, with full capability utilization anticipated in 1-2 years.
• Funding Plans: CAPEX steerage set at ₹250-300 crore for FY25, alongside a focused 25% ROE.
• Progress Drivers: Enlargement supported by economies of scale, new orders, consumer acquisitions, elevated manufacturing at new services, and value optimization efforts.
• Sustainability Dedication: The nearing completion of a photo voltaic plant aligns with sustainability objectives, providing a 5-year payback interval.
• Debt Discount: Actively engaged on reducing the debt ratio to strengthen the capital construction.
• Recognition: A latest ranking improve from CRISIL underscores the corporate’s strong enterprise mannequin and progress potential.

Valuation

ASK Automotive’s market management, strategic deal with the EV sector, export enlargement, and product diversification place it for sustained progress. These elements drive our optimistic outlook, resulting in a BUY advice with a goal value (TP) of ₹548, representing 47x FY26E EPS.

Dangers

• Business Threat: Roughly 80% of the corporate’s income comes from India’s 2-wheeler automotive sector. Any opposed adjustments on this trade might negatively have an effect on the corporate’s operations and monetary well being.
• Uncooked Materials Value Volatility: Disruptions within the provide or fluctuations within the costs of key supplies, significantly aluminium, might put stress on the corporate’s margins.

Observe: Please word that this isn’t a advice and is meant just for instructional functions. So, kindly seek the advice of your monetary advisor earlier than investing.

Recap of our earlier suggestions (As on 29 November 2024)

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