Jan 20 2024, 07:53
Radar:How ASK Automotive will go at 22% high in 12 months:
The brokerage initiated coverage on the stock with a "buy" rating and a price target of Rs 356, indicating an upside of 22% from the current levels.
ASK Automotive, a leading supplier of braking systems and lightweight parts for two-wheelers, is expanding into the passenger vehicle (PV) aluminium casting component segment to boost revenue. With a 35% market share in the 2W drum braking system market, ASK is well- positioned to benefit from the growth in the 2-wheeler industry. The company aims to achieve a 10% compound annual growth rate (CAGR) and a margin of 13-14% in the aluminium.
ASK has around 35% market share in the 2W drum braking system market, with 85% of 2W braking market constituting drum brakes.
The company is expanding its reach to the PV aluminium casting component segment to ramp up revenue profitably, both in India and globally.
With the braking system business being linked with the 2-wheeler industry volume growth, the company is poised to register 10% CAGR versus 22% revenue CAGR over FY24- 26 in aluminium casting segment, believes ICICI Securities.
On the back of steady operating profit margin of braking and aluminium segments at 10% and 15%, respectively, blended margin for ASK used to be 12-13% till FY21. Post that, driven by aluminium cost inflation and subdued 2W markets, the margin declined to 9-10%.
"We expect margin expansion of 500-600 bps for PV aluminium casting products, with 80-100 bps of margin boost from Rajasthan plant incentive, improved operating leverage and stable commodity prices to drive margin back to 13-14% levels in FY25-26," the brokerage said.
Further, the company has never raised secondary equity either from markets or from any private equity firm and has largely grown on internal accruals, resulting in a lean balance sheet.
source: et
Jan 20 2024, 07:53
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