AmtekIndia_Firstcall_300910

8/3/2019 AmtekIndia_Firstcall_300910

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Stock Data

Sector Automobile Ancillary

Face Value (Rs.) 2.00

52 wk. High/Low (Rs.) 78.00/45.10

Volume (2 wk. Avg.) 541000

BSE Code 532282

Market Cap (Rs.mn.) 8004.22

Financials(Rs.in.mn) FY10 FY11E FY12E

Net Sales 9744.30 11108.50 12663.69EBIDTA 2884.77 3238.11 3639.96

PAT 751.97 901.43 1061.39

EPS 5.96 7.15 8.41

P/E 10.64 8.88 7.54

Amtek India Ltd BUYF

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SYNOPSISAmtek India (AIL), one of the flagshipcompanies of Amtek group, is an integratedautomotive component manufacturer withfacilities for casting, machining, and sub-assemblies at locations in India and theUK. The company was incorporated in1992.

During the quarter the company hasallotted 62,10,000 Equity shares of Rs.2/-each at a premium of Rs.39/- each

aggregating to Rs.25.46Crores upon theconversion of warrants.

The Company plan to expand its castingcapacities from 1,05,000 t.p.a. to 2,25,000t.p.a. And also planning to foray into highprecision components like cylinder blocksof bigger engines, cylinder heads,transmission covers etc.

The Credit Analysis & research Ltd. (CARE)has assigned a CARE AA- (CARE Double aMinus) rating to the NCD issue of theCompany for Rs. 200Crore.

The companys net sales and net profit areexpected to grow at a CAGR of 18% and25% over FY09 to FY12E.

1 Year Comparative Graph

V.S.R. Sastry

Equity Research Desk

[email protected]

Dr. V.V.L.N. Sastry Ph.D.

Chief Research Officer

[email protected]

C.M.P: Target Price:Rs.63.45 Rs.76.00

Share Holding Pattern

September 28th, 2010


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Table of Content

Content Page No.

1. Peer Group Comparison 032. Investment Highlights 033. Company profile 064. Financials 095. Charts & Graph 116. Outlook and Conclusion 137. Industry Overview 14


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Peer Group Comparison

Name of the company CMP(Rs.)*Market

Cap.(Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)

Amtek India Ltd 63.45 8004.22 5.96 10.64 0.52 10.00

Bosch Ltd 6147.00 19300.90 243.73 25.22 5.70 300.00

Amtek auto Ltd 169.50 34188.10 7.10 23.87 1.27 25.00

Munjal Showa 58.55 2341.70 6.47 9.05 1.30 100.00* As on 28-09-2010

Investment Highlights

Results Updates (Q4 FY10)

For the fourth quarter, the top line of the company increased 42%YoY and stoodat Rs.2683.10mn against Rs.1893.20mn of the same period of the last year. Thebottom line of the company for the quarter stood at Rs.184.90mn fromRs.145.10mn of the corresponding period of the previous year i.e. an increase of27%YoY.

EPS of the company for the quarter stood at Rs.1.47 for equity share of Rs.2.00each.


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Expenditure for the quarter stood at Rs.2045.60mn, which is around 38%higher than the corresponding period of the previous year. Raw material cost ofthe company for the quarter accounts for 66% of the sales of the company andstood at Rs.1783.90mn. Other Expenditure stood at Rs.167.50mn fromRs.147.80mn. and accounts for 6% of the revenue of the company for thequarter i.e., an increase of 13%YoY.

OPM and NPM for the quarter stood at 28% and 7% respectively from 29% and8% respectively of the same period of the last year.


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During the quarter the company has allotted 62,10,000 Equity shares of Rs.2/-

each at a premium of Rs.39/- each aggregating to Rs.25.46Crores upon theconversion of warrants.

Allotment of Equity Shares

Allotment Committee of the Board of directors of the Company has allotted5475212 equity shares at Rs. 120.12/- per shares upon the conversion ofFCCB's of US $ 14.98 million.

Open offer

D&A Financial Services on behalf Amtek Auto, which is the acquirer company

has made an announcement of open offer to the equity shareholders of AmtekIndia, for acquiring 25230450 equity shares of the face value of Rs 2 each,which represents 20% of paid up share capital and resulting voting rightscapital at a price of Rs 68 per fully paid up equity shares which will be payablein cash.

Scheme of Arrangement

As per the order of Hon'ble High Court of Punjab & Haryana the Scheme ofArrangement of Amtek India Ltd., Ahmednagar Forgings Ltd., Amtek Ring GearsLtd., Amtek Crankshafts India Ltd. and Amtek Casting India Ltd. with AmtekAuto Ltd. has been dismissed on account of changed circumstances as regards

valuation of shares and decline in turnover and profits. The Court held that itwould be impermissible to order the scheme proposed on the basis of valuationof shares of the year 2007. The appropriate remedy could only be through afresh petition and the scheme cannot be considered on the basis of the dataavailable in the year 2007.


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Credit Rating

The Credit Analysis & research Ltd. (CARE) has assigned a CARE AA- (CAREDouble a Minus) rating to the NCD issue of the Company for Rs. 200Crore. Theinstruments carrying AA- rating are considered to offer high safety for timelyservicing of debt obligation. Such instruments carry very low credit risk.

Company Profile

Amtek India (AIL), one of the flagship companies of Amtek group, is an integratedautomotive component manufacturer with facilities for casting, machining, and sub-assemblies at locations in India and the UK. The company was incorporated in 1992.

The company is engaged in manufacturing automotive components with a specialfocus on iron castings. The plants of the company are located in Narasinghpur inGurgaon and at Bhiwadi in Rajasthan.

In the year 2007-08 the company expanded its casting capacity from 75000 tonnesper annum (TPA) to 105000 TPA. The company has also expanded the manufacturing

capacity of components from 175 lakh per annum to 200 lakh pa. In 1993 AILInitiated forging operations at Gurgaon, India. In 2002 the company established aniron casting facility at Bhiwadi. The company has one subsidiary -- Amtek IndustriesUK (wholly-owned foreign subsidiary company incorporated in the UK).

The company has grown significantly through acquisitions over the last three years.AIL has acquired UK-based Sigma Cast group, is one of the biggest and largestsupplier of turbo charger components in the world.

The customers of the group consist of Ashok Leyland, Aston Martin, Bajaj Auto, BMW,Briggs & Stratton, CNH Global, Cummins, Dana Italia, Davis Industries, EicherMotors, Escorts, Fairfield, Fiat India, Ford, General Motors, GE Transportation, Hero

Honda, Hindustan Motors, Hyundai, Isuzu Diesel, Jaguar, JCB, John Deere, Kawasakiand many more.

Associates:

Amtek Auto Ltd.Amtek Crank Shafts India Ltd.Amtek Deutschland GmbHAmtek Investment UK Ltd.Amtek Investment US (1) Inc.Smith Jones Inc.Amtek Ring Gears Ltd.

Amtek Transportation Systems Ltd.

Plant Location

Unit l - Village Narsinghpur, Old Manesar Road, District Gurgaon (Haryana)


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Unit ll - SPA 1195, Phase IV, RIICO Industrial Area, District Bhiwadi (Rajasthan)

Unit III- Nalagarh, Distt. Solan (Himachal Pradesh)

Unit IV - SPA 502, Phase-I, RIICO Industrial Area, District Bhiwadi, (Rajasthan)

SWOT Analysis

Strengths:

Global scale of operations

Flexible production system

New innovative and world class technology

Weaknesses:

Tight liquidity position, reluctance on the parts of banks to finance vehiclesand firming up of interest rates would affect vehicle demand which in turncould impact the company's revenues and profits.

Increase in the prices of inputs like metals, fuel oil etc., and movements inexchange rates and volatility in foreign exchange markets may create pressureon operating margins.

The Company is also exposed to the risk of Environment and pollutioncontrols, which is associated with such type of industries.

Opportunities:

A growing middle income population, rise in their average income levels anddemand for a better lifestyle, all augur well for the automotive industry both interms of personal transportation requirements as well as freight movement.

Continued improvement in roads in the coming years is expected to boostautomobile demand.

The introduction of economical small cars like 'Tata Nano' will reduce the gapbetween two wheeler prices and the entry level car prices offering a huge

opportunity a large section of the society to migrate to affordable safe &comfortable small car.

India continues to be a cost effective source for automotive industry globallyboth for vehicles and components.


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The Government has continued its thrust on infrastructure despite theeconomic slowdown. The Power sector is also showing robust growth potential.

Responsiveness to changes in market conditions and product profiles. Dynamicand Progressive leadership, willing to implement change.

Threats:

Increase in fuel prices has an adverse impact on automobile demand as was

seen in the previous year.

Hardening of consumer interest rates coupled with tightening of liquidityposition and reduction in exposure to vehicle financing by banks could havean adverse impact on the automotive industry.

Stringent emission norms and safety regulation could bring new complexitiesand cost increases for automotive industry.

WTO, Free Trade Agreements could make the market more competitive forlocal manufacturer.

The domestic passenger vehicle demand could be adversely impacted by theintroduction of rapid mass road and rail transport systems.

Global economic recovery may take longer than expected, which will affectexports from India.


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Financials Results

12 Months Ended Profit & Loss Account (Standalone)

Value(Rs.in.mn) FY09 FY10 FY11E FY12E

Description 12m 12m 12m 12m

Net Sales 7,778.70 9744.30 11108.50 12663.69

Other Income 215.8 550.07 572.07 600.68

Total Income 7994.50 10294.37 11680.57 13264.37

Expenditure -6,071.50 -7409.60 -8442.46 -9624.41

Operating Profit 1923.00 2884.77 3238.11 3639.96

Interest -433.2 -826.50 -852.25 -894.86

Gross profit 1489.80 2058.27 2385.86 2745.10

Depreciation -701.3 -962.10 -1077.55 -1206.86

Profit Before Tax 788.50 1096.17 1308.31 1538.24

Tax -247.8 -344.20 -406.88 -476.8

Profit After Tax 540.70 751.97 901.43 1061.39

Extraordinary Items 0.00 0.00 0.00 0.00

Net Profit 540.70 751.97 901.43 1061.39

Equity capital 224.3 252.30 252.30 252.30

Reserves 14512.90 15264.87 16166.30 17227.68

Face Value 2.00 2.00 2.00 2.00

Total No. of Shares 112.15 126.15 126.15 126.15

EPS 4.82 5.96 7.15 8.41


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Quarterly Ended Profit & Loss Account (Standalone)

Value(Rs.in.mn) 31-Dec-09 31-Mar-10 30-Jun-10 30-Sep-2010

Description 3m 3m 3m 3m

Net sales 2425.40 2551.20 2683.10 2951.41

Other income 155.10 124.70 122.70 128.84

Total Income 2580.50 2675.90 2805.80 3080.25

Expenditure -1836.10 -1923.10 -2045.60 -2243.07

Operating profit 744.40 752.80 760.20 837.17

Interest -213.50 -236.30 -202.50 -212.63

Gross profit 530.90 516.50 557.70 624.55

Depreciation -234.50 -234.50 -288.10 -322.67

Profit Before Tax 296.40 282.00 269.60 301.88

Tax -92.90 -88.60 -84.70 -94

Net Profit 203.50 193.40 184.90 207.09

Equity capital 236.10 239.90 252.30 252.30

Face Value 2.00 2.00 2.00 2.00

Total No. of Shares 118.05 119.95 126.15 126.15

EPS 1.72 1.61 1.47 1.64


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Key Ratio

Particulars FY09 A FY10 A FY11 E FY12 E

EBIDTA % 25% 30% 29% 29%

PAT % 7% 8% 8% 8%

P/E ratio (x) 13.16 10.64 8.88 7.54

ROE - % 4% 5% 5% 6%

ROCE - % 6% 8% 9% 9%

EV/EBIDITA (x) 3.50 2.77 2.47 2.20

Debt Equity Ratio 0.48 0.48 0.47 0.47

Price/Book Value 0.56 0.52 0.49 0.46A-Actual E-Expected

Charts:

Net sales & PAT


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P/E Ratio (x)

P/BV (X)


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EV/EBITDA(X)

Outlook and Conclusion

At the market price of Rs.63.45, the stock is trading at 8.88 x and 7.54 x for FY11Eand FY12E respectively.

On the basis of EV/EBDITA, the stock trades at 2.47 x for FY11E and 2.20 x forFY12E.

Price to book value of the company is expected to be at 0.49 x for FY11E and 0.46x for FY12E respectively.

EPS of the company is expected to be at Rs.7.15 and Rs.8.41 for the earnings ofFY11E and FY12E respectively.

The companys net sales and net profit are expected to grow at a CAGR of 18% and25% over FY09 to FY12E

During the quarter the company has allotted 62,10,000 Equity shares of Rs.2/-each at a premium of Rs.39/- each aggregating to Rs.25.46Crores upon theconversion of warrants.

Allotment Committee of the Board of directors of the Company has allotted5475212 equity shares at Rs. 120.12/- per shares upon the conversion of FCCB'sof US $ 14.98 million.

The Company plan to expand its casting capacities from 1,05,000 t.p.a. to2,25,000 t.p.a. This will lead to large scale economics and hence better margins.


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The Company is also planning to foray into high precision components like cylinderblocks of bigger engines, cylinder heads, transmission covers etc. that commandbetter margins. This will ensure sustainability of higher margins in the years tocome.

We recommend BUY this stock with a target price ofRs.76.00 for medium to longterm investment.

Industry Overview

The Indian auto component industry is one of India's sunrise industries withtremendous growth prospects. From a low-key supplier providing components to thedomestic market alone, the industry has emerged as one of the key auto componentscentres in Asia and is today seen as a significant player in the global automotivesupply chain. India is now a supplier of a range of high-value and critical automobilecomponents to global auto makers such as General Motors, Toyota, Ford andVolkswagen, amongst others.

As per an Automotive Component Manufacturers Association of India (ACMA) report,the turnover of the auto component industry was estimated at over US$ 18 billion in2007-08, an increase of 27.2 per cent since 2002. It is likely to touch US$ 40 billion,increasing Indias share in the global auto component market from 1 per cent to 3 percent by 2015-16.

Aided by a 7 per cent growth in the original equipment manufacturers (OEM) segmentand an 8.5 per cent rise in exports and after-market segment, it is expected that autoancillary production would grow by 8.2 per cent in 2009-10, according to a report bythe Centre for Monitoring Indian Economy (CMIE).

Investments in the auto component industry were estimated at US$ 7.2 billion in

2007-08 and are likely to touch US$ 20.9 billion by 2015-16. In Tamil Nadu alone,nearly US$ 1 billion have been invested by some of the major trye companies, such asApollo Tyres, ATC Tires, MRF, Dunlop and TVS Srichakra.

Exports of auto components grew at the rate of 35 per cent during 2002-07 andtouched US$ 3.6 billion in 2007-08. It is estimated to reach around US$ 20 billion-US$ 22 billion by 2015-16. During April-January 2008-09, exports grew by 27.3 percent to US$ 2.12 million. A majority of Indian exports are sent to Europe and NorthAmerica.

India will be the next destination for the Automotive Testing Expo to be hosted byUKIP Media at Hyderabad next year. The expo will now be an annual event for the

country and will showcase latest technologies, including simulation, for newautomotives and components.

Indian companies are also expanding their footprints abroad. For instance, TVSLogistics, a part of the TVS group, acquired one of the largest after market logisticscompanies in the UK. The company will undertake an investment in excess of US$


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The market is so large and diverse that a large number of players can be absorbed toaccommodate buyer needs. The sector not only has global players looking to investand expand but leading domestic component companies are also pumping in hugesums into expanding operations. An auto park is coming up near Hyderabad withinvestments worth over US$ 409.30 million from around 34 automotive ancillaryunits. This is in addition to a US$ 245.59 million Greenfield project being set up byMLR Motors near the park.

Moreover, Indian tyre makers are rolling out investment plans worth US$ 1.24 billion,due to the rising popularity of radial tyres in the commercial vehicles segment.

Some other investments include:

Apollo Tyres is to scale up investment at its upcoming radial tyre project atOragadam in Tamil Nadu from US$ 106.4 million to US$ 447.04 million.

Hero Motors will invest US$ 19.84 million in association with Austrian firm BRPPower train for manufacturing automotive transmissions in India.

Indian arm of Swedish automotive component maker SKF is investing US$ 30

million in a new ball bearings manufacturing plant at Haridwar.

Policy Initiatives

The government has taken many initiatives to promote foreign direct investment (FDI)in the industry.

Automatic approval for foreign equity investment up to 100 per cent ofmanufacture of automobiles and components is permitted.

The automobile industry has been delicensed.

There are no restraints on import of components.

The government has envisaged the Automotive Mission Plan 2016 to promote growthin the sector. It targets:

Emerging as the global favorite in the area of design and manufacture ofautomobiles and auto components.

Taking the output to US$ 145 billion, accounting for more than 10 per cent ofthe GDP.

Offering additional employment to 25 million people by 2016.

Looking Ahead

With investments around US$ 15 billion slated for the sector over the next few years,the prospects for India's auto market are bright.


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Even though India's auto component industry has conventionally relied on exports forits profits, the domestic market itself is ripe with rapidly growing opportunities.Industry experts are hopeful that the country will be able to offset China and otherSoutheast Asian countries' traditional manufacturing advantage in the coming years,facilitating the industry's achievement of its targeted market value of US$ 40 billion by2014.

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Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitationfor the purchase or sale of any financial instrument or as an official confirmation of anytransaction. The information contained herein is from publicly available data or other

sources believed to be reliable but do not represent that it is accurate or complete and it

should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of its

affiliates shall not be in any way responsible for any loss or damage that may arise to anyperson from any inadvertent error in the information contained in this report. This document

is provide for assistance only and is not intended to be and must not alone be taken as thebasis for an investment decision.


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AmtekIndia_Firstcall_300910