We anticipated AL’s outcomes to beat consensus estimates. Q4FY22 EBITDA/margin at Rs 7.76 bn/8.9% was 16/36% forward of Nomura/consensus estimates. Raw materials/gross sales got here in at 78.2%, +33bp.
q-o-q (Nom: 77.5%). Other bills got here in at 7.9% and employees value was 5%. Net debt was Rs 7.2 bn (~Rs 18.9 bn FCF in FY23F).
Management commentary: Demand is anticipated to select up on seemingly continued financial revival and enhancing capex cycle. Market share has improved backed by CNG/AVTR vary (~30% in Q4FY22). AL will develop CNG (4 variants), tippers and LCV vary in FY23F. It targets double-digit margins with worth hikes and price reductions; the corporate was in a position to retain ~75% of worth hikes (2-2.5% in April 22). Capex is deliberate at Rs 5-6 bn in FY23F. Fund elevating plan is in progress for Switch Mobility (Unlisted), the E-CV arm of AL.
Our view: We keep our view of a robust CV upcycle (+50/15% y-o-y) in FY23/24F, backed by our detailed evaluation of capability necessities. Our freight operators profitability estimate is at a 3-year excessive. Improvements in market share in Q4FY22 is an incremental constructive. Further, we anticipate growth of CNG to assist market share in FY23F. Price hikes and working leverage ought to result in margin enhancements. We suppose efficient implementation of the scrappage coverage can pose upsides to our estimates.
Estimates: We think about MHCV volumes at 110k (+49%)/127k (+16%) – greater by +6%/ flat. To think about greater uncooked materials prices, we barely decrease EBITDA margin to eight/10.3% (from 8.8%/10.8%), resulting in 4%/3% cuts in our EBITDA estimates for FY23/24F.
SOTP-based TP of Rs 168 based mostly on 12x FY24F EV/EBITDA
We keep our goal EV/EBITDA a number of for AL at 12x FY24F. The inventory’s present valuation at ~9.6x FY24F EV/EBITDA (adjusted for subs) is enticing, as we anticipate EBITDA to extend ~4x over FY23-24F. We at present don’t assign any worth to AL’s EV subsidiary – Switch, which raised $18 mn from Dana Inc. for a ~1% stake (implying a valuation of $1.8 bn). In our protection, we consider TTMT, BHFC and Sona (all rated Buy) would additionally profit from sturdy CV cycle.
Source: www.financialexpress.com”