Investment Update on ASK Automotive
Market Performance
- ASK Automotive shares have surged 46% over the past six months and 32.14% year-to-date.
- Choice Institutional Equities has initiated coverage with a ‘Buy’ rating and a target price of Rs.730, representing a 20.3% upside from the current price of Rs.608.
Growth Drivers
-
Aluminium Lightweighting Precision Solutions (ALPS) is projected to be the company’s main growth driver.
- Revenue contribution from ALPS is expected to rise from 51% in FY26 to 62% by FY29, equating to a CAGR of ~26%.
- Factors driving growth include increased aluminium usage per vehicle and stronger partnerships with original equipment manufacturers (OEMs).
-
The braking segment, which accounts for about 37% of FY26 revenue, is also forecasted to grow at an 11% CAGR between FY26 and FY29.
- ASK Automotive holds a 50% share of the OEM market for two-wheeler brake shoes.
-
The company is expanding its production capacity for brake shoes and disc pads, aiming to grow from 260 to 320 million units.
Expansion Efforts
- ASK is entering the high-pressure die-casting alloy-wheel market through collaborations with Taiwanese and Japanese firms, targeting Rs.250 crore in revenue by FY28.
- An aftermarket network of 450 dealers has enabled a 21% CAGR growth from FY24 to FY26.
Management & Financials
- Current management boasts a strong track record, reflected in a FY26 ROE of 25.3% and ROCE of 25.4%.
- Consolidated revenue, EBITDA, and PAT have grown at CAGRs of approximately 20%, 33%, and 37% from FY22 to FY26.
Future Outlook
- Revenue, EBITDA, and PAT are expected to grow at approximately 18%, 20%, and 20% CAGRs between FY26 and FY29.
- Potential for an upside exists in alloy-wheel business growth, new export orders, and additional collaborations.
Risks Highlighted
- Possible regulatory changes may impact revenue, particularly regarding ABS mandates for smaller two-wheelers.
- Risks also include volatility in aluminium prices and concentration among major OEMs.
Conclusion
Choice Institutional Equities favors ASK Automotive for its management, strong returns, and ability to outperform the broader two-wheeler industry. Investors should consider these insights while evaluating potential investments in the company.
Disclaimer: This information is intended for educational purposes only. Investors should seek advice from certified experts before making decisions.
