ASAL May Improve With Festive Season

Automotive Stampings and Assemblies Limited (ASAL) has performed well in line with the automobile sector over the years. Its performance in terms of the topline is directly and closely correlated to the growth in the automobile industry. The bottomline though is directly dependent on steel prices, it being the key component in the manufacturing of outer body parts, structural and reinforcement parts and upper body chassis components of automobiles.

As per the results announced by ASAL, the net income saw de-growth of 4.68 per cent with Q1FY13 figures reducing to Rs 128.41 crore from Rs 134.71 crore in Q1FY12. The trend of YoY negative growth in the operating profit and net profit has been ceaseless since the beginning of FY12. On the same lines, the operating profit of ASAL went down to Rs 6.38 crore from Rs 7.79 crore in Q1FY12. The net profit too declined by 45.68 per cent YoY, landing at Rs 93.43 lakhs.

The automobile industry has been facing an overall slowdown since the beginning of FY12. This situation has become worse over the first three months of FY13, with average monthly growth figures over the corresponding month in the previous year being 9.47 per cent for passenger vehicles, mainly driven by utility vehicles, and 5.29 per cent for commercial vehicles, mainly driven by LCVs. The larger components of both the segments i.e. passenger cars and medium & heavy commercial vehicles have been severely hampered.

Following the same trend, ASAL’s YoY net income growth too has slowed down considerably starting from Q1FY12 to date. Historically, revenue growth and margins have been gradually moving upward except during the 2008 crisis and the current auto slump.

Financials Of ASAL For FY12 And FY13

ASAL’s key clients include Tata Motors, Fiat India, Mahindra & Mahindra Tractor Division, Ford and General Motors. Over the months in Q1FY13, all these companies have underperformed gravely in terms of total sales volume growth as compared to the corresponding month in the previous year. This is clearly visible in the performance of ASAL.

Monthly Sales Volume Growth Of ASAL’s Clients

Apart from the blues on the demand side, the firm paid a price for increased debt in the year 2008-09 when they paid interest charges of approximately Rs 8.02 crore, resulting in a net loss of Rs 2.42 crore. Since then, the debt equity ratio of the company has improved from 2.07 in FY09 to 0.18 in FY12, thus minimising the effect of interest rate burden seen earlier.

Overall, we are of the same view on ASAL as on the automobile sector, having looked at the correlation and dependence between the two. We expect automobile sales to pick up in the festive season and thus expect ASAL to eventually perform in the second half of the financial year. Till then, we recommend investors to avoid the stock.