Recommendation from Glass company

This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year.

ASAHI INDIA GLASS: HIGH VISIBILITY IN PROFITS

HERE IS WHY
✓Huge market share
✓Strategic plant locations
✓Improving margins

The automobile sector is showing revival after a gap of almost four years. The sector also includes its ancillaries. One such company gaining momentum with strong financials is Asahi India Glass Limited (AIS). It is India’s leading value-added and integrated glass solutions’ company and a dominant player both in the automotive and architectural glass segments. Established in 1984, the company was formed as a joint venture between The Labroo Family, Asahi Glass Co. of Japan and Maruti Udyog Limited (now Maruti Suzuki India Limited). Asahi India Glass provides end-to-end solutions in the entire glass value chain from the manufacturing of float glass, processing, fabrication to installation services.

As a sand-to-solutions company, AIS offers varied types of glass products and services to its customers in India and across the globe. It is a dominant player in the Indian automotive glass market and is also recognised as a strategic supplier of choice. With a market share of approximately 73 per cent in the passenger vehicle segment, AIS’ automotive glass is installed in nearly three out of every four cars, SUVs and MUVs manufactured in India. Its customers include Maruti Suzuki (also promoter), Hyundai Motors, Tata Motors, Mahindra and Mahindra, Toyota, MG, Renault, and many more

Asahi India Glass is the second-largest producer and supplier of architectural glass in India. It has one of the widest product bouquets across clear float glass, tinted, coated, frosted, and back-painted, high-performance glass, processed glass and mirrors. 

The promoter of AIS is a leading glass manufacturer in the world with 12 per cent global market share in the floating glass segment and 30 per cent global market share in the automotive glass segment. During FY22, AIS’ total income increased by 29.96 per cent YoY to ₹3,170 crore from ₹2,434 crore in FY21 on account of increase in sales volumes across all segments. The company reported YoY improvement in operating profitability driven by improvement in realisation of float glass segment and cost control initiatives. For FY22, the PBIDT margin improved to 24.39 per cent from 18.37 per cent in FY21.

The margin improvement was despite several challenges like elevated raw material costs, high fuel and logistic expenses and was especially led by healthy margin in the building (float) glass division. In the float glass segment, the company benefitted by the imposition of anti-dumping duty on import of float glass from Malaysia during H2FY21, which led to improvement in the prospects of the domestic industry along with reduced imports from China on account of the decarbonisation drive taken by the country

AIS is undertaking capital expenditure for greenfield and brownfield capacity expansion over the next three fiscals. These are to be funded through debt and internal accrual over fiscals 2023-2025 in the range of ₹1,700-1,900 crore. The trailing 12-month sales of the company total ₹3,710 crore, up by 17 per cent. The company generated ₹438 crore in net profit during the same period, up by 39 per cent. The ROE and ROCE is 21.1 per cent and 20.8 per cent, respectively, for the period ending FY22. Due to strong fundamentals, improving margins and positive future outlook we recommend investors to BUY this scrip.