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Widening portfolio of products and increasing number of customers to benefit: Over the last couple of years, the company has consistently been investing in development of new products. During last few years, the company innovated 131 new products and expanded their reach to 18 countries by adding 9 new customers.

Rapidly rising share of exports to assist the topline growth: The Management expects the share of exports to rise from current levels of 26% in FY22 to nearly 33% over the next few years anticipating robust growth in overseas businesses.

Strong balance sheet to help in further capacity expansion: The company’s net debt to equity contracted from 0.8x in FY19 to 0.6x As on March 31, 2022. Earlier, the company had plans to invest Rs.400 cr to increase its capacity by ~50% in 2 phases at the new greenfield project at Khed, Pune. The company would not need any substantial capex to reach the turnover of Rs.1,500 cr and for another Rs.500 cr, they would need to invest Rs.150-170 cr

The long association with Enkei Corporation would always be a ‘feel-good’ factor: Enkei Corporation holds 13.8% stake in Alicon. Enkei helps in improving the face value of the company in the global markets; has always been instrumental in techno-logical upgradation, increase in efficacy & has also helped in building up a sound manufacturing base.

OUTLOOK & VALUATION

The company is engaged into production of castings for auto and non-auto sectors and today runs one of the largest non-ferrous casting production groups in the country with facilities in Pune, Haryana and Europe. From one key product, cylinder heads, the company has consistently been able to develop and innovate new products thereby widening their basket of offerings for global auto OEMs. The Management expects an improvement in profit margins as they aim to shift their focus towards the niche and value-added products and cut down the share of ‘noise’ products in their portfolio. With new products and contracts start contributing from this fiscal onwards, the growth is likely to be healthy. We expect the company to deliver an earnings per share of Rs.62.4 in FY24 as against Rs.15.0 in FY22. Assigning a target multiple of 18x, we derive a price target of Rs.1,123 over the next 18-24 months, which is an upside of ~29% from current levels.

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