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Buy Autoline Industries Ltd  For Target Rs.106 CMP 56

Strategic Initiatives to Streamline the Business and Improve Profitability

Like the auto industry, Autoline has faced its fair share of challenges in recent years, from working capital crunch to the adverse effects of the various issues troubling the auto industry in general. To overcome these setbacks and to chart a profitable roadmap for the future, the company has taken steps to consolidate its operations, reduce debt, diversify their customer base to de-risk the business and taken multiple measures to rationalize costs.

Auto Industry Revival to Provide the Necessary Boost for Growth

After nearly 3 years of an industry wide slowdown, marred by changing regulations, rising expenses, price hikes etc. the auto industry has seen a demand revival. 2- Wheelers, Passenger Vehicles and Commercial Vehicles, all have seen recovery in volumes. Rising demand, both domestic and export, is expected to propel the industry forward by over 20% in FY22. According to the Automobile Component Manufacturers Association (ACMA), automobile component export from India is expected to reach US$ 80 billion by 2026.

The Indian auto component industry aims to achieve US$ 200 billion in revenue by 2026. Autoline is a supplier of sheet metal components to major OEMs and should benefit from the rising demand. With the company taking measures to streamline its operations, demand recovery in the Indian auto industry and the auto components industry expected to deliver strong growth, Autoline is well poised to become a strong player in the coming years.

OUTLOOK & VALUATION

We have forecasted a revenue growth of 37% CAGR over FY21-24E where we expect revenue for FY24E at Rs. 726 cr, EBITDA at Rs. 86 cr at an EBITDA margin of 11.8% and Net Income of Rs. 40 cr. We estimate FY24E EPS at Rs. 10.6 and assign a PE multiple of 10x to arrive at a target price of Rs.106, which is an upside of ~89% from Friday’s closing price of Rs. 56. We initiate coverage on Autoline Industries Ltd. with a BUY rating, over an investment horizon of 24-30 months.

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