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Highlights from the Quarter (Q2FY24):

Alicon Castalloy Ltd (ACL) reported a quarterly revenue of Rs. 381.8 cr for Q2FY24, up marginally 1.1% YoY and 7.6% on a QoQ basis. Despite a fall in realization, ACL reported higher revenues driven by the commencement of supply for new parts. Further, margins were enhanced due to an improvement in product mix and a cooling of input prices.

ACL reported an EBITDA of Rs.47 cr for the quarter vs Rs.43.4 cr for the same quarter in the previous year (up 8.3% YoY) and Rs.40 cr in the preceding quarter (up 17.5% QoQ). The EBITDA margin for the quarter stood at 12.3%, up 100 bps from the previous quarter. The EBITDA margin has improved to 12.3%, after accounting for non-cash charge of Rs.3.66 crore on account of the ESOP Scheme, adjusting for which the EBITDA margin would be 13.3%, which is a massive jump for the company. The company delivered a net profit of Rs.14.5 cr for the quarter at a net margin of 3.8%.

The management mentioned that the focus of the organization is to continue to enrich the revenue mix as new products are primarily from focus categories of 4- wheeler and EV, thereby, capturing higher value addition. New orders booked in the quarter were ~Rs.186 cr, with a total order book of Rs.8667 cr executable over 6 years until FY29. Additionally, the management also mentioned that there has been a significant ramp up in volumes with Toyota as well as Maruti, and is expected to gain further traction in the second half of the year.

Recently, ACL won an order amounting to approximately Rs.90 cr from a European EV customer requiring the application of the company’s new technology called ‘Friction Stir Welding’. According to the management, this technology can be a key enabler for them to increase their EV business two-fold by FY26.

OUTLOOK AND VALUATION

Alicon Castalloy Ltd posted a robust quarter in terms of margin growth. We expect FY26E revenue at Rs.1901.4 cr, EBITDA of Rs.248.6 cr at an EBITDA margin of 13.1% and PAT of Rs.111.3 cr. We estimate FY26E EPS at Rs.69.1, and assign a PE multiple of 18x, maintaining the target price of Rs.1243 (upside ~50%) from the current market price of Rs.828. We keep our BUY Rating for Alicon Castalloy Ltd over an investment horizon of 24-30 months.

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