Buy Alicon Castalloy Ltd For Target Rs.1,465 By Sushil Finance
Highlights from the Quarter (Q1FY26):
Alicon Castalloy Ltd (ACL) reported marginally weak revenues in the first quarter of FY26, with revenues falling 4.9% YoY to Rs.418.7cr. This is primarily due to a dip in exports volume, which led to margin compression as well on a YoY basis. EBITDA for Q1FY26 stood at Rs.50.4cr, a slight increase of 5.6% from the previous quarter, but down 13.4% as compared to the same quarter in the preceding year. Net profit stood at Rs.9.3cr, largely stable on a QoQ basis. An exceptional item of Rs.2.5cr related to an out-of-court settlement for a legal case in the U.S. court impacted the reported PAT. Without this exceptional item, PAT would have been higher.
ACL's current order book is around Rs.9100cr, executable until FY29. This order book is skewed towards the four-wheeler segment, with Passenger Vehicle contributing 51% and Commercial Vehicle 30%, totaling around 81%. The company is focusing on moving from low-margin products (two-wheeler) to high-margin products (passenger and commercial vehicles), including parts for hybrid and pure EV vehicles.
Regarding the tariffs announced by the U.S., the management mentioned that the direct impact for the company is mitigated as customers pay the duty, however, the long term impact will need to be assessed over time.
The management currently expects to achieve revenue in the range of Rs.1,900cr to Rs.1,950cr in FY26, translating to a top-line growth of 12% to 14%. The company remains optimistic for FY26, anticipating EBITDA margins to be at 13%.
OUTLOOK AND VALUATION
Currently, we are revising our target price for Alicon Castalloy Ltd from Rs.1806 to Rs.1465, due to a slowdown in revenue and a negatively impacted product mix in the last few quarters. However, we still remain bullish over the long run, due to the various growth factors prevalent for the company. We expect FY27E revenue at Rs.2104.8cr, EBITDA of Rs.289.9cr at an EBITDA margin of 13.8% and PAT of Rs.95.3cr. We estimate FY27E EPS at Rs.58.6, and assign a PE multiple of 25x, revising the target price to Rs.1465 (upside ~80.8%) from the current market price of Rs.810. We keep our BUY Rating for Alicon Castalloy Ltd over an investment horizon of 24 months.
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