IGI Logo

ASK Automotive (ASK) consol. revenue was 3% above JMFe. EBITDA margin at 11.7% was 80bps ahead of JMFe. YoY margin improvement (+200bps) was led by positive operating leverage and cost control initiatives. Domestic 2W industry continues to remain healthy with an est. 8-9% vol. growth in FY25. ASK has been consistently outperforming growth of the underlying 2W industry led by expansion in product portfolio and increase in wallet share with existing and new customers. Backed by a) rising kit value in the ALP segment as the 2W/3W industry transitions to EVs, b) ramp-up of the 2W SCC business and c) expansion into PV and non-automotive segments by leveraging its capabilities, we believe ASK is well positioned to continue its healthy growth momentum. Mkt. share gain for its key customer augurs well for the company. We expect ASK to post a c.15% / 29% revenue / EPS CAGR over FY24-27E. We maintain our BUY rating with Jun’25 TP of INR 475 (30x Jun’26E EPS vs. 25x earlier). Any slowdown in electrification of domestic 2W/3W remains a key monitorable.

* 1QFY25 – Strong operating performance; beats estimate: ASK reported revenue of INR 8.6bn (+31% YoY, +10% QoQ), 3% above JMFe. EBITDA margin stood at 11.7% (+200bps YoY, +120bps QoQ), 70bps above JMFe. YoY margin improvement was led by higher economies of scale and cost optimisation efforts. EBITDA came-in at INR 1.0bn (+58%YoY, +22%QoQ), c.10% above JMFe. Income from Fras-le JV stood at INR 13mn (- 39% YoY, +27% QoQ). Adjusted PAT stood at INR 568mn (+63% YoY, +19% QoQ), 6% above JMFe.

* Operational update: During 1QFY25, revenue from Advanced Braking Solutions (ABS) / Aluminium Light-Weighting (ALP) / Safety Control Cables (SCC) grew by c.26% / 39% / 33% YoY, significantly ahead of underlying 2W industry growth (c.20% YoY). This was led by ramp-up of new businesses from existing and new customers. Revenue from exports declined by 14% YoY owing to inventory correction at its customers. However, ASK expects export business to recover from 2Q. Share of EV revenue is gradually increasing (4% in FY24 vs. 2% in FY23) led by increase in volumes and higher content per vehicle (higher by 30%-50% in E2Ws).

*  Demand outlook: 2W industry is on the path to recovery. Growth oriented budget and revival in rural spends led by above normal monsoon augur well for the 2W demand and the company estimates the industry volumes to grow by 7-8% over medium-to-long term. The company is aiming to continue its outperformance with respect to the underlying industry led by new product introductions (driving content per vehicle) and increasing wallet share with new and existing customers through better efficiencies.

* Margin outlook: The Company indicated that 120bps QoQ (200bps YoY) margin improvement was led by economies of scale, ramp-up of Rajasthan facility and a focus on cost optimization initiatives. Rajasthan plant is currently operating at 40% capacity utilisation and the company plans to further ramp-up the plant to over 60% utilisation by FY25-end / full ramp-up in FY26. This is expected to further drive positive operating leverage. Overall the company has guided for gradual improvement in EBITDA margins to ~12-13% over near-to-medium term.

*  Other highlights: 1) Update on technical collaboration with LIOHO - ASK indicated that HPDC Alloy Wheels are lighter in weight thereby leading to better fuel economy for a 2W. This technology is already proven and operational in Taiwan and is currently getting tested by Indian OEMs (at advance stage of discussion with 2 OEMs). 2) With regards to aftermarket JV with AISIN, ASK expects product launches under the JV AISIN starting 4QFY25. 3) Capex for 1QFY25 stood at INR 0.8bn. Capex guidance for FY25 stands at INR 2.5-3bn largely towards Bengaluru plant which is expected to commence operations during 4QFY25. 4) Debt during 1Q increased by INR 320mn to INR 3.8bn. ASK plans to marginally reduce its debt by year-end. 5) Company aspires to increase revenue share from exports to 10% (currently c.4%) over the next 5 years. 6) ASK’s inventory stands between 24-25 days (vs. 20-24 days historically). Working capital stands at 19 days.

Please refer disclaimer at https://www.jmfl.com/disclaimer

SEBI Registration Number is INM000010361