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Axis Securities Report
Automotive Axles Ltd. reported weaker-than-expected revenue /Ebitda/profit after tax compared to our estimates. Revenue declined by 7%/14% YoY/QoQ (10% miss), while medium and heavy commerical vehicle industry production volumes for buses and trucks were up 25% and down 1% YoY, respectively.
The lower YoY growth compared to the industry was mainly due to reduced product presence in the nine-meter bus segment, which saw high volume growth. Ebitda, at ~Rs 48.8 crore, was down 17%/23% YoY/QoQ (11% miss) due to negative operating leverage. PAT was reported at Rs 34 crore, down 2%/16% YoY/QoQ (8% miss), largely reflecting the Ebitda performance.
The near-term outlook for the commercial vehicle industry remains cautious; however, increased Govt infrastructure spending is expected to benefit the sector as a whole in the long term. As a proxy to the medium and heavy commerical vehicle industry, we see limited downside risk for AutoAxles at the current market price.
Therefore, we maintain a Buy rating at 19 times FY26 earnings per share (up from 18 times FY26 EPS) with a target price of Rs 2,210 per share (up from the previous target price of Rs 2,175).
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