Amtek Auto Limited

BUY
CMP: Rs. 181.40 Date: March 22nd, 2010. Key Ratios: Particulars OPM (%) NPM (%) ROE (%) ROCE (%) P/BV(x) P/E(x) EV/EBDITA(x) Debt equity ratio Key Data: Sector Face Value 52 wk. High/Low Volume (2 wk. Avg.) BSE Code Target price: Rs.208.00 Market Cap. : Rs.28343.75mn.

FY09 (12 m) 37 15 6 5 1.03 16.69 2.81 1.35

FY10E (12 m) 39 14 7 5 1.07 16.34 6.62 1.39

FY11E (12 m) 38 14 7 6 0.99 14.30 6.60 1.42

SYNOPSIS
• Amtek manufactures a wide range of components for automotive applications, specialized in engine, transmission and suspension systems. The company has clients like Maruti, TVS, Hero Honda, Mahindra & Mahindra, Bajaj Auto and Tata Motors. It also has presence in the US and UK. • Amtek Auto allots 3,65,41,314 equity shares upon the conversion of FCCBs. • As per the order of Hon'ble High Court of Punjab & Haryana the Scheme of Arrangement of Amtek India Ltd., Ahmednagar Forgings Ltd., Amtek Ring Gears Ltd., Amtek Crankshafts India Ltd. and Amtek Casting India Ltd. with Amtek Auto Ltd. has been dismissed on account of changed circumstances as regards valuation of shares and decline in turnover and profits. • The company has declared dividend to its Equity shareholders @ 25% for the year 2008-09 i.e. Rs 0.50 per equity share of Rs 2/- each.

Automobile Ancillary Rs.2.00 Rs.239.30/69.00 2691000 520077

V.S.R. Sastry Vice President Equity Research Desk 91-22-25276077 vsrsastry@firstcallindiaequity.com

• The company & Sumitomo Metal Industries (Sumitomo Metals) of Japan have signed a joint venture (JV) agreement for production and sale of forged crank shafts for automotive applications in India.

Share Holding Pattern:

Dr. V.V.L.N. Sastry Ph.D. Chief Research Officer drsastry@firstcallindia.com

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Table of Content Content 1. Investment Highlights 2. Company profile 3. Company products 4. Peer Group Comparison 5. Key Concerns 6. Financials 7. Charts & Graph 8. Outlook and Conclusion 9. Industry Overview Page No. 03 06 07 11 11 12 14 16 17

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25 for equity share of Rs. The bottom line of the company for the quarter stood at Rs.80mn of the corresponding period of the previous year i. an increase of 72%YoY.2. 3 .350.00 each.3021.80mn from Rs.Investment Highlights • Result Updates (Q2FY10) For the second quarter. EPS of the company for the quarter stood at Rs.2413.80mn against Rs.203.30mn of the same period of the last year. the top line of the company increased 25%YoY and stood at Rs.e.2.

30mn. OPM and NPM for the quarter stood at 38% and 12% respectively from 28% and 8% respectively of the same period of the last year.2218.00mn.00mn from Rs. 4 . which is around 15% higher than the corresponding period of the previous year..e.1905. Employee cost stood at Rs. a decrease of 5%YoY.Expenditure for the quarter stood at Rs. Raw material cost of the company for the quarter accounts for 63% of the sales of the company and stood at Rs.155. and accounts for 6% of the revenue of the company for the quarter i.90mn.148.

with Amtek Auto Ltd. 5 . Ahmednagar Forgings Ltd.65.40/. Sumitomo Metal form JV for forged crankshafts The company & Sumitomo Metal Industries (Sumitomo Metals) of Japan have signed a joint venture (JV) agreement for production and sale of forged crank shafts for automotive applications in India. and Amtek Casting India Ltd. The appropriate remedy could only be through a fresh petition and the scheme cannot be considered on the basis of the data available in the year 2007. 148..e. • Amtek Auto allots 3.314 equity shares upon the conversion of FCCBs The Board of Directors of the Company .83/. 209.each. 2010 have allotted 36541314 equity shares at Rs.50 per equity share of Rs 2/. has been dismissed on account of changed circumstances as regards valuation of shares and decline in turnover and profits. • Dividend The company has declared dividend to its Equity shareholders @ 25% for the year 200809 i. of the face value US$ 9. • Scheme of Arrangement As per the order of Hon'ble High Court of Punjab & Haryana the Scheme of Arrangement of Amtek India Ltd.500.51 million. Amtek Ring Gears Ltd. Rs 0. at a discount in compliance with the RBI FCCB Buyback Guidelines As a result of their repurchase of FCCBs the Company's outstanding FCCBs as on date at US$ 8. of June 2010 Foreign Currency Convertible Bonds (FCCBs).054 equity shares at Rs. in the meeting held on February 9..• Allotment of Equity Shares The Company has allotted 52..000.000. • Repurchases Foreign Currency Convertible Bonds (FCCBs) The Company has repurchased and cancelled.per shares upon the conversion of FCCB's of US $ 0.000 • Amtek. Amtek Crankshafts India Ltd.41. The Court held that it would be impermissible to order the scheme proposed on the basis of valuation of shares of the year 2007.25 million.per shares upon the conversion of FCCB's of US $ 111.

Ltd. Mahindra & Mahindra. Isuzu Diesel. US. Eicher Motors Limited. JCB. the Middle East. Defence. Land Rover. The products are used for 2-3 wheelers. and stationary engines. North America. tractors. Aston Martin. flywheel ring gears and assembly. CNH Global. Fairfield. Escorts. crankshaft assemblies. Jaguar. The major categories of components manufactured by the company include connecting rod assemblies. Maruti Suzuki. `With this entry to India. Ketlon Machining. This also makes Amtek a full serviced supplier of crankshafts for automotive applications as Amtek has already created market leader position for itself in the field of fully machined crankshafts in India. BMW. The company was incorporated in 1985 and is based in New Delhi. cv joints. Musashi Auto Part Pvt. CYT. Bajaj Auto Limited. Asia. Sumitomo Metals. and South America. Africa. China and India) The automobile industry faces unprecedented difficulties. Ford. Dana Italia. It exports its products primarily to Europe. Honda Scooters. and 10% by Sumitommo Corporation. and torque links. Sumitomo Metals will have a global `tetra polar` production system (Japan. This JV also provides to Sumitomo Metals entry into the high growth crankshaft market of India. General Motors. cars. heavy commercial vehicles. MG Rover. The company is a part of Amtek Group. India. Sumitomo Corporation is the global partner of crankshaft business of Sumitomo Metals. light commercial vehicles. on the other hand will bring in its world-class crankshaft forging technology. LML Limited. The company will contribute to this JV. Navistar 6 . The company's customers include Ashok Leyland Limited. Fiat India. Davis Industries. steering knuckles. Briggs & Stratton. Company profile Amtek Auto Limited engages in the manufacture and sale of auto components in India and internationally. This JV will be another milestone for the Amtek Group and step forward in the direction of consolidating its customer and product portfolio as well as attaining world-class technological edge in automotive manufacturing. Cummins. Delco Machining.. GWK. CNH New Holland. This is in line with Amtek`s strategy of augmenting its product portfolio. suspension and steering arms. MDM.This JV is to be formed with investment of 50% by Amtek. its existing local market and manufacturing know-how and experience. John Deere. LG Electronics. Kawasaki. Hindustan Motors. GE Transportation. Hero Honda. International Tractors. Hyundai. but the Indian automobile market has been growing rapidly in recent years and local demand for forged crankshafts is expected to surge significantly in the medium to long term. Mulhoff. Luk Industries. This is based on Sumitomo Metals` corporate strategy to `add strength to strong areas. 40% by Sumitomo Metals. Ltd.

General Motors. Saab. Tata Motors. Scania. Unimotion Gears. Rail. Perkins Engines. Sisu Diesel. Company products Product portfolio • • • • • Flywheel Ring Gears Machining Forging Casting Aluminium (HPDC & GDC) Casting Iron(HPDC & GDC) Flywheel Ring Gears • • • Starter Ring Gear Flex plate Assemblies (2 Piece) Flywheel Assemblies Machining • • • • • • • • • • • • • • • • • • • • Steering Knuckles Ladder frames Engine bearing ladders Exhaust manifolds Aluminium Case Housings Bridge Fork Assemblies Hubs Spindles Connecting Rods Crankshaft Housings Gear Shifter Forks Front Axle Beam Assembly Crankshaft Assembly Conrod Piston Sub Assembly Flywheel Assembly Pivot Arms Flywheel Housing & Assembly Wheel Hubs PTO Casing 7 . Toyota. and Yamaha Motors. Sanden Corp. Tallent Engineering. Tecumseh.

• • Front Axle Beams Front & Rear Axle Forging • • • • • • • • • • • • • • • Connecting rods & Caps Crankshafts & Camshafts Steering Levers Gear shifter forks Sector gears & shafts Front Impact Beams Drive Shafts Spindlers Hubs & Flanges Transmission Components Steering Parts Pistons Propeller Fork Shafts Stub – Axle Front Axle Beam Front & Rear Axle Shaft Casting Aluminium (HPDC & GDC) • • • • • • • • Clutch Cases Transmission cases Timing Chain Covers Mounting Brackets Camshaft Covers / Carriers Bearing Ladders / Sumps Structural Covers Differential Flange Casting Iron (HPDC & GDC) • • • • • • • • Cylinder Block & Head Transmission Housings Brake Carriers & Caliper Trumpet casings Crankshafts Intake and Exhaust Manifolds Flywheels & Flywheel Housings Turbo Charger 8 .

detailed FE analysis. A key feature of the design process is the use of advanced CAE techniques such as structural optimization of component topology and topography to meet customerdefined targets for stiffness. strength. Data Exchange is done through Metaphase. The facility offers design activity using 3D modeling. Linear and non-linear analysis is undertaken as required to prove design integrity under all conditions prior to first physical prototypes. DAT tape etc. NVH and fatigue performance. UK and from their well-equipped design centre in India. C3P I-Deas. from company modern design coordination centre at Letchworth. Latest Design Soft wares such as CATIA.• • Bell Housings Linkshafts Services • • Product Design Lean Six Sigma Product Design The Group has a Design and Development facility that fully supports to the customer requirements. mass. Unigraphics and Pro Engineer are used. Design engineers can work from customer’s premises. ENOAT/ODETTE as well as Internet. FTP. NVH Refinement and Kinematic analysis. thus reducing time between initial concept and production readiness 9 .

This will include programme metrics. It will become a part of the Amtek Human Resource policy. Measure.Lean Six Sigma Amtek is in the process of implementing Lean and Six Sigma. This role will help shape the Lean Six Sigma Strategy & Development within Amtek. inform and educate. Lean & Six sigma will be followed in all the plants of Amtek. They have Champions. Lean Manufacturing seeks to identify and eliminate the source of waste that exists within a process. Green Belts and we will have Master Black Belts. full time Black Belts. They have been trained on Lean/Six Sigma and once trained these people can impart training down the line. 10 . Each business will communicate the principles and progress of the Lean and Six-Sigma programme throughout the business using the agreed communication tools to share. Analyse. Improve. project metrics & plant maturity metrics. Each region & plant will have a formalized & standardized infrastructure. Six Sigma is a process of reducing variation using a DMAIC (Define. Training will be provided for different people at different levels based upon the needs of the organization. and Control) methodology.

06 19.48 11.70 9.52 1.74 188.) (As on March 22.00 60.86 7. Mn.00 Key Concerns Adverse Govt.86 95.00 48002.60 4800.11 18.62 4.) (Rs.57 4. EPS (Rs.00 28343.19 25.40 403.00 0.24 5.00 250.Peer Group Comparison Name of the company CMP(Rs. 2010) Market Cap.88 3.85 131.) P/E (x) P/BV (x) Dividend (%) Amtek Auto Hindustan Composites Limited Exide industries Motherson Sumi Bosch 181.75 2216.05 113.09 25.80 91080. policies Economic slow down. Highly competition Recession in global economy 11 .30 150714.11 9.00 135.36 35.

70 -290.30 -1510.98 -578.40 312.41 -9162.70 -555.00 10.00 156.30 -9427.25 12.00 1399.40 2630.Financials Results Update 12 months ended Profit and Loss A/C (Standalone): Value(Rs.10 -1373.80 -628.50 282.96 1539.45 13955.33 3686.26 -1216.40 2.00 24548.70 3941.00 -939.10 3313.03 1693.50 -7979.90 985.70 4091.10 3151.66 FY09 12m 10522.68 12 .50 11921.87 FY10E 12m 12415.25 11.47 1981.87 -660.00 18.43 -10354.00 141.70 -1226.25 1734.94 2.90 -826.60 4381.50 26283.96 4152.40 282.12 2312.74 312. of Shares EPS (Rs) *Year ending on June 30th FY08 12m 12823.30 1532.40 15723.00 2087.80 2.43 2641. in million) Description Net Sales Other Income Total Income Expenditure Operating Profit Interest Gross Profit Depreciation Profit before Tax Tax Net Profit Equity Capital Reserves Face Value (Rs) Total No.00 156.40 13809.00 141.50 28264.17 5369.98 4792.54 2.43 -1106.00 23016.10 FY11E 12m 14030.

70 305.80 312.00 -287.25 2.00 141.00 350.00 867.09 956.30 -2218.Quarterly ended Profit and Loss A/C (Standalone): Value(Rs.40 622.90 819.80 -1997.20 -403.25 31-Mar-10E 3m 3323.10 360.52 -137.70 282.80 1453.42 30-Sep-09 3m 2674.00 156.25 2.00 282.50 3378.30 -403.00 2.57 544.10 -244.70 -102.98 374.00 2.06 407.30 1160.61 13 .09 -411.10 -358.90 -225.50 407.50 2.13 1258.20 3341.80 -118.70 872.46 312.10 -1887.31 -2440.20 1225. in million) Description Net Sales Other Income Total Income Expenditure Operating Profit Interest Gross Profit Depreciation Profit before Tax Tax Net Profit Equity Capital Face Value (Rs) Total No.18 -302.33 3698.00 2.16 31-Dec-09 3m 3021.00 141.30 -228.50 468.00 156.70 3034.50 2.80 356.70 811.00 4.90 1036. of Shares EPS (Rs) 30-Jun-09 3m 2521.

Charts • Net sales & PAT • P/E Ratio (x) 14 .

• P/BV (X) • EV/EBITDA(X) 15 .

the stock trades at 6. Price to book value of the company is expected to be at 1.40.07 x for FY10E and 0. 148.40/. • • • • 16 .60 x for FY11E. On the basis of EV/EBDITA.51 million.68 for the earnings of FY10E and FY11E respectively. The Board of Directors of the Company .per shares upon the conversion of FCCB's of US $ 111. the stock is trading at 16.34 x and 14.10 and Rs.30 x for FY10E and FY11E respectively.181.99 x for FY11E respectively. 2010 have allotted 36541314 equity shares at Rs.11.62 x for FY10E and 6. in the meeting held on February 9. EPS of the company is expected to be at Rs.12.1 Year Comparative Graph Amtek Auto Ltd BSE SENSEX Outlook and Conclusion • At the market price of Rs.

2 billion in 2007-08 and are likely to touch US$ 20. Amtek Ring Gears Ltd. such as Apollo Tyres. has been dismissed on account of changed circumstances as regards valuation of shares and decline in turnover and profits. according to a report by the Centre for Monitoring Indian Economy (CMIE).00 for medium to long term. In Tamil Nadu alone. It is likely to touch US$ 40 billion. Ford and Volkswagen.5 per cent rise in exports and after-market segment. increasing India’s share in the global auto component market from 1 per cent to 3 per cent by 2015-16.• As per the order of Hon'ble High Court of Punjab & Haryana the Scheme of Arrangement of Amtek India Ltd. India is now a supplier of a range of high-value and critical automobile components to global auto makers such as General Motors. A majority of Indian exports are sent to Europe and North America. 17 .2 per cent in 2009-10. an increase of 27.12 million. Investments in the auto component industry were estimated at US$ 7. During April-January 2008-09. exports grew by 27. The company & Sumitomo Metal Industries (Sumitomo Metals) of Japan have signed a joint venture (JV) agreement for production and sale of forged crank shafts for automotive applications in India.2 per cent since 2002. with Amtek Auto Ltd.. It is estimated to reach around US$ 20 billion-US$ 22 billion by 2015-16. • • Industry Overview The Indian auto component industry is one of India's sunrise industries with tremendous growth prospects. the turnover of the auto component industry was estimated at over US$ 18 billion in 2007-08. Toyota.. As per an Automotive Component Manufacturers Association of India (ACMA) report.9 billion by 2015-16.6 billion in 2007-08. it is expected that auto ancillary production would grow by 8. MRF. From a low-key supplier providing components to the domestic market alone. We recommend ‘BUY’ this stock with a target price of Rs.208. the industry has emerged as one of the key auto components centres in Asia and is today seen as a significant player in the global automotive supply chain.. amongst others. nearly US$ 1 billion have been invested by some of the major trye companies. Ahmednagar Forgings Ltd. and Amtek Casting India Ltd. Amtek Crankshafts India Ltd.3 per cent to US$ 2. Aided by a 7 per cent growth in the original equipment manufacturers (OEM) segment and an 8. Dunlop and TVS Srichakra. ATC Tires. Exports of auto components grew at the rate of 35 per cent during 2002-07 and touched US$ 3.

has inaugurated the first phase of its manufacturing facility in India. The expo will now be an annual event for the country and will showcase latest technologies. the Investment Commission has set a target of attracting foreign investment worth US$ 5 billion for the next seven years to increase India's share in the global auto components market from the existing 0. Coimbatore-based Elgi Rubber Company has formed a fully owned subsidiary company in Texas.58 million in Phase I and hopes to start work on the second phase by the end of next year. a part of the TVS group.77 million in Multipart Holding in the next 18 months in order to expand its operations in the UK and rest of Europe. Tamil Nadu. Mercedes Benz India expects growth in sourcing from India to continue at 10 per cent. acquired one of the largest after market logistics companies in the UK. Michelin’s proposal to set up a US$ 851. investing up to US$ 5 million on the venture.India will be the next destination for the Automotive Testing Expo to be hosted by UKIP Media at Hyderabad next year. Seeing the growing popularity of India in the automotive component sector. Oeitker Group. The Tamil Nadu state cabinet recently gave clearance to the French tyre major. besides using more local components in cars for the Indian market. Indian companies are also expanding their footprints abroad. It has invested US$ 12.5 million Greenfield project near Chennai. including simulation. For instance. Skoda Auto India is looking at increasing localization for its small car Fabia to over 50 per cent over the next two years.5 per cent by 2015. Further. TVS Logistics. US under the name of Elgi Rubber Company LLC. Foreign Investments India enjoys a cost advantage with respect to casting and forging as manufacturing costs in India are 25 to 30 per cent lower than their western counterparts. BMW is likely to sign the first direct sourcing deal with local vendors by the end of this year. 18 . global automobile manufacturers see India as a manufacturing hub for auto components and are rapidly increasing the value of components they source from India due to: • • India's cost competitiveness in terms of labour and raw material. Destination India According to the Investment Commission of India.9 per cent to 2. for new automotives and components. Makers of luxury cars are increasingly looking at making India a sourcing hub for components. Its established manufacturing base. The company will undertake an investment in excess of US$ 26. • • Swiss auto clamps maker.

with the Tamil Nadu government to set up a unit with a capacity of 250.84 million in association with Austrian firm BRP Power train for manufacturing automotive transmissions in India. Policy Initiatives The government has taken many initiatives to promote foreign direct investment (FDI) in the industry.24 billion.30 million from around 34 automotive ancillary units. An auto park is coming up near Hyderabad with investments worth over US$ 409. Ford Motors. Some other investments include: • • • Apollo Tyres is to scale up investment at its upcoming radial tyre project at Oragadam in Tamil Nadu from US$ 106. Indian tyre makers are rolling out investment plans worth US$ 1.• • A memorandum of understanding (MoU) has been signed by the US auto giant.59 million Greenfield project being set up by MLR Motors near the park. The automobile industry has been delicensed. plastic-related items and metals for its European plants. Volkswagen has commenced sourcing components from India for its Russian plant and is also looking at sourcing light systems. German auto company. Indian arm of Swedish automotive component maker SKF is investing US$ 30 million in a new ball bearings manufacturing plant at Haridwar. 19 . The government has envisaged the Automotive Mission Plan 2016 to promote growth in the sector. There are no restraints on import of components.04 million. due to the rising popularity of radial tyres in the commercial vehicles segment. This is in addition to a US$ 245.4 million to US$ 447. The sector not only has global players looking to invest and expand but leading domestic component companies are also pumping in huge sums into expanding operations. Domestic Investments The market is so large and diverse that a large number of players can be absorbed to accommodate buyer needs. • • • Automatic approval for foreign equity investment up to 100 per cent of manufacture of automobiles and components is permitted. Moreover. It targets: • Emerging as the global favorite in the area of design and manufacture of automobiles and auto components.000 engines a year. Hero Motors will invest US$ 19.

accounting for more than 10 per cent of the GDP. Industry experts are hopeful that the country will be able to offset China and other Southeast Asian countries' traditional manufacturing advantage in the coming years. Offering additional employment to 25 million people by 2016. Firstcall India Equity Advisors Pvt.• • Taking the output to US$ 145 billion. 20 . the domestic market itself is ripe with rapidly growing opportunities. Looking Ahead With investments around US$ 15 billion slated for the sector over the next few years. ___________________________________________________________ Disclaimer: This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. Ltd. Even though India's auto component industry has conventionally relied on exports for its profits. This document is provide for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. the prospects for India's auto market are bright. The information contained herein is from publicly available data or other sources believed to be reliable but we do not represent that it is accurate or complete and it should not be relied on as such. facilitating the industry's achievement of its targeted market value of US$ 40 billion by 2014. or any of it’s affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report.

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