Financial Daily from THE HINDU group of publications
Sunday, Jan 19, 2003
Financial Daily from THE HINDU group of publications Sunday, Jan 19, 2003 |
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Investment World
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Stocks Markets - Recommendation Asahi India Safety Glass: Safe bet B. Krishnakumar
THE sustained pick-up in automobile demand has had a positive impact on the financial performance of quite a few companies including Asahi India. The company enjoys a prominent position in the automotive glass industry and is also taking steps to broaden its product and market base. Taking into account the strong fundamentals, dominant position in the industry and the acquisition of Float Glass India, the long-term outlook for Asahi India appears positive. The recent stock split (from Rs 10 to Re 1) would also impart much needed liquidity at stock markets. Investors could contemplate equity exposure in the company at the current price of Rs 38.3. Asahi India manufactures the full range of automotive safety glass. Its product range includes laminated windshields, tempered glass for side and back lites, zone tempered glass for windshields, silver printed defogger glass, black ceramic printed flush fitting glass and PVC-encapsulated glass. The company has a major presence in the original equipment (OE) segment with Maruti Udyog being its single largest client. It is also a original equipment supplier to host of other auto majors including Tata Engineering, Hyundai, Ford, Tata Engineering, Mahindra & Mahindra and Eicher. Though the OE segment continues to be the major revenue driver, the company has taken steps to tap other market segments in order to dilute earnings concentration in the OE market. It has actively tapped the replacement market, which now accounts for about 19 per cent of the turnover. In a bid to strengthen the distribution network in the replacement market, Asahi India has acquired a 50 per cent stake in a company called Map Auto Glass, which is one of the major distributors in the replacement market. Besides, the thrust towards cost reduction would also help the company achieve higher profitability. The company has also ventured into non-automotive segments such as architecture and white goods. These measures should help the company tide over unfavourable business phase arising out of a slowdown in automobile production. In the previous fiscal, the company acquired a majority stake in Floatglass India. With effect from February 2002, Floatglass India has become a subsidiary of Asahi India. Floatglass India manufactures floatglass, which is the key raw material for Asahi India, The acquisition of Floatglass India would have a major positive impact for Asahi India in terms of savings in production cost and ensuring regular supply of raw material. The efforts taken to reduce the dependence on OE segment of the automobile industry is a positive step from a long-term perspective. The improvement in passenger car production in the past few quarters has already had a positive impact on the company's earnings. Considering that the automobile industry has recorded a robust growth during the quarter ended December 2002, the company's performance is likely to improve further. Long term investors could include Asahi India in their portfolio.
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