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SBICap Securities
Amtek Auto (Buy)
CMP: ₹242
Target: ₹348
Amtek Auto Ltd (AMTK), one of India’s largest auto component manufacturers, is expected to post revenue growth of 19.1 per cent compound annual growth rate during F13-16e, riding on a cyclical recovery in domestic auto business and a turnaround in international business. We expect its earnings before interest, taxes, depreciation and amortisation (EBITDA) to grow at 17.5 per cent CAGR over F13-16e and margin to improve as capacity utilisation improves driving up the operating leverage. We expect earnings to grow at a CAGR of 45.7 per cent during the same period. We value the company on SoTP (sum-of-the-parts) basis on F16e EV/EBIDTA and arrive at a target price of ₹348. Risk: The key risk to the call is from any sluggishness in the domestic auto recovery and slower offtake in international business.
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