Thread by @alphaspotcap

Asahi India Glass Ltd Analysis!🇮🇳

A Detailed Thread🧵👇🏻
#investing #stocks

(1/15)

About:

AIG is India's largest integrated glass solutions company & a dominant player both in the automotive & architectural segments. It commands over 74% market share in the Indian passenger car glass market.

(2/15)

Business Verticals:

AIG has significant presence in the glass value chains through the following business verticals-

• Automative Glass

• Consumer Glass

• Architectural Glass

(3/15)

Fiscal 22

In FY22, AIG showed a strong YoY revenue growth of over 31%, and increase its sales to over ₹3,170 cr driven by recovery in demand from OEMs and increase in price realisations in the architectural glass segment.

The margins also sustained above 24% vs 18% YoY

(4/15)

Financial Risk Profiling:

Financial risk profile remains healthy in fiscal 2022 supported by adequate liquidity in the form of unutilised bank lines of over ₹250 cr and comfortable capital structure.

Debt metrics Int Coverage improved from 3.5 in FY21 to 5.5 in FY22

(5/15)

AIG is actively pursuing on plans to incur a capex of ₹1,500 cr for greenfield & brownfield capacity expansion over the next 3 fiscals. With healthy cash accrual of ₹500cr per annum over the next 3 fiscals, gearing should remain below 1 time and improve gradually.

(6/15)

Strengths:

• Strong business profile:

Track record of over 35 years in the automotive glass components industry has helped AIG a build dominant market position with 74% share in PV segment & key relationship with leading OEMs such as MSIL, Suzuki, Hyundai, Tata Motors.

(7/15)

Experienced Management:

AIG enjoys strong backing of Labroo family (20.9%), AGC (22.2%) & MSIL (11.1%).

AGC Inc, a leading glass manufacturer in the world with 12% global market share in the float glass & 30% in the automotive glass provides technical support to AIS.

(8/15)

Opportunity in Architectural Glass:

There is an enormous opportunity for the company in this segment for the years to come due to

• Strong Real Estate Demand
• Increasing Office Space Demand
• Rapid Urbanisation

(9/15)

Riding the PV growth:

Domestic PVs demand have seen a swift recovery after the
lockdown was lifted, aided by higher preference for personal safety, better financing availability & strong rural demand

This trend is set to continue barring minor pullback in the short run

(10/15)

Weaknesses:

Large capex requirement:

AIG operates in a capital-intensive industry where a downturn in end-user industry may affect its profitability. Gearing had remained above 1 time till fiscal 2021 on account of large capex done on its auto plant and Covid-19.

(11/15)

Cyclicality in the auto industry:

AIG derives 56% of its revenue from the OEM segment. Auto OEMs were adversely hit by the Covid19 as well as slowdown in the Indian economy. Shortage of semi-conductor chips has also impacted auto industry.

(12/15)

• Energy cost inflation to drive margin reversion:

High energy prices along with inflation is putting some pressure on the margins of AIG. The domestic prices are already up ~30% for the consumers and thus the company has limited scope to increase it further.

(13/15)

Numbers:

• Market cap: ₹13,141cr
• Stock P/E : 38.4
• Price to Sales : 4.14
• RoCE: 21.2%
• RoE: 21.4%
• PEG : 2.08
• OPM: 24%
• Debtor Days: 28
• Cash Conversion Cycle : 67

(14/15)

Shareholding Pattern:

• Promoters : 54.24%
• FIIs : 1.47%
• DIIs : 1.55%
• Govt : 0.38%
• Public : 42.36%

(15/15)

Cyclicality is the inherent issue in this business of AGI, but the long term growth trend in India can be used as an engine of growth for this company.

@caniravkaria @kuttrapali26 @Anshi_________ @aparanjape