Alicon is a globle conglomerate in high quality engineering solutions. Company is pioneer in low-pressure die casting (LPDC) and gravity die-casting (GDC). The market cap of the company is Rs 1094 crore. The cylinder head is one of the key products manufactured by the company and accounts for a lion's share of its revenue. The company derives around 80% of its revenue from domestic operations, while 20% is constituted by exports, which include overseas business. The shares of the company currently trading at Rs 698.05, after gaining 2.65%. Sharekhan securities have recommended the buy for potential gains of 23% for a target price of Rs 847.

  e-Mobility Business Taking Up Central Stage Alicon Castalloy Limited (Alicon) reported better-than-expected Q4FY2022 results. Revenue, EBITDA, and PAT exceeded the street's estimates by 8.4%, 11.5%, and 13.9%, respectively. On a y-o-y basis, numbers were muted due to high base effect, while on a q-o-q basis, the company's performance improved on higher sales. Net revenue grew 14.9% q-o-q to Rs. 320 crore, led by a recovery in automobile sales. EBITDA margin for Q4FY2022 stood at 11.8%, down 10 bps q-o-q, mainly due to a 21% increase in employee cost, partially mitigated by 30 bps q-o-q improvement in gross margin and another 30-bps improvement in other operating expenses. Management witnessed a demand uptrend across domestic markets, especially in M&HCV and PV segments. On the international front, most key export geographies in the US and Europe reported healthy auto sales, led by steady demand and stable currency in key markets. "We expect Alicon to benefit from improved business outlook from automotive and non-automotive segments, given its multi-year order wins and recovery expected in demand. Management expects e-mobility business to be the key growth driver going forward, with its aspiration to have ~45% contribution from e-mobility business. The company's new order book stands at Rs. 3,000 crore, which will be executed over the next 4-5 years and has a 25% share of e-mobility business. Given the size of the current order book and Alicon's established client relationships, we believe the company has a high degree of revenue visibility in the medium term," Sharekhan has said. Key positives and negatives The brokerage explained the positives, "Robust new order book size of Rs. 3,000 crore to be executed over the next five years with Rs. 600 crore-700 crore incremental revenue every year. During the year, the company won several contracts from multiple existing and new original equipment manufacturers (OEMs) for e-mobility, leading its share of e-mobility business to ~25% of the order book. EBITDA margin was better than expectations, led by price hikes and superior product mix. On the international front, most key export geographies in the US and Europe reported healthy auto sales, led by steady demand and stable currency in key markets. Alicon has been approved as one of the beneficiaries of the PLI scheme under the component champion incentive scheme." On key negatives, the brokerage has said, "Chips shortage and volatile input prices impacted growth and restricted EBITDA margin improvement during Q4FY2022. The restricted growth was further adversely impacted by cost-based inflation, cost of new product development, and geopolitical tension between Russia and Ukraine." Buy for a target price of Rs 847 Alicon is likely to benefit from multi-year order wins, which are expected to contribute significantly going forward. We remain positive on the company's growth prospects, given the company's multi-year order wins, increased share of high-margin machined components, and enhanced share of e-mobility components. The brokerage explained, "We expect Alicon's earning to report a robust 118% CAGR during FY2022-FY2024E, led by a 27% revenue CAGR and a 300-bps improvement in EBITDA margin to 13.4% in FY2024E from 10.4% in FY2022. The stock is trading at an attractive P/E multiple of 9.5x and EV/EBITDA multiple of 4.4x. Given strong revenue visibility, we maintain Buy on the stock with a revised price target (PT) of Rs. 847." According to the brokerage, Alicon has a significant exposure to international markets. Any slowdown or cyclical downturn in any of the locations, where it has a strong presence, can impact its business and profitability. Disclaimer The stock has been picked from the brokerage report of Sharekhan. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decisions.

Alicon Castalloy Limited (Alicon) reported better-than-expected Q4FY2022 results. Revenue, EBITDA, and PAT exceeded the street's estimates by 8.4%, 11.5%, and 13.9%, respectively. On a y-o-y basis, numbers were muted due to high base effect, while on a q-o-q basis, the company's performance improved on higher sales. Net revenue grew 14.9% q-o-q to Rs. 320 crore, led by a recovery in automobile sales. EBITDA margin for Q4FY2022 stood at 11.8%, down 10 bps q-o-q, mainly due to a 21% increase in employee cost, partially mitigated by 30 bps q-o-q improvement in gross margin and another 30-bps improvement in other operating expenses. Management witnessed a demand uptrend across domestic markets, especially in M&HCV and PV segments. On the international front, most key export geographies in the US and Europe reported healthy auto sales, led by steady demand and stable currency in key markets.

"We expect Alicon to benefit from improved business outlook from automotive and non-automotive segments, given its multi-year order wins and recovery expected in demand. Management expects e-mobility business to be the key growth driver going forward, with its aspiration to have ~45% contribution from e-mobility business. The company's new order book stands at Rs. 3,000 crore, which will be executed over the next 4-5 years and has a 25% share of e-mobility business. Given the size of the current order book and Alicon's established client relationships, we believe the company has a high degree of revenue visibility in the medium term," Sharekhan has said.

The brokerage explained the positives, "Robust new order book size of Rs. 3,000 crore to be executed over the next five years with Rs. 600 crore-700 crore incremental revenue every year. During the year, the company won several contracts from multiple existing and new original equipment manufacturers (OEMs) for e-mobility, leading its share of e-mobility business to ~25% of the order book. EBITDA margin was better than expectations, led by price hikes and superior product mix. On the international front, most key export geographies in the US and Europe reported healthy auto sales, led by steady demand and stable currency in key markets. Alicon has been approved as one of the beneficiaries of the PLI scheme under the component champion incentive scheme."

On key negatives, the brokerage has said, "Chips shortage and volatile input prices impacted growth and restricted EBITDA margin improvement during Q4FY2022. The restricted growth was further adversely impacted by cost-based inflation, cost of new product development, and geopolitical tension between Russia and Ukraine."

Alicon is likely to benefit from multi-year order wins, which are expected to contribute significantly going forward. We remain positive on the company's growth prospects, given the company's multi-year order wins, increased share of high-margin machined components, and enhanced share of e-mobility components. The brokerage explained, "We expect Alicon's earning to report a robust 118% CAGR during FY2022-FY2024E, led by a 27% revenue CAGR and a 300-bps improvement in EBITDA margin to 13.4% in FY2024E from 10.4% in FY2022. The stock is trading at an attractive P/E multiple of 9.5x and EV/EBITDA multiple of 4.4x. Given strong revenue visibility, we maintain Buy on the stock with a revised price target (PT) of Rs. 847."

According to the brokerage, Alicon has a significant exposure to international markets. Any slowdown or cyclical downturn in any of the locations, where it has a strong presence, can impact its business and profitability.

The stock has been picked from the brokerage report of Sharekhan. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decisions.