Automotive Axles Ltd., a JV between Kalyani Group and Meritor Inc., is a leading player in the manufacturing of automotive axles for Medium & Heavy Comm. Vehicles (M&HCV), esp. the rear wheel axles which is an integral and load bearing part of the drive line. It has been the leader in domestic axles industry (~30% market share) and is now all set to benefit manifold from rising share of multi-axles vehicles, post implementation of GST. The implementation of BSVI and vehicle scrappage policy or cash for clinkers will together bring about a multi-year demand for the Comm. vehicles industry benefitting both OEMs and ancillaries.
Automotive Axles Ltd. would be big beneficiary of the rising CV demand driven by
- Improved road quality & implementation of GST
- Implementation of overloading ban and stricter loading restriction
- Shift towards multi axles commercial vehicles in wake of changing ‘Hub & Spoke’ model of logistics
- Better fuel efficiencies following higher utilization levels
Investment Rationale
- Improving Commercial vehicle demand
- A big beneficiary of shift towards multi-axle commercial vehicles
- Expansion of Margins
- Rising exports opportunity
- Vehicle scrapping policy to push CV demand
- Implementation of regulatory norms
Automotive Axles Ltd. to benefit from association with OEMs growing faster than industry
Automotive Axles Ltd. is a leading supplier to Ashok Leyland; it accounts for 65% of Ashok Leyland’s requirement (as per the AR CY2017- Meritor Inc.). Ashok Leyland has gained market share in M&HCV space for last 4 years- from 27% in FY14 to 34% in FY18 and 38% in H1FY19. Over the same period, when the overall industry has grown at CAGR of 7.7%, Ashok Leyland has grown at CAGR of 18.6%; when the M&HCV Ind.s has grown at 14.4%, Ashok Leyland has reported volume growth of 21.5% in M&HCV segment thus grabbing the market share especially in the 31T to 37T multi axle segment. As the segment matures, the industry is moving towards launching higher tonnage CVs. The market leader has already unveiled a product in 40T segment, followed by Ashok Leyland and VECV who have recently launched their products in this nascent space which is expected to see slice of vigorous action.
Sales growth from 2015 to TTM
459 1,086 1,172 1,519 1,849
Net profit growth during same period
11 35 49 84 112
Net cash flow is positive
Sales growth 5Years: 18.78 %
Profit growth 5Years: 45.86 %
Zero Debt company
Improving ROCE and ROE over last 5 years