ASK Automotive Ltd – Meets Expectations; ALPS & Aftermarket to Drive Growth | MNCL Research Company Update

We retain ACCUMULATE on ASK Automotive while lowering our target price to Rs 525. The lowering of TP follows downward revision in our revenue and margin estimates, partially offset by valuation rollover. ASK delivered a strong Q2, broadly in line with our expectations. The Aluminium Lightweighting Precision Solutions (ALPS) segment continued to anchor growth, although the margins were impacted sequentially due to higher aluminium prices. We expect ASK to continue outperform the base industry growth, driven by wallet share gains in ALPS segment and a robust aftermarket performance. Alloy wheel testing under the Taiwanese collaboration is ongoing, while samples for Japanese collaboration are expected to commence from FY27E. We believe ASK will maintain its strong earnings trajectory over FY26-28E. Progress on alloy wheels and new product developments (including sunroof cables) remain key monitorables.

Strong revenue performance:

ASK reported +8.2% yoy growth in revenue to Rs10.5bn. On ex-wheels assembly segment basis, ASK reported growth of 16.3% yoy. The advanced braking systems division grew by 10% on yoy basis. The ALPS segment continued to be the primary driver of the overall performance with a growth of 22% on yoy basis, while the safety controls division reported 3% yoy growth. The wheels assembly business declined by 53% on yoy basis, attributable to the ramp down.

Higher aluminium pricing weighs on margin:

Q2 margins came in at 13% (versus our estimate at 13.4%); +102bps yoy, -41bps qoq. ASK has improved its yoy margin performance due to ramp-down of low value add wheels assembly business and ramp up at new capacities. However, on qoq basis, higher aluminium prices impacted margins. Effectively, EBITDA stood at Rs1.37bn; +17.4% yoy. Consol. PAT increased by 18.6% yoy to Rs798mn.

ALPS and aftermarket to drive outperformance:

ASK’s strong position in drum brakes is expected to benefit from the recent GST rationalization in the aftermarket segment (earlier 28% to now 18%). We expect the aftermarket business to outpace industry growth. The ALPS segment is expected to deliver robust growth, largely driven by wallet share gains. We have revised our revenue estimates downward by 3%/6% for FY26E/FY27E, respectively, to factor in slower than expected commencement of dispatches in the alloy wheels business (still under testing stage) and moderation in growth for the safety control segment. We have lowered our margin estimates which has led to an effective cut of 7%/9% resp. to our FY26/27E earnings estimates. ASK is expected to sustain its strong track record of earnings consistency. Developments in the alloy wheels program and progress on new product initiatives, (incl. sunroof cables), will be important factors to track going forward.

Valuation & Risks:

We build in revenue/ EBITDA/ PAT growth of 12%/ 16%/ 19% over FY25-28E. We have valued ASK at 27x 2QFY28E earnings to arrive at a TP of Rs525. ACCUMULATE. Key risks: High client concentration, failure to ramp up exports and regulation mandating anti-lock braking system.

Company website: https://askbrake.com/

Click to download the full ASK Automotive Ltd. 2QFY26 Company Update

Analyst: 

• Smit Shah - Research Analyst, Institutional Equities (NISM-202300068297)

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