AUTOLINE INDUSTRIES LTD. BSE SCRIP CODE 532797

Autoline Industries Ltd. (BSE: 532797 NSE: AUTOIND ISIN: INE718H01014)

Autoline Industries Ltd. is one of the premier auto ancillary manufacturing companies which is worth investing at the current prices. The stock has the capacity to grow by at least 60-80 percent in one year.
Autoline is one of the prime vendors to various Automobile Companies like, TATA MOTORS LTD. (TELCO), BAJAJ AUTO LTD, KINETIC ENGINEERING LTD, MAHINDRA & MAHINDRA LTD., FIAT (INDIA) PVT. LTD., and WALKER EXHAUST (INDIA) PVT. LTD. (a Subsidiary of Tenneco, a fortune 500 U.S. company). Autoline exports auto parts i.e. brake shoes for Mercedes Benz Trailers to Saudi Arabia, Dubai etc. The future holds promise with negotiations underway with various Detroit based Auto Component Makers for direct exports.

Autoline has grown by leaps and bounds from a single plant, a modest capital and a small staff to a company that can boast of 5 manufacturing units, over 1500 strong human resource and an almost 100 percent growth each year for seven years. Autoline Industries has traversed a growth path at an enviable pace; all thanks to excellent work quality, cost competitiveness, timely deliveries and state-of-the-art Tool Room with latest CAD / CAM facilities. To further enhance design capabilities, Autoline has take a major stake in a design engineering firm making it our subsidiary. With this acquisition, Autoline has the unique capability of Offshore Designing & Manufacturing model (ODM). At Autoline, Autoline are continuously renewing technology and upgrading quality standards, keeping in mind international benchmarks. Considering the rapid growth in the business, the company was in need of additional space and manufacturing capacities. Therefore 3 to 4 expansions had to be taken up in quick succession during last 9 years. Initially Autoline started our operations at Kudalwadi with 10,000 sq. ft. plot area. Then expanded to Chakan with 114,000 sq. ft. Plot area and T-135, MIDC, Bhosari with 53,000 sq. ft. plot area. Further Autoline have now acquired additional Land of 15 Acres (600,000 sq. ft. area approx) in Chakan very near to the existing Factory. Out of the 15 acres land acquired, 7 acres has been utilized to set up a new modern manufacturing facility on a built-up area of 1,60,000 sq. ft. Thus our existing operations of the company are spread at five places (including a wholly owned subsidiary) with good infrastructural facilities. In February 2005 Bhosari Unit got ISO/TS 16949: 2002 certification from TUV (Rh), Germany.

In August 2005 Duke Special Opportunities Fund, Private Equity Investor, invests in company. Autoline acquired as a wholly-owned subsidiary Autolinestern Pressing Pvt. Ltd., a company manufacturing tubular cross members, silencers and Exhaust Systems thus getting into proprietary products. In March 2006 Autoline acquired a 51% stake in Dimensions Engineering Software Services Pvt. Ltd., a company with 40 people into CAD/CAM/CAE & Design Engineering Services making AIL a Concept to Delivery company.

Today, more than 400 products from Autoline fit into a range of SUVs, LCVs , HCVs and passenger cars besides 2 and 3 wheelers. Stringent quality controls and timely deliveries have helped consolidate our position in the market as one of the top 5 vendors of Sheet Metal components for Tata Motors.

Financials

The company has a share capital of 10.37 crores made up of 1.03 crore shares of Rs.10.00 each. Promoters group, FIIs, institutions holdings and bodies corporate hold about 60 percent of the shares and the rest is with the public. Therefore, floating stock and consequently trading volumes are low.

The company has been performing exceedingly well in the past few years. It is also paying dividends. It reported a net profit of about 15 crores in FY 06-07 with eps of 14.5. It came out with excellent June 07 qtr. profits of 3.4 Crores and Sept. Qtr. 07 profits of 4.5 Crores. If the trend continues, the company may end up the whole year 2007-08 with a profit of 18 crores, with an eps of about 17. In general, various companies are trading at more than 15 times forward earnings and if we take into account the eps of FY March 08, the company’s share price should command a valuation of at least 220, where as it now trading at around 156 (very cheap).

The company with a share capital of 10.37 Crores, has reserves (as on Sept. 07) of 98.09 Crores, thus commanding a book value of 104.00

Our earning projections

FY 07-08 Net Profit : 18 Crores EPS 17.47
FY 08-09 Net Profit : 22 Crores EPS 21.35
FY 09-10 Net Profit : 26 Crores EPS 25.24

Presently the share should command a valuation of at least 220 going by the forward earnings. Our share price projections are 240 by April 2008, 320 by April 2009 and 400 by 2010.

The share touched a year’s high of 463 and is now trading near the year’s low levels of 156. In our opinion, the shares can be purchased by conservative investors.

People should use their judgement and invest, because investing in secondary market is risky. Investors who are not ready to rake risks, should follow mutual fund route or go in for safe avenues like Bank deposits etc.

We advise for a minimum tenure of 2 years and there may be ups and downs in the share price in he short to medium term. Our analysis is purely based on fundamental studies of the company.

People with a longer time horizon can consider investment in Autoline Industries shares.