Asahi India Glass: Buy

Date: 8 March 2004

Along with a host of other auto-ancillary companies, Asahi India too has been a beneficiary of the increase in automobile production.

Taking into account the benefits flowing from the merger of its subsidiary along with the continued increase in automobile production would have a positive impact on the company's performance. Long-term investors may contemplate equity exposure in the company.

The company makes laminated safety glass and floatglass. It is the largest supplier of laminated glass used as windshields in automobiles. Consequent to the merger of its subsidiary — Floatglass India — Asahi India's product portfolio now includes floatglass, a key raw material for making laminated and tempered glass.

The company caters to the original equipment requirement of almost all automobile majors in the country.

Considering the nature of the product, Asahi India derives a significant chunk of its revenues from the original equipment (OE) segment. To reduce its dependence on the OE segment, the company has ventured into other business segments.

It has tapped the architectural and white goods segments to broaden the revenue base. Asahi India has also taken steps to venture into the replacement market. The company now has a prominent presence in the replacement market through its associate — Windshield Experts. The company has about 12 such centres in various cities. This has helped it gain a better access to the replacement market.

Financially, the company has managed to record a steady growth in earnings. The growth in automobile production along with the merger of its subsidiary has been key driver of earnings in the recent quarters.

For the year ended March 2003, the turnover rose to Rs 469.5 crore (Rs 234.9 crore) and post-tax earnings of Rs 37.2 crore (Rs 11.8 crore).

The company appears well-positioned to exploit the growth in demand flowing from automobile production growth. The entry into the replacement and non-automotive segments is another positive feature.

The decision to set up a production unit at Chennai would also result in increased revenue flow. The new plant is expected to be commissioned by the end of this calendar year.

This would place the company in a better position to cater to the requirements of its client in the South — Ford and Hyundai in particular.

Taking into these factors, the company appears positioned to record a steady growth in earnings.

Considering the growth prospects and prominent presence in the industry, long-term investors could contemplate equity exposure at current market price of about Rs 120

600450 Asahi India Glass: Buy glassonweb.com

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