Market ignores Amtek Auto's diversification in new line of business

Market ignores Amtek Auto's diversification in new line of business

Amtek Auto remained flat at Rs 309 at 10:59 IST on BSE after company entered in to a memorandum of understanding to set up a 50:50 joint venture with American Railcar Industries, a North American leader in railcar manufacturing.

The company made this announcement after trading hours on Thursday, 21 February 2008.

Meanwhile, BSE Sensex was down 289.70 points or 1.63% to 17,444.98 as US and Asian stock markets fell on heightened fears of a US recession.

On BSE, 3,635 shares were traded in the counter. The scrip had an average daily volume of 84,314 shares in the past one quarter.

The stock hit a high of Rs 316 and low of Rs 306 so far during the day. The stock had a 52-week high of Rs 526 on 31 October 2007 and a 52-week low of Rs 289 on 18 February 2008.

The mid-cap auto component maker had underperformed the market over the past one month till 21 February 2008, declining 11.76% compared to the Sensex’s return of 0.80%. It had also underperformed the market in the past one quarter, declining 28.1% compared to Sensex’s decline of 5.93%.

The company’s current equity is Rs 26.80 crore. Face value per share is Rs 2.

The current price of Rs 309 discounts its Q2 December 2007 annualized EPS of Rs 19.38, by a PE multiple of 15.94.

American Railcar Industries (ARI) is a leading designer, manufacturer and marketer of a variety of railcars in North America. ARI also repairs and refurbishes railcar, provides fleet management services and designs, manufacturers and markets certain railcars and other industrial components used in this field.

Amtek said the proposed joint venture with ARI will be part of its transportation division, which includes railways, aerospace and surface transportation system. Amtek is targeting sales of about Rs 1500 crore in next four-five years in the transportation division. The company also said it looking at other potential opportunities and acquisitions in the transportation division in US and Europe.

Besides the railcar joint venture with ARI, Amtek is also planning to set up forgings, casting and machining facilities to manufacture components for the railcar and other railway application.

Amtek Auto is an integrated automotive component manufacturer of forgings, machining and sub-assemblies.

Amtek Auto’s net profit rose 10.2% to Rs 64.66 crore on 18% rise in sales to Rs 319.91 crore in Q2 December 2007 over Q2 December 2006.