Dalal Street Investments

Buy Amtek India+ Auto – Citigroup

July 10, 2007

Citigroup in an exclusive research report released just a while ago on Indian Auto sector has a BUY on Amtek Auto and Amtek India. They are neutral on Bharat Forge Ltd.

Our internal research analyst had recommended Amtek Auto a year ago. Citigroup has put a BUY recommendation Amtek Auto Ltd with a price target of Rs 521 up from Rs 458. Amtek Auto is expected to report fully diluted EPS of Rs 29.05 and Rs 34.76 for FY08 and FY09 respectively. Target price of Rs521 is based on 15x FY09E fully diluted EPS estimates. The current multiple is well supported by earnings CAGR of 25% over FY07E-09E.

Citi has also put a BUY-1M on Amtek India [Amtek Auto group company] with a price target of Rs 221. Amtek India is expected to report fully diluted EPS of Rs 13.32 and Rs 18.46 for FY08 and FY09 respectively. Citi forecasts consolidated fully diluted earnings to grow at 38% CAGR over FY07E-09E driven by top-line growth and moderate expansion in margins.

Target price of Rs221 for Amtek India, implying c30% upside from current levels, is based on 12x FY09E EPS estimate of Rs18.5 (fully diluted). Target price implies a one-year forward P/E of 16.6x on our FY08E EPS, c30% premium to current levels, which we believe is well supported by strong earnings CAGR over the next two years.


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