Amtek Auto Ltd.
Company Analysis
Current Financial Position
Considering the common size balance sheet and P&L statement of the company
Total Income
Total Shareholders Funds
Total Expenditure
Total Debt
Operating Profit
Net Profit after Minority Interest & P/L
Asso.Co.
Gross Block +
Total Current Assets
Adjusted Net Profit
Dividend
Total Current Liabilities
1. The company has been going into losses for the last two financial years.
2. The net sales of the company has dropped by 3% from 2014 to 2105 and almost by 20% from the last quarter.
3. The main reason for the losses is due to sharp increase in the total expenditure which is almost 100% of the
sales in the last two financial years.
4. The operating profit has also been declining. The operational performance of the company has improved, but it
still continues to bleed. While Amtek registered a loss of Rs 6666.70 crore, the company said most of that was
contributed by an exceptional item of Rs 4664 crore.
5. The total income of the company (which includes other and extraordinary incomes) has also been declining. The
total income of the company has gone down by 23% in the last quarter.
6. The debt of the company has been increasing.
7. The company has been investing in fixed asset as the gross block has a sharp increase.
8. The current assets of the company has been declining as compared to increase in current liabilities, implying
there their net working capital is in a declining phase.
9. Shares of Amtek Auto closed at Rs 43.8 on Friday, Oct 14th 2106, down by 2.23% per cent on NSE.
Balans heet Trend
P& L trend
Total Shareholders Funds
Total Income
Total Debt
Total Expenditure
Total Liabilities
Operating Profit
Total Assets
Profit Before Tax
Total Current Assets
Net Profit
Total Current Liabilities
Net Profit after Minority Interest & P/L Asso.Co.
Security Valuation
1. Shares of Amtek Auto closed at Rs 43.8 on Friday, Oct 14th 2106, down by 2.23% per cent on NSE.
2. CAPM Model Details (Calculated)
CAPM Calculation
Ri= Rf + *(Rm-Rf)
Rf
7.20%
MRP
Ri
10%
22.93%
Daily Returns method
Yearly
Overal
l
Financial
Year
Variance
of the
market
CAP
M(Ri)
0.000074
covarianc
e of
market
and index
0.000116
Oct 2014-Oct
2015
Oct 2015-Oct
2016
1.556
0.000060
0.000095
1.590
22.76
%
23.11
%
Period
Variance
of the
market
CAP
M(Ri)
Oct 2013-Oct
2016
0.000067
covarianc
e of
market
and index
0.000105
1.573
22.93
%
CAP
M(Ri)
3.1162
18224
1.929
59003
6
38.36
%
26.50
%
Weekly returns method
Yearly
Financial
Year
Variance
of the
market
Oct 2014-Oct
2015
Oct 2015-Oct
2016
0.000906
covarianc
e of
market
and index
0.002823
0.000759
0.001464
SML Daily
SML Weekly
Amtek Auto stock has a of 1.57, meaning its prices swing to a large extent and is highly volatile.
Since it is risky, it has the potential to provide higher returns, as calculated it is almost 23%
Therefore, the cost of equity is also very high and hence affects the valuation of the company.
However, the calculated beta does not take into consideration the unsystematic risk or the business risk and hence cannot
completely
justify
the
returns
it
is
showing.
Valuation for Investors:
DDM:
Since the company has been running losses for the last 2 years, it has not paid out any dividends. However, if we take an
average EPS over the last five years, its price per share comes to Rs. 10.35.
If we compare it to the current market price of Rs. 43.8, it is largely over-valued.
Relative Valuations:
1. The Value/ EBITDA is a better choice to value the firm as the
company has been reporting net losses for the last two financial
years. Since there is a substantial investment in infrastructure, this
multiple seems appropriate as compared to price/earnings multiple.
2. Since the firm has registered loss, most of which is contributed by
extraordinary expenses, this multiple would give a better picture of
the companys value.
3. From the P/B value we can say that the firm is trading at less than its
book value, which can be attributed to the fact that the company is
earning very low return on its assets, of only 0.02. Investors should
steer clear of this companys shares, because there is a chance that asset value will face a downward
correction by the market, leaving investors with negative returns.
4. Book value doesn't really offer insight into companies that carry high debt levels or sustained losses.
Valuation Multiples
Technique
P/E Ratio 12.19
PE/G Ratio 435.94
EV/Earnings -0.087
EV/EBITDA 0.3096
P/B 0.019341
P/S 0.014244
Valuation for Acquisitions
Free Cash-flow Approach
Total
Shares
outstandin
g
Debt to
Equity
Ratio
weight of
debt
weight of
equity
224755428
cost of
debt
11.50%
cost of
equity
Tax
22.93%
R(WAAC)
12.46%
2.77
73.4%
26.6%
25%
Growth
Rate
Total Present
Value of the
Firm(FCFF)
2.80%
5,621,614,037,033.
13
Total Present
Value of
Equity(FCFE)
Value/share(fir
m)
Value/Share(Eq
uity)
1,840,595,227,334.
15
25,012.14
8,189.32
1. The cost of debt is taken to be 7 year maturity non-convertible debenture issued by the firm.
2. The cost of equity is calculated using CAPM.
3. The companys intrinsic value is Rs. 25012.14/share. This shows that the company is highly undervalued as
compared to just Rs. 43.8/share at which it is currently trading. Since it is a large company, a more stable
growth technique is used
