Choice Institutional Equities has maintained a 'Buy' rating on ASK Automotive with a Rs 730 target price following strong Q2 FY27 results. The company reported a 47.5% jump in revenue, driven by its lightweighting segment. Investors should track how the company manages margin pressure from fluctuating aluminum costs.
ASK Automotive has received a positive outlook from Choice Institutional Equities, which maintained a 'Buy' rating and a target price of Rs 730 for the company's shares. This assessment follows the company's Q2 FY27 financial results, which demonstrated strong growth despite broader challenges in the automotive sector.
Financial performance for the quarter was robust, with the company reporting revenue of Rs 1,561 crore, representing a 47.5% increase compared to the same period last year. Net profit also grew by 27.3% to reach Rs 102 crore. These results highlight the company's success in scaling its operations and securing a larger share of business from existing and new clients.
Growth Driven by Lightweighting Solutions
The primary engine behind this revenue growth is the Aluminium Lightweighting Precision Solutions (ALPS) segment. This division has become a major part of the business, currently accounting for 58% of the total revenue. The company is also diversifying its product portfolio, having commenced commercial production of high-pressure die-cast (HPDC) alloy wheels in August 2026. These moves are part of a broader strategy to capture more value per vehicle, particularly as the industry shifts toward electric vehicles.
Profitability and Operational Risks
While the company has shown strong growth in sales, there are financial areas for investors to monitor. Operating margins (EBITDA margin) compressed to 11.8% from 13.4% a year earlier. This dip is largely tied to the pass-through nature of aluminum prices, where the company's reported margins fluctuate based on the cost of raw materials.
Additionally, the company has seen an increase in working capital requirements, particularly in the number of days taken to collect payments (receivable days). While this is common in the auto-ancillary sector, extended payment cycles can place pressure on cash flow. The ability to manage these costs and keep working capital efficient will be a key factor in future performance.
Going forward, the company’s success will depend on its ability to effectively utilize its new production capacities and maintain profitability amidst volatile input costs. Investors may keep a close eye on management commentary regarding the contribution of new product lines and updates on capacity utilization in the coming quarters.