ASK Automotive share price surges 20% in one month. Will rally in this auto ancillary stock continue?

Auto ancillary stock, ASK Automotive Ltd has gained over 22% in one month's period. Brokerage house JM Financial recently initiated coverage on this auto ancillary stock, with a BUY rating and a target price of ₹375, implying 23% upside. The brokerage highlighted that, despite the company's late entry, it has grown to become a significant player in the safety control cables (SCC) and aluminium light-weighting components (ALP) for the two-wheeler segment, where its market share is rising.

As per the brokerage report, ASK Automotive holds the largest market share of approximately 50% in terms of production volume for original equipment manufacturers (OEMs) + branded independent aftermarket segment in India for brake shoes and Automotive Braking (AB) systems, mainly Drum Braking systems, for two-wheeler. By manufacturing volume, its market share in ALP for two-wheeler is around 9% in FY23 (compared to 8% in FY22).

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The brokerage believes that the company is emerging as a major player, driven by the business's own technical, design, and engineering capabilities (using proprietary formulas) to create unique and customised solutions for its clients; also, because of its close ties to its clients, and the company has placed a strong emphasis on quality, cost, and delivery.

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The brokerage projects that over FY24–26E, ASK Automotive's sales and EPS will expand at a compound annual growth rate (CAGR) of 14% and 29%, respectively. This growth will be mostly driven by increased 2W/3W electrification, which will enhance kit value. Strong momentum in non-auto exports and development into the PV industry will also help. According to the brokerage, any slowdown in the electrification of residential 2W and 3W remains a critical variable.

On November 15 of last year, ASK Automotive shares got listed on the bourses at a price of ₹303.30 per share on NSE, which was 7.55% more than the ₹282 issue price. ASK Automotive shares began trading at ₹304.90 on the BSE. ASK Automotive share price has risen in value by more than 10% since its listing date. 

Also Read: ASK IPO listing: ASK Automotive share price makes lukewarm debut, stock lists at 7.6% premium at ₹303.30 on NSE

On the technical front, Dr. Ravi Singh, SVP - Retail Research at Religare Broking Ltd, said that the ASK Automotive Ltd share price is holding well above the short-term moving average in the weekly time frame, which indicates bullish momentum with a potential upside of 250 levels.

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.