AXISCADES ENGINEERING TECHNOLOGIES LTD

The Ace Investor

Axiscades Engineering Technologies Ltd

  Listed on both NSE: AXISCADES and BSE:532395
Axiscades currently trading around 240 with a market cap of around 650 crores.

Promoters hold 59.12% stake, FIIs hold 2.01%, Alchemy Fund (Rakesh Jhunjhunwala, Hiren Ved, Lashit Sanghvi, Ashwin Kedia) holds 1.84%, Ashish Kacholia holds 1.38% and Edelweiss holds 1.02%.
Total Debt has reduced to 26.7 crores from 33 crores YoY.

Formerly known as AXIS IT&T, After merger with CADES the company is now named as AXISCADES. AXIS Inc was established in 1987 and in 2003 IT&T India acquired AXIS Inc. changing its name to Axis IT&T and in 2009 AXIS IT&T picked up stake in CADES resulting in the merger that concluded in 2014.

AXISCADES today is one of India's leading technology solutions provider, catering to the needs of Aerospace, Defense, Heavy Engineering, Automotive and Industrial Production sectors.

 AEROSPACE: AXISCADES offers complete solutions that range from concept generation phase to manufacturing in the aerospace sector. It has established long-term strategic relationship with Aerospace OEMs and Tier-1 suppliers to provide integrated solutions for systems and sub-systems including primary and secondary structures, electrical wing harness design, aircraft interiors, manufacturing engineering, technical publication and reports on non conformances and avionics.

 DEFENCE: AXISCADES offers wide range of solutions and services related to Avionics, C412, Testing, System Integration, Software and Simulation.The defence sector team of Axiscades comprises of industry veterans who have served in the armed forces.

In layman terms, AXISCADES is a part of commercial aircraft and defense aircraft manufacturing process beside other services and solutions offered.

AXISCADES has recently announced an tie-up with ASSYTEM to deliver solutions to AIRBUS.
The collaboration will provide Airbus with a complete near and off-shore engineering services.

Airbus is already operating two separate civil aviation and defense aviation engineering centers along with one research and technology center in India. Airbus as of date has a total strength of more than 400 highly skilled engineers and staff in India. After having openly expressed the interest to "Make In India" Airbus Defense CEO Mr Bernhard Gerwert met PM Narendra Modi on 30th June 2015 and once again expressed his interest even as they discussed various aerospace, defense and civil aviation projects.

When PM Modi had visited France, he visited the Airbus manufacturing facility and Airbus had announced that it would increase its Indian outsourcing to $2 billion. Airbus Group has recently consolidated all its operations in India under one entity named Airbus Group India Pvt Ltd as per the group's one roof policy. India is the first international market where local operations are being brought under a single company.

Lets take a look at the financials of Axiscades :-

The financials show that AXISCADES has been growing well. However, FY16 is going to be a very good year for them as per the guidance recently provided by the management. With sales set to be around 350 crores and taking the margins as similar to last year the EPS is expected at 8.65.

2016 is also going to be the first full year in operation after the merger. The earnings estimate is not clear as in the interview management first say's that the revenue is going to be 500 crores and later backtracks and says we can't tell you as we are listed entity and there will be growth.

At current price of 240 w.r.t. FY16 earnings estimates the P/E comes at under 28. However, please note that AXISCADES is not the typical undervalued idea but something which deserves expensive p/e as well as a space in the portfolio because of the sector it is in. Drones, Aircrafts, Fighter jets and a lot of more such stuff is going to be manufactured in India and around the world and AXISCADES is in a position to make healthy gains out of it.

 Interesting thing to note is that renowned investor Ashish Kacholia had picked up 1.38% stake at the price of around 240 and Alchemy Capital which is founded by Rakesh Jhunjhunwala, Hiren Ved, Lasit Sanghvi, Ashwin Kedia too picked up the stake around the same level earlier this year. From 240 in late March 2015 the stock went to almost 400 in early April 2015 dealing constantly in upper circuits.

Suddenly, A bunch of rumor mongers noticed the heavy up move and stepped in by spreading all sorts of rubbish about the company on Social Media websites as well as messengers. Stupid allegations were doing rounds on Whatsapp, Telegram, Facebook, MMB and the stock price crashed to 180s. Forcing the company to give a disclosure statement to the exchanges denying the rumors.

Basically, A good stock was available at a huge discount to the price where big guys purchased mainly due to social media misuse which is a growing menace. One of the rumors in the market have been that Alchemy and Ashish Kacholia have completely exited Axiscades as they found some fallacy in the financials reported.

We have now entered the month of July and the share-holding pattern is going to be out some days and as per me there might be a increase in the stake owned by these big investors who don't usually play short-term.

Dynamatic Technologies is another defense stock where Alchemy and Ashish Kacholia had invested.
The same stock has moved from 585 in Jan 2014 to hit a high of 4225 in Apr 2015.
Up 622% in a year and four months. Kacholia had officially invested in Jun 2014 at around 1500.
Even today after crashing from 4225 to 3000, Dynamatic is still trading at a p/e of around 200.
 
Axiscades however is avilable around the level these big guys invested at.

     Technically too Axiscades is really looking good now, the stock has really bounced back well in last few days after a long consolidation. The stock has now broken out of a range and looks set to surpass its earlier highs of around 400.

 All in all, AXISCADES looks like a must-have in the portfolio and it seems the up-trend has already started. This is another probable multibagger candidate as "DEFENSE" is a buzz word in the markets along with "AVIATION" and "MAKE IN INDIA".

Note: The above is not a research report but information as available on public domain and it should not be treated as a research report.

Registration status with SEBI: I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations”

Disclosure: It is safe to assume that i might have Axiscades Engineering Technologies Ltd in my portfolio and hence my point of view can be biased. Readers should consult their financial advisory before any investments.

:Links:

Axiscades Website

Axiscades Screener

Axiscades FY15 Results

Axiscades Latest Analyst Presentation

Axiscades Management Interview
Airbus keen to "Make In India" 30th June 2015: Business Standard