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We believe it would be tough for Asahi India Glass Ltd. to sustain its present elevated profitability levels amid steep rise in energy costs. Past five-year average energy cost / sales has been ~ 13.5%, which increased to ~ 17% in Q3 FY22.
We expect it to surge a further ~ 400 basis points by Q1 FY23E, assuming present natural gas and crude oil prices. Also, logistics cost to sales is ~ 5-6%, and ~ 20% increase in fuel costs would add a further 100 bps pressure on margins.
We therefore cut our FY23E / FY24E Ebitda margin of Asahi India by ~ 400 bps / ~ 300 bps, resulting in an Ebitda cut of ~ 15% / 10% respectively, with revenue estimates largely unchanged.
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