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Automotive Axles (AAL):Reports muted performance in Q2FY22

News: In Q2FY22, AAL's net sales rose 21.1% QoQ to Rs.309 crore. Margins expanded by 110 bps sequentially to 7.2% with consequent PAT placed at Rs.10.1 crore vs. Rs. 5.6 crore in Q1FY22. On b/s front, the company posted CFO of Rs.19.1 crore for H1FY22 vs. Rs.61.3 crore last year on the back of lower payables.

Views: Topline performance lagged overall sequential volume growth in core domestic M&HCV industry, specifically the anchor client Ashok Leyland. Margin improvement was also below expectations, and was primarily driven by operating leverage gains with gross margins contracting by 230 bps. Going forward, we expect AAL to be a beneficiary of cyclical CV recovery domestically with recovery in margin profile being a key monitorable.