Atul Auto Q4 FY12 Detailed Reportbreport.myiris.com/firstcall/ATUAUTO_20120630.pdf · brand vehicles are ply on the roads of Gujarat. For more than two decades, ATUL GROUP is renowned

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SYNOPSIS

Atul Auto, an Atul group company is the leading manufacturers of Three-Wheeled Commercial Vehicles in the state of Gujarat.

Atul Auto Ltd. offers wide range of three wheeler diesel auto rickshaw, CNG auto rickshaw and PNG auto rickshaw in Shakti and GEM series.

During the quarter ended, the robust growth of Net Sales is increased by 121.28% to Rs. 41.60 million.

The company has recommended a final dividend @ Rs. 5/- per share or 50% on paid up share capital of the Company and also recommended the issue & allotment of bonus shares in the ratio of One equity share for every Two shares held in the Company.

Net Sales and PAT of the company are expected to grow at a CAGR of 27% and 33% over 2011 to 2014E respectively.

“Most promising SME in Auto & engineering” by CNBC-TV18-ICICI Bank Emerging India Awards 2012, on March 22, 2012 at Mumbai.

Years Net sales (Rs. Mn)

EBITDA (Rs. Mn)

Net Profit (Rs. Mn)

EPS (Rs.) P/E

FY 12 2988.20 282.60 155.90 20.65 9.03

FY 13E 3615.72 339.67 190.93 25.29 7.38

FY 14E 4121.92 389.00 223.61 29.62 6.30

Stock Data:

Sector: Automobile

Face Value Rs. 10.00

52 wk. High/Low (Rs.) 203.00/76.68

Volume (2 wk. Avg.) 44000.00

BSE Code 531795

Market Cap (Rs in mn) 1408.45 Share Holding Pattern

1 Year Comparative Graph

BSE SENSEX Atul Auto

C.M.P: Rs. 186.55 Target Price: Rs. 209.00 Date: June 30th, 2012 BUY

Atul Auto Ltd. Result Update: Q4 FY 12

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Peer Group Comparison

Name of the company CMP(Rs.) Market Cap. (Rs.mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)

Atul Auto Ltd. 186.55 1408.45 20.65 9.03 2.51 48.46

Hero MotoCorp Ltd. 2141.10 427750.60 119.09 17.99 8.02 5250.00

Bajaj Auto Ltd. 1572.00 457885.00 103.81 15.14 7.53 450.00

TVS Motor Co. Ltd. 36.45 17316.90 5.24 6.96 1.39 110.00

Investment Highlights

Q4 FY12 Results Update

Atul Auto Ltd. has reported net profit of Rs 41.60 million for the quarter ended on

March 31, 2012 as against Rs. 18.80 million in the same quarter last year, an

increase of 121.28%. It has reported net sales of Rs 829.10 million for the quarter

ended on March 31, 2012 as against Rs 637.20 million in the same quarter last

year, a rise of 30.12%. Total income grew by 29.94% to Rs 830.60 million from Rs.

639.20 million in the same quarter last year. During the quarter, it reported

earnings of Rs 5.51 a share.

Quarterly Results - Standalone (Rs in mn)

As At Mar-12 Mar-11 %change

Net sales 829.10 637.20 30.12%

PAT 41.60 18.80 121.28%

Basic EPS 5.51 3.09 78.19%

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Break up of Expenditure

Recommend Final Dividend & approves Bonus Issue

Atul Auto Ltd has recommended a final dividend @ Rs. 5/- per share or 50% on

paid up share capital of the Company and also recommended the issue & allotment

of bonus shares in the ratio of One equity share for every Two shares held in the

Company.

Company Profile

Atul Auto, an Atul group company was originally incorporated as an Atul Auto

(Jamnagar) Pvt. Ltd on June 18, 1986 under the Companies Act, 1956, in the State of

Maharashtra. It has achieved a turnover of Rs 168 crore. The Name of the Company

was changed from Atul Auto (Jamnagar) Pvt. Ltd. to Atul Auto Pvt. Ltd. August 12,

1994. The Company was subsequently converted into Public Limited Company and

fresh certificate of incorporation was obtained on August 12, 1994 from the Registrar

of the Companies, Gujarat.

The Company is the leading manufacturers of 3-Wheeled Commercial Vehicles in the

state of Gujarat, presently engaged in the manufacture of Three Wheelers like 6-seater

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Auto Rickshaws, Pick-Up Vans and Chassis of Passenger Vehicles. These vehicles are

marketed under the brand name of KHUSHBU, which is well established and very

popular.

Atul Auto pioneered motorized rural transport in Gujarat, with multi purpose vehicle

called the Khushbu. The Khushbu has been instrumental in transforming the

economy of Gujarat by bridging the rural-urban divide. Over 1,50,000 Khushbu

brand vehicles are ply on the roads of Gujarat.

For more than two decades, ATUL GROUP is renowned as leading manufacturer of

three-wheeled commercial vehicles in the state of Gujarat. From common people’s

favorite vehicle CHHAKADA to today’s SHAKTI Atul Group had come a long way.

'chhakada' was the first vehicle which was skillfully engineered from a motorcycle

which later became a way of life for the people of Saurashtra.

The company has already obtained CMVR and Roadworthiness Certificates for the

existing range of products viz. Chassis for goods carriage/ 6-passenger Auto Rickshaw

with steering wheel and Pick Up.

Products:

The company’s existing products are various types of Front Engine & Rear Engine

Three wheelers under the brand name “Atul Shakti”, “Atul Gem” & “Atul Smart”.

The company categories of the Products are as follow:

� Goods Carriers

� Passengers Carriers

� Special Purpose Vehicle

� Chicken Carrier

� Tripper

� Water Tank Carrier

� Soft Drink Carrier

� Mobile Shop

� Hopper

� Bio Hazard

� Vegetable vending

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Other Group companies-

• Atul Motors Pvt. Ltd. - Marketing of Maruti Range of Cars & 4-Wheelers

• Atul Auto Agencies - Distributors of Honda 2-Wheelers

• Atul Automotives - Distributors of Mahindra LCVs

• Atul Petroleum - Dealing in Petroleum Fuels & Products

• Atul Tele Services - Mobile and Tele Communication Services

• Atul Rachna Pvt. Ltd. - Real Estate Developers & Builders

• Atul Auto Batteries Pvt. Ltd. - Battery Manufacturer

• Khushbu Auto Finance Ltd. - Auto Finance Company

• Khushbu Auto Pvt. Ltd. - Centralised Marketing Organisation

• New Chandra Motor Cycle House - Distributors of LML Vespa Scooter, Royal

Enfield Motor Cycles, etc.

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Financial Results

12 Months Ended Profit & Loss Account (Standalone)

Value(Rs.in.mn) FY11 FY12 FY13E FY14E

Description 12m 12m 12m 12m

Net Sales 2020.50 2988.20 3615.72 4121.92

Other Income 6.20 5.90 7.02 7.72

Total Income 2026.70 2994.10 3622.74 4129.65

Expenditure -1826.40 -2711.50 -3283.08 -3740.65

Operating Profit 200.30 282.60 339.67 389.00

Interest -17.10 -7.60 -6.08 -5.78

Gross profit 183.20 275.00 333.59 383.22

Depreciation -42.50 -42.60 -44.73 -46.97

Profit Before Tax 140.70 232.40 288.86 336.26

Tax -46.40 -76.50 -97.92 -112.65

Profit After Tax 94.30 155.90 190.93 223.61

Equity capital 60.80 75.50 75.50 75.50

Reserves 342.70 485.40 676.33 899.95

Face value 10.00 10.00 10.00 10.00

EPS 15.51 20.65 25.29 29.62

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Quarterly Ended Profit & Loss Account (Standalone)

Value(Rs.in.mn) 30-Sep-11 31-Dec-11 31-Mar-12 30-Jun-12E

Description 3m 3m 3m 3m

Net sales 752.60 796.80 829.10 820.81

Other income 1.40 2.90 1.50 1.05

Total Income 754.00 799.70 830.60 821.86

Expenditure -665.40 -739.10 -758.40 -744.88

Operating profit 88.60 60.60 72.20 76.97

Interest -1.90 -1.20 -0.80 -0.92

Gross profit 86.70 59.40 71.40 76.05

Depreciation -10.40 -10.10 -10.90 -11.12

Profit Before Tax 76.30 49.30 60.50 64.94

Tax -25.70 -18.40 -18.90 -21.43

Profit After Tax 50.60 30.90 41.60 43.51

Equity capital 60.80 75.50 75.50 75.50

Face value 10.00 10.00 10.00 10.00

EPS 8.32 4.09 5.51 5.76

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Key Ratios

Particulars FY11 FY12 FY13E FY14E

No. of Shares(in mn) 6.08 7.55 7.55 7.55

EBITDA Margin (%) 9.91% 9.46% 9.39% 9.44%

PBT Margin (%) 6.96% 7.78% 7.99% 8.16%

PAT Margin (%) 4.67% 5.22% 5.28% 5.42%

P/E Ratio (x) 12.03 9.03 7.38 6.30

ROE (%) 23.37% 27.79% 25.40% 22.92%

ROCE (%) 52.38% 52.12% 46.99% 41.72%

Debt Equity Ratio 0.15 0.11 0.09 0.07

EV/EBITDA (x) 5.66 4.98 4.15 3.62

Book Value (Rs.) 66.37 74.29 99.58 129.20

P/BV 2.81 2.51 1.87 1.44

Charts:

Net sales & PAT

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P/E Ratio (x)

Debt Equity Ratio

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EV/EBITDA(x)

P/BV

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Outlook and Conclusion

• At the current market price of Rs.186.55, the stock is trading at 7.38 x FY13E

and 6.30 x FY14E respectively.

• Earning per share (EPS) of the company for the earnings for FY13E and FY14E

is seen at Rs. 25.29 and Rs. 29.62 respectively.

• Net Sales and PAT of the company are expected to grow at a CAGR of 27% and

33% over 2011 to 2014E respectively.

• On the basis of EV/EBITDA, the stock trades at 4.15 x for FY13E and 3.62 x for

FY14E.

• Price to Book Value of the stock is expected to be at 1.87 x and 1.44 x

respectively for FY13E and FY14E.

• We expect that the company will keep its growth story in the coming quarters

also. We recommend ‘BUY’ in this particular scrip with a target price of

Rs.209.00 for Medium to Long term investment.

Industry Overview

The automobile sector of any country reflects the health of its economy. By this virtue,

the Indian economy is very much in a good shape as the country's automobile

industry has marked impressive growth in the last fiscal. The overall Indian

automobile industry grew by 12.12 per cent in 2011-12 by selling 17.3 million units,

majorly driven by demand for two-wheelers and light trucks. Further, the sector

witnessed sales growth of 12.46 per cent for the period between April 2011 and

February 2012.

The industry has undergone numerous developments and investments recently that

have substantially impacted the market dynamics.

Market Dynamics

As per the 2010-11 data released by the Society of Indian Automobile Manufacturers

(SIAM), domestic vehicle market is dominated by two-wheelers segment with 76 per

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cent of the pie. Passenger vehicles, commercial vehicles and three-wheelers account

for 16.25 per cent, 4.36 per cent and 3.39 per cent of the market, respectively.

Hero MotorCorp rules the two-wheeler market with 56 per cent of the share. Maruti

Suzuki holds its leader position in passenger vehicle segment with 38 per cent of the

pie, while Hyundai follows with 15 per cent of the share.

For passenger vehicle segment, the share of the entry-compact segment (that consists

of cars like the Tata Nano, Maruti Alto, Ford Figo, Maruti WagonR, Hyundai's Santro,

i10 and Eon and GM's Beat) stood at 47 per cent in 2011, while premium compacts

(like Maruti Swift, Hyundai i20 and VW Polo) maintained their share of 11 per cent.

Sports-utility vehicle (SUV) segment registered the fastest growth rate (32 per cent) to

capture over 18 per cent of the market share, while Sedans had 19 per cent of the pie.

Key Statistics

• The cumulative production for April-March 2012 registered a growth of

13.83 per cent over April-March 2011, manufacturing 20,366,432 vehicles

during the period

• While Passenger vehicle segment grew at 4.66 per cent during April-March

2012, overall commercial vehicle segment registered an expansion of 18.20

per cent year-on-year (y-o-y)

• Two Wheelers sales registered a growth of 14.16 per cent during April-March

2012 wherein Mopeds, Motorcycles and Scooters grew by 11.39 per cent,

12.01 per cent and 24.55 per cent, respectively

• The industry exported 2,910,055 units registering a growth of 25.44 per

cent in April-March 2012. Automobile exports registered a growth of 17.81

per cent in March 2012 as against March 2011

Major Developments & Investment

• World's largest two-wheeler manufacturer Hero MotoCorp has inked a

technology-sharing deal with US motorcycle firm Erik Buell Racing (EBR)

wherein Hero would buy technology from EBR without sharing profits or

ownership. EBR is already working on some of Hero MotoCorp's products to

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customise them according to the Indian markets. New models of bikes and

scooters are likely to get launched by 2013

• The Stuttgart-based luxury car maker Mercedes Benz intends to invest Rs 350

crore (US$ 67.97 million) by 2014 in its facility near Pune and launch about five

compact premium cars in India by then. The company sees great growth

prospects in India and hence plans to strengthen its dealership network and

ramp-up its production capacities to harness the opportunity

• Tata Motors, the country's largest automobile producer, has announced that it

will infuse Rs 800 crore - Rs 1000 crore (US$ 155.2 - 194 million) over 2012-

2015 to build a plant in Dharwar, Karnataka. The facility that would be

exclusively dedicated to manufacture the Tata Ace Zip and Magic Iris, will have

an annual capacity of 90,000 units. It is anticipated that the plant would reach

its full capacity by the end of fiscal 2012-13

• Nissan plans to bring its premium car brand Infiniti in the domestic market as

it intends to expand its luxury car basket in India. Infiniti's entry will intensify

the competition in Indian luxury car space as there are so many brands vying

for substantial market share. Nissan plans to assemble the car in India instead

of importing it a completely-built unit (CBU)

• Escorts' agri-machinery arm won a one-year rate contract from the Ministry of

Commerce and Industry for supplying tractors to Central and State-level

agencies. The contract would enable the Faridabad-based firm to supply

tractors on pre-approved prices directly without entering any tendering process

Government Initiatives

In order to enforce compliance and the Energy Conservation Act, the Government has

recently given its nod to fuel mileage standards and labelling for new cars. Keeping

consumer interest in mind, these norms would mandate auto makers to put

Government certified fuel efficiency labels on each car they sell and improve efficiency

of their products. While the labels will become compulsory soon, the standards will be

introduced by 2015, giving manufacturers time to improve upon their technology.

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SIAM is working on a voluntary recall policy that is in favour of auto manufacturers.

The soon-to-be-unveiled policy would make producers proactive rather than being

reactive for the recall activity.

On a similar note, the Indian Government is in the process of constituting a National

Automotive Board (NAB) which would become a formal set-up to look into the issue of

recall of vehicles and hence improve manufacturing standards. The prospective body,

to oversee technical and safety aspects of vehicles, will have representatives from all

the nodal ministries and automotive bodies such as the Automotive Research

Association of India (ARAI).

Road Ahead

Industry body SIAM expects overall automobile sales to grow by 10-12 per cent in

2012-13 on the back of supportive Government policies, launch of new models and

intensifying enthusiasm for cars among Indian consumers.

Furthermore, Rothschild, a UK-based global financial advisory firm, forecasts that

India would become the third largest auto industry by volumes by 2015. The growth is

anticipated to be driven by increase in investments by auto makers that would expand

the capacity from 4.8 million units in 2010 to 12 million in 2018. New launches,

strengthening dealership networks, strategic alliances and predicted mergers and

acquisitions (M&As) are expected to provide an impetus to the sector in the years to

come.

______________ ____ _________________________ Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation

for the purchase or sale of any financial instrument or as an official confirmation of any

transaction. The information contained herein is from publicly available data or other

sources believed to be reliable but do not represent that it is accurate or complete and it

should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s

affiliates shall not be in any way responsible for any loss or damage that may arise to any

person from any inadvertent error in the information contained in this report. This document

is provide for assistance only and is not intended to be and must not alone be taken as the

basis for an investment decision.

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