CD Equisearch Pvt Ltd April 7, 2016 Equities Derivatives Commodities Distribution of Mutual Funds Distribution of Life Insurance Atul Auto Ltd. No. of shares (m) 21.9 Mkt cap (Rs crs/$m) 1116/167.7 Current price (Rs/$) 509/7.6 Price target (Rs/$) 561/8.4 /9.1 52 W H/L (Rs.) 635/330 Book Value (Rs/$) 71.8/1.1 Beta 1.1 Daily volume (avg. monthly) 37220 P/BV (FY16e/17e) 7.3/5.7 P/E (FY16e/17e) 22.4/20.0 EPS growth (FY15/16e/17e) 25.7/35.9/9.7 ROE (FY15/16e/17e) 34.7/36.4/31.0 ROA(FY15/16e/17e) 35.1/36.7/31.3 D/E ratio (FY15/16e/17e) -/-/- BSE Code 531795 NSE Code ATULAUTO Bloomberg ATA IN Reuters ATUL.BO Shareholding pattern % Promoters 52.7 MFs / Banks / FIs 10.0 Foreign 6.3 Govt. Holding - Total Public 31.0 Total 100.0 As on Dec 31, 2015 Recommendation ACCUMULATE Phone: + 91 (33) 4488 0043 E- mail: [email protected]Figures (Rs crs) FY13 FY14 FY15 FY16e FY17e Income from Operations 363.84 430.14 492.80 542.22 598.70 Other Income 1.98 2.92 7.51 2.46 2.46 EBIDTA (other income included) 42.06 48.31 65.42 83.26 92.26 Net Profit 25.92 29.78 37.42 50.85 55.77 EPS 11.81 13.57 17.05 23.18 25.42 EPS growth (%) 11.4 14.9 25.7 35.9 9.7 Company Brief Atul Auto Ltd. is one of the youngest players in the 3 wheelers business with humble beginning in 1992 that started with manufacturing of Chhakaras (Rural Transportation Vehicle- RTV). It produces auto rickshaw under various product names- Atul Shakti, Atul Smart, Atul Gem and Atul Gemini-DZ. Quarterly Highlights • AAL’s total volumes in 9MFY16 grew by 6% overall whereas its exports rose at 21% y-o-y. As a result of modest increase in sales volumes revenues grew by just 8.4% y-o-y. The net profit has seen a growth of 21.5% (y-o-y) to Rs 36.55 crs compared to Rs 30.07 crs in the same period a year ago. • AAL’s cargo segment market share has gone up to 20% in 9MFY16 FY16 as compared to 18% in the same period last year. The company has achieved 200 primary dealerships in 9MFY16 as compared to 180 in FY15. Its international presence is also on an increase with a total number of 8 distributors for exports. • Demand sentiment was bad which had affected trade receivables in Q2FY15. Working capital has worsened a little more in Q3FY16 but is expected to return to normal in a few quarters. Although the demand for diesel vehicles is very strong in rural and semi-urban areas, it suffered in the last quarter due to the bad monsoons. • The ability to maintain positive growth even in dampening market conditions clouded with negative sentiments portrays AAL’s ability to sustain the same in the future. Positive growth in EPS and revenues together with its plans to maintain the debt free status works in its favor. • The stock trades at a currently trades at 21.9x FY16e EPS of Rs 23.18 and 20.0 x FY17e EPS of Rs 25.42. Aided by higher operating margins (14.7% vs 11.6%), earnings advanced by a spectacular 21.6% in the first three quarters of current fiscal. AAL’s three wheeler volumes in FY16 have grown at the lowest rate (5.5%) in last four years, goading us to cut next year EPS estimate by 8.9%. Yet there exists high chance of revival in the Indian automobile sector in the near term. We, therefore, assign ‘accumulate’ rating on the stock with revised target of Rs 561 (previous target: Rs 586) based on 22x FY17e earnings (peg ratio:1; on FY15-FY17 earnings growth), over a period of 6-9 months; forward P/E justified not least due to high probability of dramatic improvement in volumes.
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CD Equisearch Pvt Ltd April 7, 2016
Equities Derivatives Commodities Distribution of Mutual Funds Distribution of Life Insurance
Atul Auto Ltd.
No. of shares (m) 21.9
Mkt cap (Rs crs/$m) 1116/167.7
Current price (Rs/$) 509/7.6
Price target (Rs/$) 561/8.4 /9.1 52 W H/L (Rs.) 635/330
Net change (a+b+c+d+e) 26.70 7.08 -17.79 -8.95 -1.32
*adjusted for capital advances ** includes change in fixed deposits
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CD Equisearch Pvt Ltd
Equities Derivatives Commodities Distribution of Mutual Funds Distribution of Life Insurance
Key Financial Ratios
FY13 FY14 FY15 FY16e FY17e
Growth Ratios(%)
Revenue 21.8 18.2 14.6 10.0 10.4
EBITDA 49.4 14.8 26.0 36.9 10.8
Net Profit 67.1 14.9 25.7 35.9 9.7
EPS 11.4 14.9 25.7 35.9 9.7
Margins (%)
Operating Profit Margin 11.0 10.6 11.8 14.9 15.0
Gross profit Margin 11.4 11.1 12.2 15.2 15.3
Net Profit Margin 7.1 6.9 7.6 9.4 9.3
Return (%)
ROCE 39.0 35.6 35.1 36.7 31.3
RONW 39.8 35.3 34.7 36.4 31.0
Valuations
Market Cap/ Sales 0.4 0.9 2.5 2.1 1.9
EV/EBITDA 3.0 7.2 19.6 13.5 12.1
P/E 6.3 13.3 32.6 22.4 20.0
P/BV 2.2 4.3 10.3 7.3 5.7
Other Ratios
Interest Coverage 93.3 124.5 93.3 93.7 93.0
Debt Equity 0.0 0.0 0.0 0.0 0.0
Current Ratio 1.7 2.0 1.8 1.6 1.5
Turnover Ratios
Fixed Asset Turnover 8.8 9.0 7.5 6.8 7.7
Total Asset Turnover 5.6 5.1 4.6 3.9 3.3
Inventory Turnover 12.3 16.6 17.6 17.0 17.8
Debtors Turnover 55.0 42.5 21.8 13.7 13.0
Creditor Turnover 16.4 15.1 16.1 15.7 15.8
WC Ratios
Inventory Days 29.7 22.0 20.7 21.5 20.5
Debtor Days 6.6 8.6 16.8 26.7 28.2
Creditor Days 22.2 24.1 22.6 23.2 23.1
Cash Conversion Cycle 14.2 6.4 14.9 24.9 25.6
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CD Equisearch Pvt Ltd
Equities Derivatives Commodities Distribution of Mutual Funds Distribution of Life Insurance
Financial Summary – US dollar denominated
million $ FY13 FY14 FY15 FY16e FY17e
Equity capital 2.1 1.9 1.8 1.7 1.7
Shareholders funds 13.7 15.7 19.3 23.8 30.2
Total debt 0.0 0.0 0.0 0.0 0.0
Net fixed assets (incl CWIP) 8.8 8.9 12.8 17.9 25.1
Investments 0.2 0.2 0.2 0.1 0.1
Net current assets 5.2 6.9 6.2 5.6 4.8
Total assets 13.7 15.7 19.3 23.8 30.2
Revenues 66.8 71.1 80.6 81.4 89.9
EBITDA 7.7 8.0 9.9 12.5 13.9
EBDT 7.6 7.9 9.9 12.4 13.7
PBT 6.8 7.1 8.9 11.6 12.7
PAT 4.8 4.9 6.1 7.6 8.4
EPS($) 0.22 0.22 0.28 0.35 0.38 Book value ($) 0.6 0.7 0.9 1.1 1.3
Operating cash flow 7.5 5.0 4.7 7.4 9.8
Investing cash flow -1.8 -1.7 -5.8 -6.7 -8.3
Financing cash flow -0.8 -2.1 -1.8 -2.1 -1.8
*income statement figures translated at average rates; balance sheet at year end rates; projections at current rates All dollar denominated figures are adjusted for extraordinary items.
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CD Equisearch Pvt Ltd
Equities Derivatives Commodities Distribution of Mutual Funds Distribution of Life Insurance
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