@Niraj, Clarification by co;
http://www.bseindia.com/xml-data/corpfiling/AttachLive/Atul_Auto_Ltd_200913.pdf
âŚmeanwhile monthly sales numbers out
Sales for month of Sep-13 up 23.4% to 3366 from 2727 (Sep-12).
For Q2/Fy13-14 its up 26.4% to 9576 from 7578 (Q2/Fy12-13).
Hope the higher sale volumes translate into higher profitability this time. The Jun-2013 quarter profits were flat in spite of higher vehicle sales compared to Jun-2012 quarter.
Hi Ajit,
Not sure why you are saying the profits were flat last quarter.
The number of vehicles in June 2013 qtr were 10% higher than last year. Net profit was 11% higher than last year. There was in fact a linear relationship between increase in number of vehicles to net profit.
There was however, no non-linear relationship btw nos. sold and net profits, like we have come to expect of Atul Auto and that was definitely a down-er. But we need to dig deeper.
Why were the profits not non-linear. The major reason was rise in employee expenses. Now, why did employee expenses increase?
a) Maybe they hired external consultants to re-design the plant to increase capacity beyond 48K units
b) Maybe dealer expansion (11 extra locations in 4 months) had taken its toll on employee/other expenses
and so on and so forth, which may depress earnings in the short term but maybe positive in the long term.
Answering such questions at a deeper level will lead us to an answer of linear vs non-linear growth in profits for a given increase in volume of sales, than just hoping.
Disc: Invested.
Hi Kiran. Thanks for this insight. My comment was indeed driven by the disappointment I felt when the 10% increase in vehicle sales did not translate into a 15-20% rise in NP as I had expected.
Expenses on external consultants and on dealer expansion usually would not get reflected in Employee Expenses. My guess is thatthe increase may be due to either additional hiring or a pay hike. Both these are recurring expenses. But, I do agree with your point that more employees or better motivated employees can lead to long term benefits for the co.
I am invested here too and hoping for a positive surprise in the Sep-2013 quarter.
Thanks Ajit. I had meant to say increase in employee and other expenses contributed to a linear increase. Anyway, I think the essence and the takeaway is in the right direction.
I am not really worried about this quarter or the next quarter, whether they will have a linear/non-linear in the next 2 quarters etc. My major worry at this point in time is - where is the capacity addition? At the rate at which they are going, they are going to hit the 48K vehicles very soon (maybe by mid-end next year). And capacity plants canât be built in a day or a month. The management was talking about constructing a plant, but I havenât seen them walk the talk (yet).
My major worry is, they might still be hoping to acquire their previous love, Scooters India to augment capacity and might piss away way too much money on that acquisition. Till date, the management has acted very prudently, but old flames die hard 
I personally think Atul Auto has a very long way to go (qtr to qtr volatility to chalta hi rehta hai), given the oligopolistic nature of the business, unless of course they piss away money on foolish acquisitions. I am keeping a close watch on their capacity augmentation rather than anything else.
Kiran - Sale of 48,000 vehicles in FY-15 should translate into at least 50-60% PAT growth from current level. At that level we could see an EPS of Rs.36-38, which sets up a target price of Rs.288 to Rs.380 (P/E range 8-10). Those are very good returns from CMP Rs.190 for a 18 month horizon.
I have one major concern. How will the launch of Bajajâs new range of 3 wheelers and quadricycle affect Atul in the passenger segment and goods carrier segment respectively. Bajaj is the clear market leader, and its recent announcement of revamping the 3-wheeler range shows that the co has not lost focus on this segment even though it forms only a small part of its product portfolio.
Atulâs competitor TVS 3 wheeler sales grew @ 56%⌠7800 units from 5005 last year
http://www.moneycontrol.com/news/business/tvs-registers-16-increasetotal-sales_961123.html
The TVS product platform is different. They are more into 350 kgs pay load small gasoline passenger three wheeler, mainly for export. Atul is more into 500 kgs pay load. Their product range is competing with Piaggio Ape, Mahindra Alfa and Scooters India Vikram.
The TVS growth in the 3 wheeler segment for the month of September is indeed very impressive. No taking away from that. My earlier post was in context to Atul. The problem with TVS n Mahindra is that the 3 wheeler segment forms only a small part of their turnover.
Hi Guys,
Sharing some interesting data for the period April to August.2013. Against the Industry de-growth of 4%, Atul Auto has grown 18% during this period.
|
INDUSTRIES COMPARISON - APRIL TO AUGUST |
|||||||||
|
Manufacturer |
2012-13 |
2013-14 |
Growth |
||||||
|
Lc |
Pass |
Total |
Lc |
Pass |
Total |
Lc |
Pass |
Total |
|
|
Atul Auto Limited |
5462 |
6095 |
11557 |
5662 |
7934 |
13596 |
4 % |
30 % |
18 % |
|
Bajaj Auto Ltd |
1784 |
79418 |
81202 |
55 |
80172 |
80227 |
-97% |
1% |
-1 % |
|
Force Motors Ltd |
0 |
1 |
1 |
0 |
0 |
0 |
#DIV/0! |
-100 |
-100 |
|
Mahindra & Mahindra Ltd |
7040 |
17928 |
24968 |
7152 |
14854 |
22006 |
2% |
-17% |
-12% |
|
Piaggio Vehicles Pvt Ltd |
19979 |
51476 |
71455 |
19435 |
48330 |
67765 |
-3% |
-6% |
-5% |
|
Scooters India Ltd |
3158 |
2893 |
6051 |
2674 |
2321 |
4995 |
-15% |
-20% |
-17% |
|
TVS Motor Company Ltd |
0 |
5718 |
5718 |
0 |
4111 |
4111 |
#DIV/0!% |
-28% |
-28% |
|
Total |
37423 |
163529 |
200952 |
34978 |
157722 |
192700 |
-7 |
-4 |
-4 |
interesting, how did you get the piaggio numbers ?
I must confess that the extent n speed of the rally in the share price of Atul Auto has come as a bit of a surprise (though a very pleasant one!) even to me. I guess the monthly sales figure for September and the announcement for the maiden interim dividend gave that added thrust. Going forward we can reasonably expect more than decent Q2 results, a liberal interim dividend and record sales for October. The valuation of a stock is as much a question of perception as it is of performance, which has never been an issue. The buzz here in Mumbai is that a few big boys (FIâs n large brokerages) are taking a close look at Atul. If one or two come on board, then the story has a long way to go âŚ
Finally, some good news -http://www.livemint.com/Industry/XABztQT6J7dbXW1Hdq9PWI/Atul-Auto-to-set-up-new-plant-launch-petrolpowered-3wheel.html
New plant to to be operational by April 2015.
Superb indeed !!!
| Apr- Sep | 2013 | 2012 | Growth | Market Share |
| Bajaj Auto | 98885 | 101884 | -3% | 41% |
| Piaggio | 83922 | 88117 | -5% | 35% |
| Mahindra | 28409 | 31016 | -8% | 12% |
| Atul Auto | 16922 | 14284 | 18% | 7% |
| Others | 11401 | 15207 | -25% | 5% |
|
Total |
239539 |
250508 |
-4% |
Yes, its really commendable the way the co has grown profitably in this environment.
Atul Auto Ltd.
Invites you to a post result conference call
to discuss the Q2FY14 financial result
on Friday, 01st November, 2013 at 10:00 a.m. IST
with
Mr. Niraj Chandra a Whole time Director
Mr. Jitendra Adhia a VP (Finance)
Access Numbers:
**Single India Number: **1860 420 4233
**Mumbai Local Access Number: **022 3344 1100
Was in Deogarh (jharkhand) and the visibilty of Atul Auto was superb.
Saw almost 5 service camps where Atul Auto was hard-selling as well as servicing the autos.
Plus if my estimates are correct almost 1/3rd autos were Atul (balance being Mahindra and Piaggio).
Asked the auto driver, he mentioned, that Deogarh is a tough terrain, Bajaj and TVS dont work hereâŚThey need sturdy autos
Some highlights from Atul Autoâs call which just got over now. It is not formatted in the greatest shape nor is it in a narrative like a report. But Iâve listed the key points that were shared by mgmt.
16% market share compared to 14% in goods carrier segment HY on basis. Increase from 3.7% to 5.3% in passenger car, Overall market share improvement, 5% to 7%.
Contribution of Gemini â 691 in Q1, 1000 in Q2.
176 dealers today. 40 dealers added in H1FY14. By end of FY14 they should have 200 dealers.
Domestic 3 wheeler market is slowing down or negative depending on geography, Exports are good
Their sales increase is due to increase in market share?
How have 4 wheelers LCV affected (implying Ace category of vehicles)?
Ace costs Rs. 3.5 lakh. Their vehicle costs around Rs. 1.75 lakh. Mileage for Ace is around 25 kmpl. A 3 wheeler vehicle gives around 32-33 kmpl. Even after the âoverloadingâ that happens in India, a typical three-wheeler will still be better in terms of costs to owner
Export targets - Africa, Sri Lanka, Latin America. Right now very small. Have applied to govt. of Sri Lanka for approval of project. Donât have intention of having local partner. Approvals are taking time.
Impact of Bajajâs quadricycle â mgmt. sees no threat
New states plan â Eastern states and Northern states have good response. Kerala, Karnataka and AP in the South.
Product range expansion â Gasoline 0.35 T three wheeler, 0.5 ton front and rear engine cargo and passenger. Plus CNG and LPG variants.
Sales breakup - Passenger â 60%, goods â 40%
2nd factory in Gujarat â Current plant capacity will get exhausted in H1FY15. Will start work in another quarter. 48,000 vehicles per annum capacity, 24,000 + 24,000 in phase 1 and 2.
Cost is Rs. 80 â 100 crore, 18 month expansion. Internal accruals should be enough plus a little debt if need be. Mgmt. does not want to increase D/E.
Present capacity utilization â 80%.
They are providing after-sales service. In conjunction, the dealers make their own arrangement for spare parts. This is not part of Atul Autoâs turnover. Spare parts contribution in P&L is very low.
They consider internal challenges bigger than competition risk.
No other plan except for 3 wheelers in 3-4 years ahead.
Sales break up FY13 â 45% from Gujarat, H1FY14 â 40% from Gujarat. Home state dependence reducing but still high.
0.5 T vehicles have Greaves Cotton Engines, they also have alternative fuel options. For 0.35 T they will start creating alternate fuel options.
Sri Lanka plant plans, whenever it is built, will be a full-fledged plant and not a plant which assembles CKD kits.
How much inventory is kept at dealer? 30-35 days of inventory. Dealer margin â 6-7%. Dealers earn more by financing commissions, insurance commissions, spare parts sales. Upfront capex required for a dealer including deposit to Atul Auto? They donât take too much deposit, since it is cash and carry. Rs. 1.5 â 2 cr. Showroom, service station and working capital. Atul Auto has only exclusive dealers.
Thanks Kunal for a fantastic update of the call. Good to see 2 people from this group asking questions to the management :)
Here is a small addition about revenue break-up across brands, which if tracked over a period of time may possibly point to some interesting trends.
| Col 1 | No. of units | contriution to turnover | unit price |
|---|---|---|---|
| Atul Shakti | 4936 | 52.95 cr. | 1,07,273 |
| Atul Smart | 553 | 6.29 cr. | 1,13,743 |
| Atul Gem | 9964 | 114 cr. | 1,14,411 |
| Atul Gemini | 1691 | 15.28 cr. | 90,360 |