Received the post split shares on 16 Sep.
Strong result posted again.
Revenue growth YoY 20%
Earning growth YoY 48%
Vehicle sales growth YoY 15%
1HFY15 PAT = Rs206crs up 76% YoY. Looks like they have taken price hikes in 2Q. Solid results and Rs2.5/share interim dividend (v/s Rs2/share last year)
Reverse DCF is a useful tool but like all tools it has its limitations.
There are a few variables that need to kept in mind regarding Atul auto.
There is a huge export market that Atul auto is not participating in at the moment. It doesnât have petrol engines which the export market demands. It is in the process of developing it. The three wheeler exports in FY 14 from India were over 3 lac units and Atul was virtually missing from the party.
It is also in the process of coming out with a CNG engine. Both of these models will also allow it to sell autos in municipal limits where diesel autos are not allowed.
A good management like Atul Auto will certainly be able to capture a part of this opportunity. This needs to be built into the discounting model.
Atul auto is also increasing its ASP which has gone up to Rs 1.18 lacs this first half as compared to last fiscal of Rs1.13 lacs. This has been achieved by reducing dealer margin and some price hike. Also the product mix needs to be considered as some of the higher end autos sell for more than Rs 2 lacs. We donât have the model wise break up but it would be useful to look at it to.
The return on capital in Atul Auto is outstanding. The present capacity is 48000 units per year but as per the management it can be increased by another 10000 by de-bottlenecking the existing plant. The capex is a few crores.
If we assume an ASP of Rs1.2 lacs then the revenue impact of this capacity expansion can be Rs120 crores. For ease of calculation with a net margin of 10%, that is a net profit of Rs 12 crores.In which other business can you get this kind of a return.
The company is operating at 90% capacity so the operating leverage will also kick in and boost profits.
It should be borne in mind that high return on capital businesses command a valuation premium and the stock prices donât come down in a hurry.
Disc - Invested
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Atul Auto hit new high on Goldman Sachs stake buy
Atul Autohas gained 4% to Rs 455 on National Stock Exchange (NSE) afterGoldman Sachs India Fundbought nearly 300,000 shares of the company from the open market.
On November 25, Goldman Sachs India Fund purchased 283,936 shares representing 1.3% stake of Atul Auto at price of Rs 428.87 per share, the NSE bulk deal data shows.
Earlier on November 21,Birla Mutual Fundacquired 200,000 equity shares of Atul Auto at Rs 405 per share through a bulk deal, according to data on the BSE.
Meanwhile, the stock hit a record high of Rs 462, rallied 8.5% from its intra-day low of Rs 426 touched on NSE. Till 0954 hours, a combined 171,908 shares changed hands on NSE and BSE.
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Most unhappy person would be Vijay Kedia after selling bigger stake.
Sharp run up is due to coverage of 2 big Fund house.
This is what add more fuel to the run today 
This is what add more fuel to the run today
BIG CORRECTION ON INTERPRETATION HERE.
Vijayâs smart move is superb. He still has massive chunk even after selling 3.22 lakh stocks recently.
Team up with other savvy investors. If you get them interested in the stock, the stock gets re-rated:
This is Vijay Kediaâs master stroke. He sold small chunks of his shareholding in Atul Auto to master stock pickers like Raamdeo Agrawal, Prashant Jainâs HDFC Mutual Fund, Birla Mutual Fund and, now, Goldman Sachs. The result is that Atul Auto has got re-rated and Kedia has reaped the biggest benefit of that.
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Niraj Chandra, Whole Time Director & JV Adhia, VP Finance took the queries.
Key Points of Conf Call by Capital Mkt; The company registered 13% rise in net sales for third quarter ended December 2014 to Rs 139.33 crore. Net profit rose 17.5% to Rs 11.31 crore.The company sold 11,817 units during the quarter ended Dec 14, up by 9.8% on yoy basis.For the nine month ended December 2014, net sales rose by 17% to Rs 370.32 crore. Net profit rose 49.5% at Rs 31.94 crore.On a nine month basis, the domestic three wheeler industry grew by 14%. Out of this the cargo segment grew 8% while the passenger segment grew 15%.On a nine month basis between April to December 2014, domestic three wheeler volumes grew from 3.64 lakh units to 4.16 lakh units. For Atul Auto, during the period, it has managed to grow by 10%. The company registered 17% growth in cargo segment and 5% growth in passenger segment.The company expects high double digit growth to continue though the same has moderated in the last few quarters.The company' market share in cargo segment stands at 18% while in the passenger segment it is 5%. Volumes have been improving on the back of added dealerships and increasing geographic presence along with market share gains in existing markets.The company's new Petrol Engine products will take another couple of quarters to be launched. This would lead to Atul's entry in urban as well as export markets. Currently, the company's sales are mainly in the semi urban and rural areas. The current facility can be expanded from 48,000 units to ~60,000 units by carrying out the de-bottlenecking activity.For exports, the company is focussing on 7-8 destinations in overseas markets. They are mainly African countries, Bangladesh, Sri Lanka and Latin American countries. In African countries, its mainly Nigeria, Kenya, Tanzania, South Africa. |
Till last year I as a retail investor was also getting an invite from Atul Auto management for the results conference calls. I have stopped getting the same for the last 3 quarters. For last 2 quarters I assumed they did not have a call. But this quarter they surely had one.
Why this change in behaviour? Has the increase in market cap gone to their head? So do they now believe they need to answer the questions of just Ramdeo Agarwal, HDFC, Goldman and Birla MF? So we retail investors donât matter anymore?
So they donât need investors who believed in them much before any of the above mentioned people?
What is happening to this stock ? Monthly sales data is flat but not the type which can make it fall by 8-10% each day. It seems like a bottomless pit. Can someone throw some light ? Ever since Vijay Kedia moved off, the Southern sojourn seems to be non stop
âMarket takes stairs on its way up, and elevator on its way downâ
I wouldnât care if the stock is moving up or down due to an action of any investor. We should rather focus on the fundamentals and make sure that there is no change in the company growth story. The next trigger would be the launch of âpetrol versionâ, until then Iâd expect growth to be muted and that will reflect in the stock price as well. If they are unable to launch the petrol version in a timely manner, then the stock will be rerated downwards in line with other automobile companies.
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Thx Punit Does this mean 15-20 PE, in case Petrol version is delayed. With crude inching up, it is time AA does this quick. No point launching it , when we hit the $ 90 mark in crude
I think the petrol version is important irrespective of crude price points. Petrol version is 60-65% (approx 400K units annually) of the total passenger segment, especially the urban market and almost 90% (approx 350K units annually) of the export market.
I hear that petrol version got delayed because of the engine supplier. So Atul might be assembling its own petrol engine. This will provide a big boast on margins as it will provide around 5-10% savings at operating level.
I also hear (but not confirmed by the management) that Atul is exploring CNG version which is becoming popular due to cleaner energy source and ease of getting license.
Iâm sure the management is working hard to get the petrol version out and we just need to trust them and wait for the triggers, unless you have lost confidence in the management.
If you look carefully at candlestick chart the large fall has been in very low volumes where as earlier rise have been in very high volumes. I think this is good opportunity to accumulate.
I hear that the petrol version is recently launched after getting all the approvals. They are initially focussed on selling it in export market and Gujarat which is their strongest foothold. Also the engine is assembled by themselves. So given better realisations in export, engine assembly and operating leverage we should see an expansion of margins as petrol version is scaled up.
JV Adhia, VP Finance took the queries on Conf Call.Key Points by Capital Mkt:
Atul Auto posted a net revenue of Rs 122.5 crore in Q4FY15, lower than that of the previous quarter by 12%. However, the annual revenue grew by 15% to Rs 492.8 crore. Net profit for the year significantly surged by 36% to Rs 40.5 crore in FY15 compared to the previous year net profit of Rs 29.8 crore.The number of vehicles sold annually increased by 11% to 41598 during FY15.The three wheeler industry grew 10.8% in FY 14-15. Out of this, cargo segment grew 5.3% while passenger segment grew 12.1%.
Industrywise total volumes total volumes stood at 5.32 lakh units as against 4.8 lakh unitds in FY 14.Atulâs growth during FY 14-15 stood at 11%. Out of this, 12% growth was for cargo and 6% was for passenger from.Atulâs market share stood at 18% in cargo category and 5% for passenger category.
The company incurred Rs 33.51 crore capex plan in the year FY 14-15.Margins should improve between 50 bps-75 bps in current year for the company.
The company has taken 54 acre land at Ahmedabad for expansion. While the company has captured phenomenal growth based on its value offeringsin the market, it is expected that it will continue this growth momentum in the time to come.Existing plant will be able to cater the growth for next 2 years and current capacity of 48,000 vehicles can be expanded up to 60,000 units P.A.The total diesel market stands around 250,000 units.India is one of the largest manufacturer for 3-wheelers producing volume of 950,000 units p.a. and growing at 6-8% p.a.The country has a domestic market of ~ 550,000 units p.aâŚ
Export markets include developing and under-developed countries like Bangladesh, Sri Lanka, Indonesia, African countries and Latin American countries.
Atul Auto is producing petrol vehicles from current facility only.There are 200 dealers currently. It will be increased in current year.
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One more key point during the call - The petrol engine model is ready to be launched. The engine will be assembled by Atul Auto internally which will help them to improve margins. The existing plant has the flexibility to switch between the petrol and diesel version depending on the demand of the product.
Sources on the ground tells me that the petrol version will be first launched in Gujarat and selected export market very soon. Secondly the capacity at the existing plant can be ramped up to 66-68K by adding another shift, so there is room for growth from the existing plant and in the mean time the new plant should be up and running with an additional capacity of 60K.
Last time, when I brought this up, Atul Auto was at a decent 460s level and now, there is another 100 Rs cut, even after the announcement that petrol engine is coming. Stock is almost at 20 PE now. Is there more downside? I hope not that we will see 15 PE, and slide to around 300⌠What a fall it has been, from the peak of 720? no wonder, Kedias of the world bailed out long, long ago, laughing all the way to the bank. I have down averaged enough and I am still adrift a ton and getting tired of seeing this RS Software like slide.
Coming to the inhouse manufactured Petrol engine vs the supplied one; I am foxed. There are so many manufacturers who could have executed this in time. I am unable to understand the delay but atleast there is some visibility that it is about to get released.
The monthly sales figures are not Eicheristic but not bad either. The one positive reinforcement, which I stumbled up on is this -I went through this splendid analysis of Dr. Vijay Mallik in self sustenance and growth of Atul Auto http://www.drvijaymalik.com/2015/06/atul-auto-limited.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+blogspot%2FLAXXlY+(Vijay+Malik)
but Mr.M has his own mind
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