Solid numbers from this one.
Ayush had prompted a dose of realism a few days back. Here are some collated numbers for everyone to reflect on.
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While results seem to show a 30% growth in Sales in Q3FY13, and great improvements at Operating and Net levels - that's more a result of operational efficiencies and great Working Capital Management. Notice the jump in operating Margins to ~13%. Wow! Its great to hold on to such a company (if you are invested in from much lower levels).
But this must be balanced with a look at Volumes growth coming down - that the uptick in Sales seen since Oct may be fizzling out! That should be noted with CAUTION -before any fresh adventures at current levels. We should try and corroborate with what is happening on the ground - in the 3 wheeler space and auto demand in general.
I have data from only from Aug. If someone tracks/has the figures for Apr-July 2013, please update.
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Revised projections for Atul Auto. Very difficult to see 25+ as mentioned in some earlier post.Realistic range is 20-22 EPS for FY13. And that's not cheap with Atul quoting 10x. Any attempts at discounting FY14 may be foolhardy given the visible slowdown.
Ayush is right in advising abundant caution. But we should also remember any turnaround in demand situation will augur very well for this company from here on because of the improvement in efficiencies/working capital management.
Disc: Invested. Am holding on without any qualms; but would look at the demand situation carefully before adding more.
Hi Donald,
The consolidted figures of sales volume from April to August 2012 are available. Here is the link.
April to August 2012 11692
April to August 2011 9866
http://news.indiamart.com/story/atul-auto-posts-1321-rise-sales-august-2012-167202.html
Donald, the missing piece is the overall sector. Every company is struggling in the auto sector. Atul, in that kind of environment, has actually done fairly well. All types of CV sales are down. Regular/Monthly diesel price increase is likely to impact sentiment further.
Here is one more link on the company and a mention of ICRA report on Auto industry.
Atul Auto sold 6841 in April-June 2012 quarter versus 5583 in the previous corresponding quarter.
Yes Abhishek, the picture ahead does not look too good, if you consider the 3-wheeler space. And things are catching up with Atul Auto after a few months of bucking the trend. But we must also remember Atul has the advantage of growing from scratch in new territories (unlike the other players in 3-wheelers). In my visit to Bihar/Jharkhand in Dec 2012, I was happy to note quite a few new ATUL AUTOs in Patna, Gaya, Ranchi.
My sense is Atul will still continue to grow Volumes at 15%+ for a few quarters ahead. So no need to panic and quit in a huff, especially when the company is blazing guns on the operational front, and especially if you are invested in from lower levels.
Ayush - I know you are busy in celebrations (Guys - Ayush & Roopali were recently blessed with a Baby). Can you find time for an update from Management - mostly near term visibility?
-Donald
1 Like
Thanks Tony.
That Apr-Aug figure shows a ~18.5% kind of growth. Excluding Aug, we get Apr-July growth at ~19%.
Company has been providing Monthly Sales figures directly since August 2012. We must make it a point to keep track/update this valuable advance data.
-Donald
One point to keep in mind is that the domestic market is not the only growth driver. The company is planning to expand into srilanka and the export markets (which is a larger market even for bajaj auto).
The growth may slow in the domestic markets in the short/ medium term, but the company should be able to compensate it with the export markets. A 10% volume growth + 5 % value growth (15% topline growth) does not appear to be too much of stretch
Here is a management that seems to doing every thing right.
* Increasing the operational efficiencies tremendously.
* Doing its best to increase the Sales (entering New state, new country)
Below are my conservative projections for Fy14 provided things keep going they way they are And given the fact mgmt is trying hard to capture new markets, it should be doable comfortably. Need to keep a tab on that though.
|
FY14 Worst |
Fy14 Best |
|
|
Sales |
355.31 |
468.96 |
|
EBIT |
38.64 |
41.01 |
|
Net Profit |
31.31 |
33.45 |
|
EPS |
27.9 |
29.8 |
Considering this, I think there is a still a lot of juice left in Atul auto. At this point of time I would even say better than Mayur & Astral.
I am holding from lower levels and want to add (but refrain as Donald has suggested to be balanced :)
From Bajaj Auto FY12 AR
| 3 Wheeler (Passenger Segment) | FY2011 | FY2012 |
|---|---|---|
| Industry Sales | 526,022 | 513,251 |
| Bajaj auto Sales | 205,603 | 202,979 |
| Bajaj auto Market Share | 39.1% | 39.5% |
http://piaggio.co.in/Category/about-us/milestones.aspx
From Piaggio vehicles Pvt Ltd site :With an aggregate market share of 41% in the 3w industry and 64% in the 3w cargo segment in 2010.
(Piaggio (Brand : Ape) rolled out the 10,00th vehicle from it's factory in year 2000 and one millionth vehicle in 2010).
Assuming Piaggio has maintained similar market share in 2012, then we are left with roughly 20% of the "passenger segment" market to be shared between Mahindra, Atul & TVS ? Are their other players ?
From the above numbers, it seems, Atul's current market share in "passenger segment" is roughly 2-6%, taking into account their 26k+ annual sales and not knowing the breakup between passenger and cargo segment sales.
It seems, their is still some headroom for Atul to grow taking into account their expansion plans.
In Puri & Bhubaneswar, observing the vehicles on road, it seems to be very good market for the auto companies. For instance in Puri main road, one can see around 200+ auto's at any point of time in a small stretch 5 kms !!
The old smaller auto's (mostly from Bajaj) are being replaced at a very fast rate by the new bigger ones (like Atul gem Paxx, Mahindra Alfa, Piaggio Ape) for obvious reason of extra space and better mileage.
Roughly out of 200 auto's, i could see 30-40% are from Piaggio and another 30-40% are from Mahindra (Alfa). I didn't see that many from Bajaj which would confirm to the market share numbers given above. Atul Gem Paxx, i could see only 6-8 out of 200, which kind of confirms to their market share number.
Over the next few days, i plan to pose as a customer (prospective Auto Driver) and try to visit the showroom of all the 4 in Puri and BBSR and see what i can learn. Hope to have good fun!!
Disc: I hold from lower levels.
Raj,
Thanks for your note. Please do more local scuttlebutt and revert. That is always helpful.
One clarification:Bajaj Auto is not a competitor fro Atul (given current product portfolio atleast). Bajaj Auto does not service the larger passenger carrier+cargo market. Effective competition for Atul I would think is primarily Piaggio Ape, and Mahindra.
-Donald
Atul,
Nice to see you making an attempt at projections. Its an important exercise to make us think constructively.
Once caveat: we usually do projections after we have good visibility on the road ahead - usually 1 or 2 years. Given the visible slowdown in the industry/demand, I think visibility is poor - even one year ahead.
That visibility can improve
a) as we track and notice an upward swing in monthly numbers not before; rate cuts may help, but diesel hikes may queer the pitch too
b)if we see industry demand picking up - that will be reason enough for better visibility
c) Meanwhile feedback from company will help put things in better perspective - which we have asked Ayush to probe.
Growth may still come from newer domestic market penetration; some growth may come from exports which is probably still to be inked on paper (local assembly and manufacture) as there are exorbitant duties slapped which make it counterproductive for direct exports.
Let’s put our minds to getting the FACTS on the table, first.
-Donald
Donald,
Regarding diesel price hike, One should not be worried at all, as the OMC’s have decided to increase a little every month, even if there is a steep price hike, usually it gets passed on to the customer, Don’t you think in that case vehicles which give higher mileage per litre will be the beneficiaries.
Agree this may not be a big worry, going by announcements made.
For me the bigger worry is real slowdown in demand. Things can get worse form here. I don’t want to be gung-ho, feel we should better wait & watch, especially as Valuations are no more cheap - its factoring in future growth - which has certainly become cloudy.
did anyone attend the earnings conference call sheduledfor atul auto today?
Bajaj has these competing models ‘Mega Max’ Vs Atul Gem Paxx (http://www.bajajauto.com/comm_psngr_megamax.asp )
and ‘RE 600’ Vs Atul Gem Cargo
(http://www.bajajauto.com/comm_psngr_re600.asp)
Today I went to Bajaj and Atul showroom here, and was introduced to the Bajaj’s cargo vehicle as ‘Max GC 1000’ which looks pretty similar to RE 600 in the site.
The products from both companies looked very similar with hardly any difference in price and feature. Mileage claim was the maindifferentiatingfactor(Atul was 5 kms better at 40 kmpl vs Bajaj’s 35 kmpl claim) for the passenger vehicle.
Will update with more details after i visit Piaggio and Mahindra showrooms.
One clarification:Bajaj
Donald,
Visibility consideration was there in back of my mind, but I kind of treated visibility and projectionindependently; even in reverse order. And Bang ! You caught it right there and helped correcting it well on time.
Thanks,
Atul
Thanks for the correction Raj. Appreciate.
We had collected data for all manufaturers in Dec 2011 (around the time of initial interest in Atul Auto) for 3 wheeler Diesel passenger+ Cargo Sales. I seem to remember from that Piaggio & Mahindra were the main competitors. Bajaj was not a threat!
Here’s a link to one of the articles pointing to the data points for FY11, which shows about 20,000 annual sales for Bajaj Diesel 3 wheelers.
But there was another one, where I think we got it directly from the source month by month data for all manufacturers. Should have been SIAM site, but the public data doesn’t show manufaturer break-ups.
Can’t find it straightaway. will look for that tomorrow. Vinod MS do you remember? where you the one who pointed us to the data?
-Donald
(http://www.bajajauto.com/comm_psngr_re600.asp Link: http://www.bajajauto.com/comm_psngr_re600.asp )
maindifferentiatingfactor(Atul clarification:Bajaj Auto is not a competitor fro Atul (given current product portfolio atleast). Bajaj Auto does not service the larger passenger carrier+cargo market. Effective competition for Atul I would think is primarily Piaggio Ape, and Mahindra.
-Donald
That makes sense Donald,
I was told at Bajaj, due to the widening price gap between petrol and diesel, and the resultant surge in demand for diesel auto’s, they have now introduced both the old smaller version and the new bigger version in diesel.
I get a sense, Bajaj’s delay in launch of diesel vehicles has contributed to Piaggio & Mahindra’s lead in the larger size auto market. But knowing Bajaj, i think they will fight hard to regain the lost ground, now that they have product (need to find date of the new introductions). It’s a high return business for them. They had the better showroom and personnel and also a adjoining service center unlike Atul.
Atul’s Puri store in-charge (he was also the ex-Bajaj store in-charge of Puri)turned out to be an old acquaintance ofmine. Couldn’t meet him today, would try to get more details from him in next few days.
On a side note, i saw that both of them were using only exide batteries. Whereas on tyres, Bajaj gave the option of fitting any of the MRF/CEAT.
Link: http://management-punditz.blogspot.in/2011/05/indian-three-wheeler-industry.html