Emkay Global Financial's report on Atul Auto
Q1FY21 results were weak due to lower volumes. Revenue declined 82% yoy to Rs265n, in line with our estimates. Net loss stood at Rs68mn, better than the estimated Rs81mn loss, owing to lower-than-expected employee expenses. Near-term volume performance is likely to remain under pressure. We expect a pick-up by FY21-end, led by replacement demand and a gradual improvement in economic activity. Market share gain is expected in FY21 on high exposure to cargo segment and launches. To strengthen presence, management continues its efforts on: 1) increasing penetration in alternative-fuel vehicles; 2) improving credit access through its group finance arm; 3) increasing presence in key export geographies; 4) launches; and 5) network expansion.
Average ROCE is expected at 16% over FY21-23E. Valuations are inexpensive at 9x/7x P/E on FY22/23E compared to the historical average of 14x P/E. Maintain Buy with a TP of Rs258 (Rs238 earlier), based on P/E of 10x Sep’22E (Mar’22E earlier).
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