Prabhudas Lilladher's research report on Atul AutoWhile volume growth during Q3 remained in mid‐single digits for the fourth successive quarter, lower commodity price and higher realisations led by a better product mix boosted Atul Auto’s (AAL’s) EBITDA margin to a new peak of 16.6%. This led to robust 41.2% YoY growth in Q3FY16 profit for AAL to Rs160m. Growth prospects appear healthy for AAL over the long‐term, as the company continues to launch new products and enters more markets. H2FY16 should also witness higher volumes from the petrol product launch. While the company is small in size currently, its presence in a niche segment with low competition ensures high growth. AAL enjoys a debt‐free status, with adequate free cash flow generation to part‐finance its capex through internal accruals. We maintain ‘Accumulate’ with a price target of Rs537. AAL trades at PE of 22.3x FY16e and 17.9x FY17e EPS. At our price target, the stock would trade at a PE of 20x FY17e and an EV/EBITDA of 13.2x FY17e (currently at 11.8x). For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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