Buy Atul Auto on dips: Dipen Sheth

Dipen Sheth, Head-Instl Research at HDFC Securities told CNBC-TV18, "In Atul Auto’s case, the addressable opportunity is rising dramatically. The March numbers were soft. We were expecting higher numbers. So, a little bit of monthly miss is always to be expected. They are building out their dealer network. They are building out a new plant which will double capacity from the existing 60,000 to 1,20,000. This is a company which can compound continuously here on for I do not know how many more years, because they have still got something like a 40,000-45,000 volume in a 10,00,000 volume market. And half that market was unaddressable for them because they did not have a petrol model. So, they only had diesel models across sizes and ranges. Now, they have developed an in-house petrol engine. We are betting on it. The risks are great in terms of commissioning or designing and rolling out an engine from scratch. There is some evidence with us in our research that tells us that they have got it right. They have got an industry veteran to build it up from scratch and they are working at 35-40 percent kind of return ratios.""A high return ratio company with a very large addressable opportunity misses numbers on a couple of months here and there, at 14x again on FY'18 basis, I think there is not much to worry about. In fact, investors should buy into any fall that might happen here on," he said."It is a very low capital employed company in terms of the kind of output that it does. So, you look at revenue to capital employment, you look at asset turns and so on, they are magnificent," he added.