Hold Atul Auto; target Rs 325: Sushil Finance

Sushil Finance's research report on Atul Auto

Atul Auto, during Q2 FY14, the top-line grew 26.7 percent YoY to Rs.1,087.2 mn driven by record volumes. The Company sold 9,576 vehicles as compared to 7,578 vehicles in Q2 FY13 and 7,567 vehicles in Q1 FY14. The growth was primarily driven by strong volume growth as the blended realizations for the quarter recorded muted improvement. On the profitability front, the EBITDA margin declined from 11.0 percent in Q2 FY13 to 10.5 percent primarily due to higher other expenses and staff costs, as a percentage of revenues. On sequential basis, the margin improved from 8.4 percent. The moderate pressure at the operating level was further carried down to the net level. The bottom-line registered an increase of 18.9 percent YoY to Rs.73.8 mn as the net margin contracted from 7.2 percent in Q2 FY13 to 6.8 percent in Q2 FY14. On sequential basis, the net profit improved 70.8 percent from Rs.43.2 mn in Q1 FY14. The adjusted Q2 FY14 EPS stood at Rs.6.59 as compared to Rs.5.54 in Q2 FY13 and Rs.3.86 in Q3 FY14. "Atul Auto continued to outperform the 3W industry for yet another quarter and the Management maintained its earlier statement of an anticipated stronger second half. The Company’s new product launches have proved successful and AAL has managed to enhance its capacity utilization even after doubling up the capacity during last couple of quarters. Going forward, the Company is going to explore new geographies coupled with new product offerings in the pipeline and anticipated increase in the capacities. In light of above factors, we maintain our positive outlook for the Company. In addition, the recent continued record sales and an increase in our revenue estimates have encouraged us to enhance our target multiple for the Company. Accordingly, we maintain our HOLD rating for the stock for an increased target of Rs 325 (10x FY15 estimated EPS of Rs 32.5," says Sushil Finance research report. 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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