Atul Auto plans to expand its production capacity by 1.5 times over the next two years through expanding its existing plant and building a new greenfield plant. This will increase its capacity from 48,000 units currently to 120,000 units. The expansion is aimed at achieving greater scale and market share in the industry. Atul Auto also plans to launch a new 0.35 ton petrol 3-wheeler and aggressively expand its export volumes over the next 3-5 years. The management expects the overall 3-wheeler industry to grow at a 6-8% CAGR in the medium term. Atul Auto's stock currently trades at a PE of 25.8 based on its FY2015 earnings.

1. 1
Automobiles (3 wheelers)
Atul Auto
Sensex: 28420 CMP: INR 480
Expandingcapacityby1.5x
Atul Auto has current capacity of 48000 units. The company plans
to expand capacity by 1.5x to 120000 units in the next 2 years.
While capacity of 12000 units will be created by removing some
bottlenecks at the existing unit at an investment of INR 30-50 mn,
another 60000 units expansion will take place at a greenfield
plant in Ahmedabad. Total investment for the new plant would be
~INR 1.50 bn of which INR 0.40 bn has already been invested. The
company plans to undertake the commercial production of the
new plant in or before FY18. Atul's current capacity is miniscule
compared to the established players in the industry and their
capacity enhancement plans will help them in achieving scale.
Product Portfolio
Currently Atul Auto's product portfolio comprises of 45 variants
under 4 brands i.e. Shakti, Smart, Gem and Gemini. The company
plans to launch its new 0.35 ton petrol 3 wheeler in H2FY16. Petrol
3 wheelers account for 46% of passenger 3 wheeler market in
India and almost 100% of passenger 3 wheeler exports from India.
The company enjoys a market share of ~7.5% in India despite
being present in only ~56% of the market. With the launch of this
new vehicle, we expect Atul Auto to further expand its market
share in India.
Aggressive Export plans
Exports account for 43% of total Indian 3 wheeler industry sales
whereas it accounts for 3.5% of Atul Auto's sales. Almost entire
July 21, 2015 VISITNOTE
export market of 408000 units of 3 wheelers is 0.35 ton petrol.
While previously Atul was not present in the segment, now with
its 0.35 ton 3 wheeler, we expect the company to clock significant
growth in export volumes with its widening target audience. The
company too plans to scale up export volumes to more than 10000
units over the next 3-5 years.
Industry Outlook
The management expects 3 wheeler industry to grow at a CAGR of
6%-8% in the medium term. Both passenger and goods 3 wheelers
are expected to grow on the back of demand from both urban and
rural areas. Atul Auto also expects limited competition & impact
from electric 3 wheelers (or E-rickshaws) and RE60 of Bajaj Auto
as these vehicles are likely to find buyers only in urban areas and
feeder routes. The company anyways till now does not have
significant presence in urban markets.
Outlook & Valuation
Atul Auto, being a relatively small player in the 3 wheeler
industry, is expected to grow on the back of widening product
portfolio, growing distribution reach and expanding market
opportunity size. Increase in capacity by 1.5x will help the
company in achieving scale, enhance market share and fulfill
the near term vision of the management of achieving sales of
100000 3-wheelers. Topline and bottomline grew at a CAGR of
16.4% and 23.4% between FY13-15. At CMP the stock is trading
at a PE of 25.8x FY15 earnings.
Shareholding (%) Mar-15
Promoters 52.70
FIIs 11.45
DIIs 8.27
Others 27.58
Relative Price Performance
Key Data
BSE Code 531795
NSE Code ATULAUTO
Bloomberg Code ATA IN
Reuters Code ATUL.BO
Shares Outstanding (mn) 21.94
Face Value 5
Mcap (INR bn) 10.25
52 Week H/L 722.00/264.13
2W Avg. Qty.NSE 72189
Free Float (INR Bn) 4.85
Beta 1.24
(INR mn) FY12 FY13 FY14 FY15
Net Sales 2988 3638 4301 4928
Growth (%) 47.90% 21.76% 18.22% 14.57%
EBIDTAM (%) 8.86% 11.01% 10.55% 11.75%
Adj. PAT 155 259 296 394
Growth (%) 64.28% 66.89% 14.45% 33.13%
Adj. EPS (INR) 20.54 23.11 26.45 17.61
P/E(x) 5.41 6.27 13.32 30.91
EV/EBIDTA 2.89 3.10 7.70 20.58
Net Debt/Equity 0.07 0.00 0.00 0.00
RoACE (%) 28.02% 36.96% 33.21% 33.25%
RoAE (%) 32.17% 39.71% 35.11% 36.60%
We met the management of Atul Auto and visited their manufacturing facilities to understand the dynamics of the
3 wheeler industry & steps they are taking to further strengthen their market share. The company plans to launch 0.35 ton petrol
3 wheeler this year which will complete its product portfolio and expand its addressable market size. Atul Auto's medium term
strategy is to achieve 100000 unit sales and INR 1000 crs turnover. Given below are the key takeaways from the visit:-
Prashant Biyani
prashant.biyani@spagroupindia.com
Ph. No. 91 33 4011 4800 (Ext. 833)
40
60
80
100
120
140
160
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Atul Auto Sensex

2. 2
Automobiles (3 wheelers)
Financials
Income Statement
Year End March (INR mn) FY12 FY13 FY14 FY15
Net Sales 2988 3638 4301 4928
Growth in Sales (%) 47.90% 21.76% 18.22% 14.57%
Cost of goods sold 2376 2843 3317 3722
Employees Cost 156 197 257 324
Other Expenses 174 181 247 303
Total Expenditure 2724 3238 3847 4349
EBIDTA (without OI) 265 401 454 579
% Growth -36.23% -51.38% -13.28% -27.58%
EBITDA Margin % 8.86% 11.01% 10.55% 11.75%
Depreciation/Amortization 43 44 52 56
EBIT 222 356 402 523
EBIT Margin % 7.43% 9.79% 9.34% 10.62%
Interest Expense 8 4 4 6
Other Income 18 20 30 75
Exceptionals 1 0 2 11
EBT 232 372 428 593
Tax Expenses 77 113 130 187
APAT 155 259 296 394
% Growth 64.28% 66.89% 14.45% 33.13%
APAT Margin % 5.19% 7.11% 6.89% 8.00%
Balance Sheet
Year End March (INR mn) FY12 FY13 FY14 FY15
Sources of funds
Share capital 76 112 112 112
Reserves & Surplus 485 631 833 1099
Total Networth 561 743 945 1211
Total Debt 39 0 0 0
Total Liabilities 600 743 945 1211
Application of funds
Net Block 400 431 527 799
Capital Work-in-Progress 16 50 6 0
Investments 12 12 12 10
Total Current Assets 493 699 851 892
Total Current Liabilities 299 440 438 507
Net Current Assets 194 258 413 385
Net Deferred Tax (47) (45) (61) (52)
Other Assets 25 37 47 68
Total Assets 600 743 945 1211
Cash Flow
Year End March (INR mn) FY12 FY13 FY14 FY15
EBT 232 372 428 593
Less: Other Income/Exceptionals (18) (20) (30) (75)
Add:Depreciation 43 44 52 56
Add: Interest paid 8 4 4 6
Direct taxes paid (70) (122) (134) 0
Change in Working Capital (26) 202 (84) (150)
Cash Flow from operations (a) 169 481 236 429
Change in Fixed Assets 20 (75) (148) (327)
Change in CWIP (16) (34) 44 6
Change in Investments 11 0 0 12
Others (38) (12) (11) (21)
Cash Flow from Investing (b) (23) (121) (115) (329)
Change in Equity 15 37 0 0
Debt Raised/(Repaid) (21) (39) 0 0
Dividend paid (27) (43) (77) (96)
Interest paid (8) (4) (4) (6)
Others (20) (44) 30 (176)
Cash Flow from Financing (c ) (61) (93) (50) (278)
Net Change in Cash (a+b+c) 85 267 71 (178)
Opening Cash 28 114 381 452
Closing Cash 114 381 451 274
Key Ratios
Year End March FY12 FY13 FY14 FY15
Per Share Data (INR)
Adj. EPS 20.54 23.11 26.45 17.61
Growth (%) 32.29% 12.50% 14.45% -33.44%
CEPS 35.43 54.35 62.43 80.68
DPS 4.85 5.88 7.35 5.00
BVPS 74.29 66.34 84.34 54.05
Return Ratios (%)
RoACE 28.02% 36.96% 33.21% 33.25%
RoANW 32.17% 39.71% 35.11% 36.60%
Liquidity Ratios
Net Debt/Equity 0.07 0.00 0.00 0.00
Current Ratio 1.65 1.59 1.94 1.76
Efficiency Ratios
Asset Turnover Ratio 5.62 5.42 5.10 4.57
Inventory Days 38 34 25 24
Debtor Days 7 7 9 17
Creditor days 18 24 28 28
Valuation Ratios
P/E(x) 5.41 6.27 13.32 30.91
P/BV (x) 1.50 2.19 4.18 10.07
P/CEPS (x) 3.14 2.67 5.64 6.74
Dividend Yield (%) 4.36% 4.05% 2.09% 0.92%
EV/Net Sales (x) 0.26 0.34 0.81 2.42
EV/EBIDTA(x) 2.89 3.10 7.70 20.58

3. 3
Automobiles (3 wheelers)
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