Atul Auto Ltd. - Q3 FY14 Result Update - CMP Rs.285 - Maintain HOLD - INVESt VISTa - Sushil Finance

ATUL AUTO LTD. - Q3 FY14 RESULT UPDATE - CMP Rs.285, Maintain HOLD

Atul Auto Ltd. (AAL) released its Q3 FY14 performance on January 29, 2014. Following are the highlights from the quarterly results and the conference call.

Q3 FY14 Result Highlights

- During Q3 FY14, the top-line grew 19.0% YoY to Rs.1,228.9 mn driven by yet another quarter of record volumes. The Company sold 10,764 vehicles as compared to 9,173 vehicles in Q3 FY13 and 9,576 vehicles in Q2 FY14. The growth was primarily driven by strong volume growth as the blended realizations for the quarter improved marginally by 1.4%.

- The EBITDA grew 20.3% YoY and 30.6% QoQ to Rs.149.3 mn. On the profitability front, the EBITDA margin increased marginally from 12.0% in Q3 FY13 to 12.1% primarily due to lower raw material expenditure, as a percentage of revenues. On sequential basis, the EBITDA margin improved 165 bps from 10.5%.

- The bottom-line registered an increase of 16.7% YoY to Rs.96.6 mn as the net margin stood at 7.9% in Q3 FY14 as compared to 8.0% in Q3 FY13. On sequential basis, the net profit improved 30.9% from Rs.73.8 mn in Q2 FY14 at 6.8%. The improvement in the profitability was resulted from better performance at the EBITDA level.

- The adjusted Q3 FY14 EPS stood at Rs.8.63 as compared to Rs.7.39 in Q3 FY13 and Rs.6.59 in Q2 FY14. There were no extra-ordinary or non-recurring items recognized during the quarter.

Other Updates

- During the quarter, the Company sold 10,764 vehicles as against 9,173 units in Q3 FY13 and 9,576 units in Q2 FY14. The Company made record sales of 4,050 vehicles during October 2013; it further sold 3,204 units in November, 2013, 3,510 units in December, 2013 as compared to 2,997 units in November, 2012 and 2,844 units in December, 2012. During January, 2014, AAL sold 3,330 vehicles as compared to 2,808 in January, 2013.

- The dealer network enhanced to 179 dealers and is expected to reach 250 in the first phase of dealership expansion; there are 19 LoIs under process as of now and the Company expect to close the year with almost 200 dealers. The Company is focusing on eastern states for dealer network expansion. The Company expects to have a Pan-India presence over the next few quarters.

- The work on the second plant in Gujarat is processing well and is expected to commercialize by FY16; as mentioned during last update, the new plant would also have a capacity of 48,000 units and would require an initial capex of Rs.1,000 mn.

- The Company expects to register a volume of 50,000 units in FY15 as against 32,040 units achieved during FY13 and 27,908 units in 9M FY14.

- The Company is still awaiting the Sri Lankan's Government approval for setting up its 100% subsidiary; the planned initial capex for the project is Rs.200 mn.

- Rajasthan and Gujarat currently drives the leadership position for the Company and currently consists 45% of the Company's top-line.

- The Petrol Model Vehicle is currently under the evaluation process and is expected to launch commercially in the coming one or two quarters.

OUTLOOK & VALUATIONS

The Company continued to perform better than the industry which is clearly facing the headwinds amidst economic slowdown and going through low demand phase. The Company has not only been able to maintain healthy performance at the top-line but at the profitability front as well. Though the significant part of the current top-line growth is being contributed by the volume growth, we expect realizations to improve as well, going forward. In addition, the geographical expansion plans and wider product-line which are likely to materialize over the period of 4-8 quarters will result into robust financials for the Company. Accordingly, we maintain our HOLD rating for the stock for target of Rs.325.

Source : Equity Bulls

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