Competent Auto - 4QFY2015 Result Update - Angel Broking

For 4QFY2015, Competent Automobiles (Competent) reported a strong set of numbers on all fronts. The top-line for the quarter grew by an impressive 30.3% yoy to Rs. 254cr, higher than our estimates of Rs. 208cr. The revenue growth replicates the strong performance reported by Maruti in 4QFY2015 where it reported 7% volume growth. The EBIDTA for the quarter came in at Rs. 9cr as against Rs. 5cr reported a year ago. EBIDTA margin for the quarter improved by 91bp yoy to 3.5% as against 2.6% in 4QFY2014. This is attributable to lower other expense as a percentage of sales (3.4% for the quarter as against 4.6% in 4QFY2014). However, depreciation cost for the quarter grew by 295% yoy to Rs. 3.5cr as against Rs. 0.9cr in 4QFY2014 while other income declined by 69% yoy and came in at Rs. 0.3cr. The impact of the same was negated by lower tax rate of 13.7% which resulted in PAT growing by 44.6% yoy to Rs. 3.8cr.

Proxy play on Maruti's growth: The top-line performance of the company is closely linked to the performance of Maruti Suzuki (MSIL). We expect MSIL to post robust volume growth in the domestic market going ahead on back of new launches which will be replicated by Competent. Also, we expect the market share of the company to remain stable/improve, as entry of a new dealer seems to be commercially unviable with property prices having soared significantly in the Delhi region. Further, higher vehicle sales would likely get converted into greater demand for after sale services, thus bringing in additional revenue for the company.

Scalable business model with healthy balance-sheet: The company has a scalable business model which will enable it to report sustainable revenue growth going ahead. Further, the company has turned net debt free in FY2015 with cash on books of Rs. 31.9cr which is 46.5% of its current market cap, thus providing margin of safety.

Outlook and Valuations: We believe that Competent will continue to benefit from its established position in the automobile dealership market in Delhi, Haryana, and Himachal Pradesh, and its conducive relationship with its principal, MSIL. During FY2015-17E, we expect the company to register a top-line and bottomline CAGR of 9.8% and 22.3%, to Rs. 1,114cr and Rs. 17cr, respectively. We recommend a Buy rating on the stock with a target price of Rs. 141 valuing the stock at 5x FY2017E earnings.

Shares of COMPETENT AUTOMOBILES CO.LTD. was last trading in BSE at Rs.121.5 as compared to the previous close of Rs. 119.5. The total number of shares traded during the day was 1091 in over 36 trades.

The stock hit an intraday high of Rs. 127.9 and intraday low of 120.1. The net turnover during the day was Rs. 134029.

Source : Equity Bulls

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