AtulAuto

February11,2016

While volume growth during Q3 remained in midsingle digits for the fourth
successivequarter,lowercommoditypriceandhigherrealisationsledbyabetter
productmix boosted Atul Autos (AALs)EBITDAmargin to a new peak of 16.6%.
Thisledtorobust41.2%YoYgrowthinQ3FY16profitforAALtoRs160m.

RohanKorde
rohankorde@plindia.com
+912266322235

Rating
Price
TargetPrice
ImpliedUpside
Sensex
Nifty

Accumulate
Rs482
Rs537
11.4%
23,759
7,216

(PricesasonFebruary10,2016)
Tradingdata
MarketCap.(Rsbn)
Shareso/s(m)
3MAvg.Dailyvalue(Rsm)
Majorshareholders
Promoters
Foreign
DomesticInst.
Public&Other
StockPerformance
(%)
1M
6M
Absolute
(11.8)
10.1
Relative
(7.1)
25.5
HowwedifferfromConsensus
EPS(Rs)
PL
Cons.
2017
26.8
27.5
2018
32.1
35.8

10.8
22.4
29.9

Growth prospects appear healthy for AAL over the longterm, as the company
continues to launch new products and enters more markets. H2FY16 should also
witness higher volumes from the petrol product launch. While the company is
small in size currently, its presence in a niche segment with low competition
ensureshighgrowth.AALenjoysadebtfreestatus,withadequatefreecashflow
generation to partfinance its capex through internal accruals. We maintain
Accumulate with a price target of Rs537. AAL trades at PE of 22.3x FY16e and
17.9x FY17e EPS. At our price target, thestock would trade at a PE of 20x FY17e
andanEV/EBITDAof13.2xFY17e(currentlyat11.8x).

On theback of steady volume growthof6.7% YoY,AALs revenuegrowth was

9.2% YoY during Q3FY16 (realisation improvement of 2.4% YoY). With non
operating income declining 44.6% YoY, growth in total income for the quarter
was8.9%YoY.

Grossmarginsimproved370bpsYoYand150bpsQoQ,asAALavailedofbenefits
of lower commodity costs. Improvement in gross margins helped to drive
EBITDAmarginup390bpsYoYand130bpsQoQto16.6%.Staffcosts/salesratio
washigher50bpsYoY,whileotherexpenditure/salesratiowaslower70bpsYoY.
ThisresultedinhealthyEBITDAgrowthat42.1%YoYtoRs251m.

52.70%
6.86%
9.53%
30.91%

Contd...2
12M
(18.1)
(1.9)
%Diff.
2.6
10.2

PricePerformance(RIC:ATUL.BO,BB:ATAIN)

Keyfinancials(Y/eMarch)
Revenues(Rsm)

Growth(%)

EBITDA(Rsm)
PAT(Rsm)
EPS(Rs)
Growth(%)
NetDPS(Rs)

2015
4,928
14.6

577
394
17.6
32.2
5.0

2016E
5,368
8.9
782
483
21.6
22.6
6.0

2017E
6,496
21.0
934
601
26.8
24.4
7.0

2018E
7,746
19.3
1,105
720
32.1
19.6
7.0

2015
11.7
36.6
36.9
2.1
18.2
27.4
8.9
1.0

2016E
14.6
34.9
30.0
2.0
14.0
22.3
6.9
1.2

2017E
14.4
33.8
26.2
1.7
11.8
17.9
5.4
1.5

2018E
14.3
31.5
25.3
1.4
10.0
15.0
4.2
1.5

Source:Bloomberg

Feb16

Dec15

Oct15

Aug15

Jun15

Apr15

Feb15

(Rs)
700
600
500
400
300
200
100
0

Profitability&Valuation
EBITDAmargin(%)
RoE(%)
RoCE(%)
EV/sales(x)
EV/EBITDA(x)
PE(x)
P/BV(x)
Netdividendyield(%)
Source:CompanyData;PLResearch

PrabhudasLilladherPvt.Ltd.and/oritsassociates(the'Firm')doesand/orseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresultinvestorsshouldbeawarethat
theFirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthereport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.

Pleaserefertoimportantdisclosuresanddisclaimersattheendofthereport

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Q3FY16ResultUpdate

Marginsscaleanewpeak

AtulAuto

Perunitparameterswerealsohigher.Contributionpervehicleincreased17.7%
YoY,whileEBITDApervehiclewashigherby33.2%YoY.

With healthy EBITDA growth, adjusted profit in Q3 was higher 41.2% YoY to
Rs160m,whichwashigherthanexpectations.

Conferencecallhighlights

Exhibit1:

AALcurrentlyhas200primarydealersand120secondarydealers.Thecompany
currentlyhaseightoverseasdistributors.

BillingforCNGvehicleforthedomesticmarkethasstarted.

Overthelongterm,AALsaspirationisforexportstocontribute2530%oftotal
salesvolumes.

AfricandealersarewitnessingproblemsofDollaravailability.Someofthemare
hopingfortheissuetoberesolvedinacoupleofquarters.

AAL is exploring options in nonAfrican markets like Sri Lanka, Bangladesh,

Indonesia,LatinAmerica,etc.Thetimeframeinvolvedinenteringthesemarkets
canrangefrom312months.

Q3FY16ResultOverview(Rsm)

Y/eMarch

Q3FY16

Q3FY15

YoYgr.(%)

Q2FY16

9MFY16

9MFY15

YoYgr.(%)

NetRevenues

1,517

1,393

8.9

1,429

4,013

3,703

8.4

RawMaterials

1,086

1,050

3.4

1,044

2,914

2,804

3.9

71.6

75.3

73.1

72.6

75.7

Personnel

%ofNetSales

96

81

18.5

94

283

243

16.5

6.3

5.8

6.6

7.0

6.6

%ofNetSales

Manufacturing&OtherExp

84

86

(2.0)

71

227

227

%ofNetSales

5.5

6.2

5.0

5.7

6.1

TotalExpenditure

1,266

1,217

4.0

1,209

3,424

3,273

4.6

EBITDA

251

177

42.1

219

590

430

37.1

16.6

12.7

15.3

14.7

11.6

13

13

13

40

42

(5.7)

EBITDAMargin(%)

Depreciation
EBIT

238

164

45.6

206

550

388

41.8

InterestExpenses

(54.5)

60.0

Nonoperatingincome

(44.9)

12

54

(77.8)

ExtraordinaryIncome
PBT
TaxTotal

TaxRate(%)Total

NA

19

NA

242

170

42.1

204

554

455

21.7

82

57

43.8

69

189

136

39.0

34.0

33.5

1.2

34.0

34.1

29.8

14.2

ReportedPAT

160

113

41.2

135

365

320

14.4

Adj.PAT

160

113

41.2

135

365

306

19.3

Source:CompanyData,PLResearch

February11,2016

2
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Exhibit2:

AtulAuto

OperatingMetrics

Y/eMarch

Q3FY16

Q3FY15

YoYgr.(%)

Q2FY16

9MFY16

9MFY15

YoYgr.(%)

12,609

11,817

6.7

11,925

33,372

31,338

6.5

NetRealisation/Vehicle

120,311

117,906

2.0

119,807

120,259

118,170

1.8

Materialcost/vehicle

86,089

88,821

(3.1)

87,572

87,316

89,460

(2.4)

GrossProfit/vehicle

34,222

29,085

17.7

32,235

32,944

28,710

14.7

Employeecost/vehicle

7,629

6,871

11.0

7,857

8,474

7,745

9.4

Otherexpenses/vehicle

6,662

7,252

(8.1)

5,987

6,805

7,247

(6.1)

EBITDA/vehicle

19,930

14,961

33.2

18,390

17,665

13,718

28.8

NetProfit/vehicle

12,666

9,571

32.3

11,296

10,949

9,775

12.0

SalesVolume(nos)

Source:CompanyData,PLResearch

February11,2016

3
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IncomeStatement(Rsm)
Y/eMarch
2015
NetRevenue
RawMaterialExpenses
GrossProfit
EmployeeCost
OtherExpenses
EBITDA
Depr.&Amortization
NetInterest
OtherIncome
ProfitbeforeTax
TotalTax
ProfitafterTax
ExOditems/Min.Int.
Adj.PAT
Avg.SharesO/S(m)
EPS(Rs.)

4,928
3,724
1,204
303
324
577
56
6
77
593
187
406
12
394
22.4
17.6

2016E

2017E

2018E

5,368
3,880
1,488
378
327
782
56
12
18
732
249
483

483
22.4
21.6

6,496

7,746
5,677
2,069
545
419
1,105
85
14
22
1,028
308
720

720
22.4
32.1

4,727
1,768
454
380
934
69
13
20
872
270
601

601
22.4
26.8

AtulAuto

BalanceSheetAbstract(Rsm)
Y/eMarch
2015

2016E

2017E

2018E

1,211

52
1,263
799

10
454
274
692
512

1,263

1,560
500
73
2,133
1,538

10
585
337
858
610

2,133

2,004
600
88
2,693
1,969

10
714
354
1,106
746

2,693

2,567
600
103
3,270
2,384

10
876
396
1,369
889

3,270

QuarterlyFinancials(Rsm)
Y/eMarch
Q4FY15

Shareholder'sFunds

TotalDebt
OtherLiabilities
TotalLiabilities
NetFixedAssets
Goodwill
Investments
NetCurrentAssets
Cash&Equivalents
OtherCurrentAssets
CurrentLiabilities
OtherAssets
TotalAssets

CashFlowAbstract(Rsm)
Y/eMarch

2015

2016E

2017E

2018E

C/FfromOperations
C/FfromInvesting
C/FfromFinancing
Inc./Dec.inCash
OpeningCash
ClosingCash
FCFF
FCFE

296
(319)
(155)
(178)
452
274
(56)
(56)

484
(795)
375
64
274
337
172
672

571
(500)
(55)
17
337
354
58
158

698
(500)
(156)
42
354
396
184
184

Revenue(%)
EBITDA(%)
PAT(%)
EPS(%)

Profitability
EBITDAMargin(%)
PATMargin(%)
RoCE(%)
RoE(%)

BalanceSheet
NetDebt:Equity
NetWrkngCap.(days)

Valuation
PER(x)
P/B(x)
EV/EBITDA(x)
EV/Sales(x)

EarningsQuality

Q2FY16

Q3FY16

1,068
119
11.1
13
1
4
108
37
71
71

1,429
219
15.3
13
6
4
204
69
135
135

1,517
251
16.6
13
1
4
242
82
160
160

2015

2016E

2017E

2018E

Threewheelersales(units)
41,598
Realisationpervehicle(Rs)
117,811
Grossprofitpervehicle(Rs)
28,938
EBITDApervehicle(Rs)
13,880
Profitpervehicle(Rs)
9,477
Source:CompanyData,PLResearch.

44,510
119,835
33,422
17,577
10,859

52,299
123,400
33,809
17,854
11,500

60,667
126,889
34,101
18,213
11,861

KeyFinancialMetrics
Y/eMarch
Growth

Q1FY16

1,225
149
12.2
14
2
5
137
51
86
88

NetRevenue
EBITDA
%ofrevenue
Depr.&Amortization
NetInterest
OtherIncome
ProfitbeforeTax
TotalTax
ProfitafterTax
Adj.PAT

2015

2016E

2017E

14.6
27.2
32.3
32.2

8.9
35.5
22.6
22.6

21.0
19.3
24.4
24.4

19.3
18.3
19.6
19.6

14.4
9.3
26.2
33.8

14.3
9.3
25.3
31.5

0.1
23

0.1
23

17.9
5.4
11.8
1.7

15.0
4.2
10.0
1.4

31.0
2.3
3.5
26.4

30.0
2.1
3.4
25.6

11.7
8.0
36.9
36.6

14.6
9.0
30.0
34.9

(0.2)
23

0.1
23

27.4
8.9
18.2
2.1

22.3
6.9
14.0
2.0

Eff.TaxRate
31.5
OtherInc/PBT
10.5
Eff.Depr.Rate(%)
4.8
FCFE/PAT
(14.3)
Source:CompanyData,PLResearch.

34.0
2.5
3.8
139.0

2018E

KeyOperatingMetrics
Y/eMarch

February11,2016

4
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AtulAuto

PrabhudasLilladherPvt.Ltd.
3rdFloor,SadhanaHouse,570,P.B.Marg,Worli,Mumbai400018,India

Tel:(9122)66322222Fax:(9122)66322209
RatingDistributionofResearchCoverage

PLsRecommendationNomenclature

%ofTotalCoverage

60%
50%

47.7%
40.2%

40%
30%
20%

12.1%

10%

0.0%

0%
BUY

Accumulate

Reduce

BUY

Over15%OutperformancetoSensexover12months

Accumulate

OutperformancetoSensexover12months

Reduce

UnderperformancetoSensexover12months

Sell

Over15%underperformancetoSensexover12months

TradingBuy

Over10%absoluteupsidein1month

TradingSell

Over10%absolutedeclinein1month

NotRated(NR)

Nospecificcallonthestock

UnderReview(UR) :

Sell

Ratinglikelytochangeshortly

DISCLAIMER/DISCLOSURES
ANALYSTCERTIFICATION
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subjectissuer(s)orsecurities.Wealsocertifythatnopartofourcompensationwas,is,orwillbedirectlyorindirectlyrelatedtothespecificrecommendation(s)orview(s)inthisreport.
Terms&conditionsandotherdisclosures:
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