Atul Auto Ltd Q2 FY17 Earnings Call Analysis
Revenue, margin, capex, fundraise and order book outlook from management commentary.
Management growth scorecard
Revenue
Category 3
Margin
Category 3
Fundraise
No
Order
N/A
Capex
Yes
1 of 4 growth signals are positive — mixed outlook.
Full analysisRevenue guidance
Category 3- The company targets minimum double-digit volume growth for the second half of FY `17 despite external uncertainties. (Page 7)
- Positive momentum in demand is expected to continue for the rest of the year due to good monsoon and positive economic environment. (Page 2)
- The shortfall in first half FY `17 volumes compared to previous year is expected to be covered soon; strong sales since August indicate improving trends. (Page 2)
- Electric three-wheeler market potential is large (120,000 units annually); company aims to capture 10-20% market share adding 20,000-25,000 units to volume. (Page 10)
- The company is confident to end the fiscal year on a positive note in volume terms. (Page 7)
- Exports currently contribute about 3% of revenue, with focus on smaller international markets for consistent volume growth. (Page 11, 5)
- Expansion plans include starting new project work by March-April 2017 with commercial production from FY `19 to meet growing demand. (Page 11)
See what Atul Auto Ltd management said on margin guidance — free account, 30 seconds.
Fundraise plans
No- For CAPEX, the company has already incurred close to Rs. 50 crores for land acquisition at Greenfield expansion.
- The balance Rs. 100 crores is likely to be incurred over the next two years (FY18 and FY19).
- For FY17, no large CAPEX is planned; the company intends to fund expansion through internal accruals only.
- No specific mention of new fundraising through debt or equity was made during the call.
- The company emphasizes utilizing internal accruals for upcoming investments.
- No indications of external financing or capital raising initiatives were disclosed.
See what Atul Auto Ltd management said on order book — free account, 30 seconds.
Capex plans
Yes- The company has already incurred close to Rs. 50 crores for land acquisition for a Greenfield expansion.
- An additional Rs. 100 crores is planned to be spent over the next two years (FY18 and FY19).
- For FY17, no large CAPEX is expected; the expenditure will be internal accrual funded.
- Project work for new facilities is expected to start around March-April 2017.
- Commercial production from the new facility is planned to commence by FY19 (around April 2018).
- Investments in R&D are modest, around Rs. 4-5 crores annually, focusing on upgrading products rather than major new developments.
- No significant CAPEX for electric vehicle setup is needed as existing infrastructure suffices, with expenditures well below Rs. 5 crores.
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Margin guidance
Category 3- The company targets minimum double-digit volume growth for the second half of FY `17 (Page 7).
- Confident of ending FY `17 with positive numbers, expecting 5-10% growth in vehicle sales for the remaining part of the year (Page 8).
- Net profit for the quarter increased by 175.65% Quarter on Quarter, indicating strong operating performance (Page 3).
- EBITDA margin improved to 16.10% versus 15.73% in the corresponding quarter last year; gross contribution improved to 28% from 27.03% (Page 3).
- EPS for the quarter stood at Rs. 6.29 per share, maintaining steady earnings (Page 3).
- Management expects other expenses to revert back to normal levels, which should support margin stability (Page 18).
- Investment in R&D is consistent but not very high (~Rs. 4-5 crores annually), focusing on sustaining product upgrades (Page 16).
- Electric vehicle segment presents growth opportunity with potential to add volumes and expand product basket (Pages 7, 10).
Order book
- The transcript does not explicitly mention the current or expected order book or pending orders.
- However, management discussed sales volumes: approximately 3,000 electric three-wheelers sold in select pockets during the seeding phase.
- Expectation of double-digit growth in volume for FY17.
- Monthly sales reached a record high with over 5,000 vehicles sold in October.
- Electric three-wheelers potential market size is around 120,000 units annually with a target to capture 10-20% share.
- New Greenfield expansion project work planned from March-April 2017 with commercial production starting FY19, indicating anticipation of increased orders.
- Export orders remain insignificant currently, at about 3% of revenue.
- The company is focusing on expanding dealership networks and markets to grow sales and order inflow.
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What Atul Auto Ltd's management said in earlier quarters
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