Atul Auto LtdQ3 FY16Agricultural, Commercial & Construction Vehicles

Atul Auto Ltd

Q3 FY16 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

Order

N/A

Capex

Yes

1 of 4 growth signals are positive — mixed outlook.

Revenue 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)

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).

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→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.

→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.

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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