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Exports to drive volume performance; maintain Buy
* Atul Auto’s Q4FY19 revenues grew 11% yoy to Rs1.7bn (our est. of Rs1.7bn), driven by 6%/5% volumes/realizations growth. We expect revenues to rise at 13% CAGR over FY19-21E, underpinned by an 8% CAGR in volumes.
* EBITDA margins contracted by 70bps yoy to 11.3% (our est. of 12.8%) due to higher marketing spends. Going forward, we expect margins to remain above 12% over FY20-21E, supported by higher scale and better mix.
* After 17% volume growth in FY19, we expect 14% increase in FY20E, led by robust exports growth, continuing penetration of alternative-fuel vehicles in the domestic market, and pre-buying before the BS6 transition.
* We prune FY20/21E EPS by 2%/3% to Rs28/Rs30 on lower margin assumptions. Following the cut, revenue/earnings CAGR is expected at 13% over FY19-21E with an average ROE of ~21%. Maintain Buy with a TP of Rs450 based on 15x FY21E EPS.
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