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Atul Auto Ltd. (AAL) recently announced its performance for the quarter ended March 31, 2022. The performance was below our estimates and thus, we have revised our estimates for FY23 downwards. Following are the key highlights:

Result Highlights

• During FY22, the company sold 16,061 vehicles as against 16,295 units sold in FY21. During the quarter, AAL sold 4,562 units as against 4,993 units in Q4 FY21 and 5,168 units in Q3 FY22. During April, 2022, the company sold 1,593 units as against 915 units (+73%, YoY) in April, 2021. Further, during May, 2022 AAL sold 1,794 units vs 100 units in May, 2021.

• During the quarter ended March 31, 2022, the turnover from automotive vehicles & parts segment stood at Rs.85.8 cr as against Rs.91.7 cr in Q4 FY21 and Rs.93.7 cr in Q3 FY22. The turnover from NBFC segment stood at Rs.9.1 cr vs Rs.9.12 cr in Q3 FY22. The operating loss from auto segment stood at Rs.5.8 cr as against Rs.6.5 cr in Q4 FY21 and Rs.10.3 cr in Q3 FY22. The operating profit from NBFC stood at Rs.2.4 cr as against Rs.1.8 cr in Q3 FY22

• On standalone front, the company’s non-current borrowings have gone up from Rs.15.0 cr as on March 31, 2021 to Rs.64.3 cr as on March 31, 2022. The current borrowings stood at Rs.16.1 cr. On consolidated basis, the non-current borrowings have gone up to Rs.114.6 cr and current borrowings stood at Rs.73.0 cr.

OUTLOOK & VALUATION

FY22 performance was substantially below our estimates; hence, we have revised our FY23 estimates downwards. Further, we have introduced FY24E to our valuation model. We believe the company’s dominance in passenger vehicles segment restricted the rebound in volumes unlike the 3W industry as the year was impacted by Covid led lockdowns - schools, colleges & offices were shut for major part of the year. In addition, the rural India has been witnessing a slowdown on account of steep inflation. Nevertheless, we believe that volumes will rebound in the medium-to-long-run with Covid-led issues broadly behind us, company’s focus on volume-growth led by exports and strengthening demand for electric vehicles for last-mile connectivity. We expect AAL to report a top-line & EPS of Rs.612.1 cr & Rs.20.6 in FY24E, respectively. Maintaining our P/E target multiple of 17x we derive our revised target price of Rs.350 with an investment horizon of 18-24 months.

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