Weekender
February 24th, 2012
Latin Manharlal Securities Pvt Ltd
Index
Closing
Chg
Chg(%)
Sensex
17923.57
-365.78
-2.0%
Nifty
5429.3
-135.00
-2.4%
Auto
10033.24
-285.96
-2.8%
Bankex
12068.47
-667.62
-5.2%
Cap Goods
10560.97
-545.81
-4.9%
Cons Durables
6544.35
-103.08
-1.6%
FMCG
4190.01
36.81
0.9%
Healthcare
6279.22
-96.08
-1.5%
IT
Metal
6309.02
42.15
0.7%
12072.82
-499.64
-4.0%
Oil & Gas
8652.69
7.98
0.1%
Power
2287.72
-75.56
-3.2%
Realty
1928.46
-151.26
-7.3%
World Index
Closing
Chg(` )
Chg(%)
12984.69
80.61
0.6%
Dow Jones
Nasdaq
2956.98
-2.87
-0.1%
Hang Seng
21406.86
-84.76
-0.4%
Nikkei 225
9647.38
263.21
2.8%
FTSE 100
5937.76
32.69
0.6%
65819.63
-322.08
-0.5%
Brazil Bovespa
Russia RTS
1685.47
28.87
1.7%
38027.84
-184.40
-0.5%
Singapore Strait
As on Friday 4pm
2978.08
-22.51
-0.8%
Mexico Bolspa
*
Top Gainers
Closing
Chg(` )
Chg(%)
Oracle Financial Ser
2583.05
413.1
19.0%
Godrej Industries Lt
250.7
35.4
16.4%
Videocon Industries
188.35
14.3
8.2%
579
36.1
6.6%
142.9
8.7
6.5%
Bajaj Finserv Ltd.
Amtek Auto Ltd.
*
As on 24th Feb,12
Closing
Chg(` )
Chg(%)
Rural Electrific
205.2
-43.15
-17.4%
GMR Infrastructure L
27.35
-5.35
-16.4%
IRB Infrastructure D
174.4
-33.25
-16.0%
57.5
-9.45
-14.1%
203.8
-32.4
-13.7%
Top Losers
Dish TV India Ltd.
IndiabullsFinService
*
As on 24th Feb,12
Metal
Closing
Chg
Chg(%)
Gold($/oz)
1778.93
55.55
3.2%
35.57
2.30
6.9%
Aluminium($/MT)
2231.75
113.75
5.4%
Copper($/MT)
8394.75
108.75
1.3%
Lead($/MT)
2138.00
153.00
7.7%
Silver($/oz)
Zinc($/MT)
As on Friday 4pm
SNAP SHOT
During the week ended 24th February 2012, key benchmark
indices tumbled snapping a 7-week rally, as investors booked
profits after a recent rally as concerns mounted over rising
crude oil prices. The Sensex fell 365.78 points or 2% to
17,923.57 and S&P CNX Nifty fell 135 points or 2.43% to
5,429.30. Higher oil prices spoiled investor sentiment as the rise
in prices could worsen a widening trade deficit. Oil advanced for
the 7th day in a row on 24th Feb’12, the longest winning streak
since January 2010, on signs of economic recovery from the US
to Germany and concern escalating tension with Iran threatens
crude supplies.
Inflows from FIIs remained positive despite the broad based
selling in Indian shares. FIIs have bought shares worth a net Rs
14483.61 Crs in this month so far (23 Feb’12). The primary
market saw revival after a long time with IPO of Multi
Commodity Exchange of India (MCX) receiving an overwhelming
response. MCX's IPO was subscribed by a massive 52.75 times on
the last day of bidding for the IPO on 24 Feb’12 by 4pm.
For the week ahead, automobile and cement shares will be in
focus in the near term as companies from these two sectors
start unveiling monthly sales volume data for February 2012
from 1 March 2012. HSBC's manufacturing purchasing managers'
index (PMI), which indicates the health of the manufacturing
sector will be out on 1 March 2012. Budget expectations may
keep share prices volatile in the near term. Reports indicate
that the finance ministry is considering a proposal to increase
excise duty from 10% to 12% in Union Budget 2012/13. The
finance minister will present the annual budget for 2012/13 on
16 March 2012, while the railways budget will be presented on
14 March 2012. The budget session of parliament will start on 12
March 2012. The government will present on March 15 the
Economic Survey for 2011/12, a document on the state of
economy prepared by the economic division in the ministry of
finance.
Nifty
5640
2030.75
72.00
3.7%
5580
DII(cash)
FII(Cash)
FII(FO)
5520
20-Feb-12
HD
HD
HD
21-Feb-12
-337.5
594.6
2628.78
22-Feb-12
-625.8
1494.6
-707.43
23-Feb-12
NA
966.9
-411.21
24-Feb-12
NA
NA
-470.94
Closing
* Chg($)
Chg(%)
*
Date
Infosys
59.65
0.24
0.4%
ICICI Bank
37.51
-1.59
-4.1%
HDFC BANK
34.27
-0.6
-1.7%
Tata Motors
27.18
-0.65
-2.3%
Wipro
11.42
0.16
1.4%
*
As on Thursday
5505.35
5483.3
5460
5429.3
5400
17-Feb
NA- Not Available HD- Holiday
ADR's
5607.15
5564.3 5564.3
20-Feb
21-Feb
22-Feb
23-Feb
24-Feb
Global Economic Update
United States:
 US Mortgage Bankers Association’s Index decreased by 4.5%
For the week ended February 17, 2012 compared to prior
week fall of 1.0%. The group refinancing gauge decreased
Research Desk
Latin Manharlal Securities Pvt Ltd
GDR's
Closing
* Chg($)
Chg(%)
RIL
33.51
0.01
0.0%
SBI
90.95
-6.45
-6.6%
L&T
27.84
-1.86
-6.3%
12/30/201
1(` Crs)
Chg(` Crs)
Chg(%)
Credit growth
43656.4
986.6
2.3%
Deposit growth
58279.1
1553.2
2.7%
Banking Data
ECONOMIC CALENDAR
Date
Economic Data
27-Feb
Pending Home Sales YoY
29-Feb
MBA Mortgage Applications
Previous
UNITED STATES
-4.50%
351K
Initial Jobless Claims
1-Mar
Continuing Claims
3392K
2-Mar
Total Vehicle Sales
14.13M
UNITED KINGDOM
29-Feb
Mortgage Approvals
52.9K
1-Mar
PMI Manufacturing
52.10
GERMANY
-0.40%
CPI (MoM)
29-Feb
Unemployment Change (000's)
-34K
JAPAN
29-Feb
Vehicle Production (YoY)
2-Mar
Jobless Rate
 US sales of previously owned US homes sales rose in
January. Purchases climbed 4.3% to a 4.57 million annual
rate from a revised 4.38 million pace in December.
 Initial Jobless claims remained unchanged from earlier
week revised figure of 351,000 for the week ended
February 18, 2012.
 Continuing claims decreased by 52,000 to 3.392 million for
the week ended Feb 11, 2012 from earlier revised claims of
3.444 million of previous week.
4.40%
1-Mar
28-Feb
by 4.8% and purchases Index decreased by 2.9% for the
same period.
UK & Europe:
 UK posted the biggest budget surplus in four years in
January. Revenue exceeds spending by 7.75 billion pounds
compared with a surplus of 5.2 billion pound a year earlier.
 Germany producer prices rose 3.4% and 0.6% on YoY and
MoM basis for the month of January.
 Germany PMI manufacturing Index dropped to 51.5 in the
month of February compared to 50.1 recorded in the month
of January.
Asia:
13.40%
4.60%
 Japan merchandise trade balance rose -¥1475 billion in the
month of January compared to -¥205.1 billion recorded in
December.
 Japan Investors were net sellers of foreign bonds and
securities during the week ended Feb.17 having net sale of
105.6 billion Yen.
CURRENCY, CRUDE & G-SEC
USD - INR
USD-JPY
80.7
80.56
80.29
80.4
79.8
49.2
49.2
49.2
49.2
79.74
49.1
79.63
79.5
49.0
49.0
20-Feb
21-Feb
22-Feb
23-Feb
24-Feb
20-Feb
108.17
107.83
107.8
21-Feb
22-Feb
23-Feb
24-Feb
Govt.Yield
Crude($/bbl)
108.4
8.40%
8.34%
8.30%
107.2
106.6
49.3
49.3
80
80.1
49.4
8.20%
106.2
106.25
106.28
8.22%
8.19%
8.21%
10-Feb
17-Feb
24-Feb
8.15%
8.10%
106.0
20-Jan
21-Jan
22-Jan
23-Jan
24-Jan
8.00%
27-Jan
3-Feb
2
Research Desk
Latin Manharlal Securities Pvt Ltd
ATUL AUTO LTD (Atul Auto)
CMP (24/02/12): `119
Rec: BUY
Target: `167
Upside: 40.3%
Eq. Capital (FV `10): `7.31 Crs
Market Cap: `87 Crs
Shareholding: Promoters-60.81%, FII-4.34%, Public & Others-21.24%, FIs & MFs-13.61%
52-w H/L: `131.85/76.65
COMPANY PROFILE
Incorporated in 1994, Atul Auto Ltd (Atul Auto) is the leading manufacturers of 3-wheeled Commercial
Vehicles based out in Gujarat. It presently engaged in the manufacture of 3-wheelers like 6-seater Auto
Rickshaws (3 to 6 seaters), Pick-Up Vans, Delivery Vans (Diesel, CNG, LPG variants) and Chassis of Passenger
Vehicles. These vehicles are marketed under the brand name of Khushbu, which is well established and very
popular in the state of Gujarat. Over 1,50,000 Khushbu brand vehicles are ply on the roads of Gujarat.
For more than two decades, ATUL GROUP is renowned as leading manufacturer of 3-wheeled commercial
vehicles in the state of Gujarat. From common people's favorite vehicle ‘Chhakada’ to today's ‘Shakti’ Atul
Group had come a long way.
Manufacturing Units
Atul Auto's only manufacturing plant situated at Rajkot (Gujarat) has a production capacity of 24,000 vehicle
per annum on single shift basis. It is equipped with CNC machines, fabrication shop, high quality paint shop
and test house. Currently, Atul Auto manufactures and markets ~16 models in the domestic market. The
company's R&D center is based in Pune.
Products – Gem, Shakti and Smart
 The Rear-Engine 3-wheeler Atul Gem is its fastest growing platform comprising ~57% of Sales in FY11.
 The front-engine 3-wheeler Atul Shakti is the other main platform bringing up ~42% of Sales in FY11.
 Atul Smart is a new brand of front-engine 3-wheeler launched in FY11.
INVESTMENT POSITIVES
 Positive prospects for 3-wheeler segment
The Indian 3-wheeler segment has many growth drivers. The government's focus on road infrastructure
development, restriction of heavy vehicles in the city, and the growing rural economy are important growth
triggers. The greater use of small commercial vehicles (CVs) for last mile connectivity and the underdeveloped nature of the public transport system also imply good prospects for 3-wheeled goods and passenger
carriers.
3
Research Desk
Latin Manharlal Securities Pvt Ltd
 Doubling of capacities + Launching New Models = to drive growth
Presently, Atul Auto has 3 models— Shakti, Smart and Gem, the last of which is a high-volume product. The
recently launched Smart, an upgraded version of Shakti, will be the first Atul Auto product to be introduced
in states such as Tamil Nadu and Madhya Pradesh. The company is in the process of doubling its 3-wheeler
capacity at Rajkot plant to 48,000 units per annum. It has already spent `60 Crs on the expansion.
It’s also working on two new models - a sub-1-tonne 4-wheeler and a small 3-wheeler (both the models will
be ready for launch in FY13E). Currently the company is looking for a partner to foray into the 4-wheeled
small commercial vehicle segment and is in talks with a few companies and would finalise a partner very
soon. In the 4-wheeled sub-1- tonne small truck segment, Atul Auto will pit against Tata Motors (best selling
Ace) and Mahindra & Mahindra those who already have established products in the market. The company is
scouting for land, either in Gujarat or Maharashtra, to set up a separate unit for manufacturing the product
with a capex of ~`200 Crs. A final decision on the venture would be taken after April 2012 as the company is
busy doubling its 3-wheeler capacity.
The other new vehicles which are under planning: Micro Commercial Vehicle to carry 750 Kg. payloads and
range of Electric Commercial Vehicles.
 Looking at National presence – earlier focused on Gujarat and Rajasthan
The company has pioneered motorized rural transport in Gujarat and so far been confined to its home state
and Rajasthan. However with its capacities doubling, Atul Auto is now trying to replicate their success across
new territories in India & abroad. The company is expanding its presence by appointing new dealers in Andhra
Pradesh, Rajasthan and Maharashtra while entering new markets such as Kerala, Karnataka, Bihar and Assam.
Atul Auto currently has ~5.5% share in the 3-wheeler market, where Bajaj Auto and Piaggio Vehicles are
dominant players. The company’s focus still remains on the non-metro cities that have demand for largersized 3-wheelers accommodating more than 3 passengers. It aims to achieve a market share of 9% in the 3wheeler segment by FY14E. For this, it plans to ramp up capacity to 100,000 units annually. For the 9MFY12E,
the company’s sales rose 45% at 19,543 units over 13,477 units sold in the same period of the last fiscal.
 Gaining market share – despite dominated by established players
Atul Auto has seen a small gain in market share in a segment that has bigger and more established rivals such
as Bajaj Auto, Piaggio Vehicles and M&M. Its market share went up to 5.1% from 3.55% as sales rose to 21,673
units from 15,628 units (in FY11), according to data from the Society of Indian Automobile Manufacturers, or
SIAM. The advance comes amid overall 3-wheeler sales staying almost unchanged in the first 10 months of
FY12 as high interest rates have dissuaded buyers from purchasing new vehicles.
 Strong performance during 9MFY12 - eyes 40% y-o-y growth in sales in FY12E
Atul Auto is targeting to achieve 40% growth in sales in FY12E. The company’s sales in 3Q12 grew by 49%
despite worries like inflation, rising interest rates and input costs. The company's sales for the 3Q12 stood at
7,173 units as compared to 4,813 vehicles in the corresponding quarter last financial year. The management
is confident of ending the FY12E with a strong growth in vehicle sales - a growth of 40% on a y-o-y basis which are almost on track despite the difficult situation.
During 9MFY12, Atul Auto sold 19,548 units against 13,475 units during 9MFY11. The company is targeting to
sale more than 26,000 3-wheelers by the end of FY12E as compared to last year’s 19,398 units.
 Long Term Goal – `1,000 Crs revenue by FY16E + entry into agriculture machines
The company has set a target of clocking a `1,000 Crs in turnover by 2015-16, a 5-fold jump over its gross
turnover of ~`220 Crs in FY11. A key role will be played by its new light 4-wheeler commercial vehicle which
is set to debut around 18 months after acquiring the land for the project. The company’s plan of entering the
4-wheeler project has got delayed due to the hurdles in acquiring real estate. The original plan was to
complete the land acquisition by July 2011. Atul Auto is looking at a plot of 50-100 acres. Atul Auto sees
strong growth for light 4-wheeled CVs sustaining over the next decade.
4
Research Desk
Latin Manharlal Securities Pvt Ltd
Atul Auto is also planning to enter the agriculture machines business next and is looking at acquiring a
Gujarat-based company.
 Exports – New thrust area
The company’s target of touching the `1,000 Crs mark will also ride on its new focus on exports. The company
has plans of an assembly plant in Bangladesh which is expected to commissioned early 2012 will play an
important role. The Bangladesh unit will have an annual capacity to assemble 12,000 units. The company is
bullish about reaching peak production capacity in Bangladesh in a year of operation. At 12,000 units
annually, it expects business of `150 Crs (at full capacity) from its Bangladesh operations. It had stopped
exports in FY11 to meet growing demand from its domestic dealers.
After Bangladesh, Atul Auto’s focus is on setting up a base in Sri Lanka. Unlike in Bangladesh, where it has a
technology alliance with its partner (Bangladesh Machine Tool Factory) who has invested in the assembly
infrastructure, this will be a J.V model in Sri Lanka. Talks are in advanced stages now with the Sri Lankan
partner and a final decision is likely to be taken soon. The Sri Lankan venture will be followed by another in
Africa.
Presently, Atul Auto exports to Nigeria, Kenya, Egypt, Tanzania and some other African countries. It has also
recently introduced Atul Gem Diesel & CNG variants in Bangladesh.
 Negligible Debt on Books – very comfortable D/E ratio
The Debt of Atul Auto at the end of FY11 stood at just `6 Cr compared to ~`23.2 Cr in FY10. Debt-to-Equity
stands at just 0.15. With the rights issue proceeds of ~`4.4 Crs (Atul Auto had come up with a Rights issue of
1:4 at a price of `30 when the share price was around `100), the company intends to repay its term loans and
become a Debt-free company in the near future. (As per its 2011 Annual Report).
VALUATION
At the CMP of `119, the stock is trading at 4.26x its FY13E EPS of `27.9. We recommend BUY on the stock with
a 12-18 months target price of `167, providing an upside of 40.3% from the current levels.
FINANCIALS
5
Research Desk
Latin Manharlal Securities Pvt Ltd
Source: Capitaline, LMSPL Research
Registered Office:
LMSPL Network:
124 Viraj, S,V.Road, Khar (W), Mumbai 400 052.
Tel. (022) 4082 4082, Fax (022) 2649 7997. research@lmspl.com www.latinmanharlal.com,
Fort, Mahalaxmi, Parel, Bandra, Santacruz, Vile Parle, Andheri, Malad, Kandivili,
Borivali, Bhayender, Ghatkopar, Mulund, Chunabhatti, Jacob Circle, Masjid Bunder, Cotton
Green, Thane, Bhiwandi, Panvel, Pune, Sholapur, Nasik, Malegoan, Ahmednagar, Aurangabad,
Akola, Mahekar,
Nagpur,
Surat,
Karjan(Baroda),
Khambat,
Ahmedabad, Rajkot,
Surendranagar, Porbandar, Amreli,
Bharuch,
Anand,
Chennai,
Vishakhapatnam,
Vizianagaram, Palasa, Kakinada, Karnal, Kolkatta, Bhubhaneshwar, Hyderabad, Bangalore,
Jafrabad, Chital, Kodinar, Keshod, Gondal, Haryana, Srikakulam, Mehkar (Buldhana,
Jamnagar, Bangalore, Jodhpur, Jalgaon, Malkangiri (Orissa), Karimnagar Dist. (Andhra
Pradesh).
This document is for information only and is meant for the use of the recipient & not for circulation. The information contained in this document has been taken from publicly
available information, trade and statistical services & other sources. While the information contained herein is from sources believed to be reliable, we do not hold ourselves
responsible for its completeness and accuracy. All opinions and estimates included in this report constitute our judgement as of this date and are subject to change without
notice. Investors are expected to use the information contained in this report at their own risk. This report is not and should not be construed as an offer or the solicitation of
an offer to buy or sell any securities. M/s Latin Manharlal Securities Pvt. Ltd. and it’s affiliates may act as market maker or have assumed an underwriting position in the secureties of companies discussed herein and may sell them to or buy them from customers on a principal basis.
6