Some Unique Disclaimers first-
Atul Auto is a 3-wheeler manufacturer. It submitted an important announcement to BSE regarding Q4 performance here. Company has sold 7457 vehicles in Q4, a 26% increase YoY. Lets do some analysis to see expected numbers for Q4.
So, in short, I am expecting a 33% growth in EPS & 70% growth in net profit, which makes it a good short term opportunity. So, a 10%-15% jump after the results along with 3.5-4.5% dividend is a very likely scenario (Because 6 P/E stocks are expected to post drop in EPS and not growth).
FAQs
HEADS I WIN, TAILS I DON'T LOSE!!!
Am I missing something?
- Forgive me Warren for having holding period of some part of my portfolio as Less than Forever!!
- I love mid & small caps because of the inefficiencies that exist in these markets. Its tough to find similar inefficiencies in the large caps.
Atul Auto is a 3-wheeler manufacturer. It submitted an important announcement to BSE regarding Q4 performance here. Company has sold 7457 vehicles in Q4, a 26% increase YoY. Lets do some analysis to see expected numbers for Q4.
| 4Q11 | 1Q12 | 2Q12 | 3Q12 | 4Q12E | |||
| Worst | Best | Expected | |||||
| 3-wheelers Sold | 5927 | 5583 | 6794 | 7166 | 7457 | 7457 | 7457 |
| q-on-q growth | 21.7% | 5.5% | 4.1% | ||||
| y-on-y growth | 25.8% | ||||||
| Revenues (in Crs) | 63.72 | 60.98 | 75.26 | 79.68 | 82.92 | 83.23 | 82.92 |
| per unit (in lakhs) | 1.08 | 1.09 | 1.11 | 1.11 | 1.11 | 1.12 | 1.11 |
| increase | 1.4% | 0.4% | 0.0% | 0.4% | 0% | ||
| Net Profit (in Crs) | 1.88 | 3.29 | 5.06 | 3.09 | 2.45 | 5.60 | 3.22 |
| Margin | 3.0% | 5.4% | 6.7% | 3.9% | 3.0% | 6.7% | 3.9% |
| YoY | 31% | 198% | 71% | ||||
| EPS | 3.21 | 5.62 | 7.41 | 4.32 | 3.24 | 7.41 | 4.26 |
| YoY | 1% | 131% | 33% | ||||
So, in short, I am expecting a 33% growth in EPS & 70% growth in net profit, which makes it a good short term opportunity. So, a 10%-15% jump after the results along with 3.5-4.5% dividend is a very likely scenario (Because 6 P/E stocks are expected to post drop in EPS and not growth).
FAQs
- Market has ignored the good sales numbers announcement. Why will it react to good EPS announcement?
- In the worst case scenario, we are getting no growth in EPS. How likely is that possibility or even worse, a drop in EPS?
- What if market crashes before the result or EPS is not that good or stock stays at same price even after the result?
HEADS I WIN, TAILS I DON'T LOSE!!!
Am I missing something?
What is the ROCE??? and how is it managing Retained Capital???
ReplyDeleteHigh ROCE of 30%.
ReplyDeleteFor past 2 years, Using retained earnings to reduce debt.
Debt down to 3.75 crs from 31 crs in 2.5 yrs..
This comment has been removed by the author.
ReplyDeleteYour analysis indicates a very high operating leverage.
ReplyDeleteI got attracted to the company after seeing the FY 2012 volumes. After digging further, I liked the numbers and also anticipate a decent growth (betting only on its presence in Guj & Raj,leaving out the rest). It seems like a 'BUY' at 6X from all the angles except one, I'm not sure of the management, not because of something negative but because of very little information. Plus, its continuous desire to venture into something new (scooters,LCV) and intense competition on a pan-India level might not be received well by the investors making it less attractive.
Views invited.
Hi Nikhil,
ReplyDeleteVery little info doesn't make management -ve for me. I doubt we can find much substantial on most of small & mid caps' managements.
LCV entry plan is also a big No for me. But according to latest info, that entry is 2 yrs away.
On another note, they just have 3% of market share of autos. Doubling market share from lower base doesn't require as much hard work as doubling from 30% to 60%.
What say?
JK,if the co. has to grow substantially it has to look beyond its turf (Guj & Raj), it will be very difficult for it to create a standing given the mighty presence of Bajaj & Piaggio. I'm just concerned about how will it grow!
ReplyDeleteHow will it differentiate among competition? Price? Features? Could you throw some light on it.
One alternative could be to go for geographical segmentation and create a hold in regions facing mild competition, their increasing focus on Assam & Kerala might be a step in the same direction (though, not much clarity available).
Go through this... It will help.
ReplyDeletehttp://www.valuepickr.com/company/atul-auto/management-q-a/management-q-a-jan-13-2011
(Requires free registration)
Hey JK, what do you make of the results?
ReplyDeleteResults are pretty much on expected lines. I like dividend increase, debt repayment(zero debt now) & increase in payables.
ReplyDeleteEven after 25-30% jump, this looks cheap to me & I continue to hold.