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Friday, July 3, 2015

RELIANCE INDUSTRIES LTD: THE SLEEPING DRAGON NOT ANYMORE !!!

Scrip Code: 500325 RELIANCE
CMP:  Rs. 1010.85; Market Cap: Rs. 3,27,017.04 Cr; 52 Week High/Low: Rs. 1043.30 / Rs. 796.45. 
Total Shares: 323,50,69,941 shares; Promoters : 146,39,61,977 shares –45.25 %; Total Public holding : 177,11,07,964 shares –54.75 %; Book Value: Rs. 609.07; Face Value: Rs. 10.00; EPS: Rs. 70.20; Divd: 95.00 %; P/E: 14.39 times; Ind. P/E: 17.02; EV/EBITDA: 10.03.
Total Debt: Rs. 89,141 Cr; Enterprise Value: Rs. 4,04,587.04 Cr.

RELIANCE INDUSTRIES LTD: The Company was founded on 11th February 1966 by name of Reliance Textile Industries Pvt Ltd in Mumbai, Maharashtra. In November of 1977, the promoters Mr. Dhirajlal H Ambani & Mr. Natvarlal H Ambani along with some other existing shareholders offered for sale at par 28,20,000 equity shares to the public to get listed on Bombay Stock Exchange. In June 27 of 1985, company again changed its name from Reliance Textiles Industries Ltd to its current name Reliance Industries Ltd. Reliance Industries Limited (RIL) is a conglomerate with business in the energy and materials value chain. RIL together with its subsidiaries, primarily engages in the exploration and production of oil and gas in India and worldwide. The company operates two refineries and owns 1.24 million barrels per day of crude processing capacity. The company has till date delcared lucartive bonuses - it delcared its first bonus in 1983 at ratio of 3 new shares for every 5 held; second was declared on 1997 in ratio of 1:1 and last bonus was declared in the year 2009 in ratio of 1:1. The Company mainly operates in three segments: Petrochemicals, Refining and Oil & Gas segments. The Petrochemicals - includes production and marketing operations of petrochemical products namely, polyethylene, polypropylene, polyvinyl chloride, poly butadiene rubber, polyester yarn, polyester fiber, purified terephthalic acid, paraxylene, ethylene glycol, olefins, aromatics, linear alkyl benzene, butadiene, acrylonitrile, caustic soda and polyethylene terephthalate. The Refining - includes production and marketing operations of the petroleum products. The Oil and Gas - includes exploration, development and production of crude oil and natural gas. The Oil and Gas segment includes exploration, development and production of crude oil and natural gas. Reliance Industries subsidiaries include Reliance Retail Limited (RRL) serves customers, farmers, and vendors. RRL operates approximately 900 stores in 80 cities across 14 states in India. RRL operates Reliance Fresh, Reliance Mart & Reliance Super which offer a range of products for daily household usage; Reliance Digital focuses on consumer durables & information technology, Reliance Trends is into apparel & accessories, Reliance Wellness is into health, wellness & beauty, iStore focuses on especially Apple products, Reliance Footprint is into footwear, Reliance Jewels into Jewellery, Reliance TimeOut is into books, music & entertainment, Reliance AutoZone for automotive products & services; and Reliance Living focuses on home-ware, furniture, modular kitchens, furnishings. RRL has strategic partnerships with companies, such as Marks and Spencer, Office Depot, Pearle Europe (optical products) and Hamleys (toys). RRL has a direct engagement with approximately 5o lakh customers following a loyalty programme ‘Reliance One’. Reliance Ventures Ltd, a subsidiary of RIL, is a joint venture with Haryana State Industrial Investment Development Corporation (HSIIDC) formed a joint venture company Reliance Haryana SEZ Limited to develop SEZs. The project would function as an integrated package with all the required facilities for the development of medium and large scale industries and service activities. RIL has a refinery in the special economic zone (SEZ) at Jamnagar. The refinery has a crude oil processing capacity of 5,80,000 barrels of oil per day. The refinery has a Nelson Complexity Index of 14.0 enabling processing of heavy crudes and production of products. The Jamnagar SEZ commissioned a captive power plant and water desalination plant in 2008. The railway sidings for solid products were completed during the year 2008. The SEZ unit, the petroleum refinery and polypropylene plant (RPL) were successfully started in 2008. The company, as of March 2009, commenced production of hydrocarbons in its KGD6 block in the Krishna Godavari basin with the production of sweet crude of 42° API. Its other segment includes Telecom & Broadband business. During the fiscal year ended March 31, 2012; RIL further increased its interest to 18.53 % in EIH Limited. The company is compared locally with HPCL, BPCL, Mangalore Refinery, Chennai Petroleum Corp. Ltd, and Globally with Exxon Mobil Corp and Chevron Corp both from USA; Royal Dutch Shell PLC from Netherlands; BP from UK; Endesa SA from Spain; Rosneft Oil, LUKOIL and Gazprom Oao both from Russia; RWE AG and E.On AG both from Germany; China Petroleum & Petro China Corp both from China; Total SA from France; Petrobrass Brasileiro from Brazil.

Investment Rationale:
Reliance Industries is India’s largest private sector company, and the first Indian company to be featured in the Fortune Global 500 list. Reliance Industries is in the business of oil and gas exploration, refining and petrochemicals. The crude oil and gas produced is the raw material for refining and petrochemicals segment. Reliance is also a major importer of oil for its refining business. The major products under refining are LPG gas (Reliance gas), naphtha, gasoline, aviation turbine fuel, kerosene oil, high speed diesel etc. Petrochemical segment produces polyester, fibre intermediates, plastics and chemicals. Reliance is now focusing on other segments of its business like Retail and Telecom. RIL is investing Rs.85,000 crore in R-JioR-Jio has a pan-India licence in the 2300 megahertz (MHz) frequency band, which has not seen many international 4G launches using the so-called long term evolution (LTE) technology standard. That’s mainly because the higher the frequency, the lower the signal strength, although it offers higher data delivery speed. Reliance Jio Infocomm Limited (“RJIL”) plans to provide reliable fast internet connectivity and rich digital services on a Pan India basis. RJIL has finalized the key vendor and supplier partnerships that are required for the launch of services, and is making rapid progress in building the critical infrastructure needed to launch its services. RJIL has signed agreements with various telecom infrastructure providers to widen access to telecom tower and forfibre optics infrastructure to expedite the rollout of its 4G services. R-Jio intends to provide 4G service, using LTE technology, in the 800MHz, 1800MHz and 2300MHz bands through an integrated ecosystem. R-Jio has spectrum in 20 of the 22 circles in the country in the 800MHz band which accounts for 92 % of industry revenues and 14 circles in the 1800MHz band. Its licence for the flagship 2300 MHz covers all 22 circles. Reliance Jio Infocomm’s installation of 70,000 LTE sites for the launch network is mostly completed. Reliance Jio has completed roll-out of 100,000 Rkm of optic fiber cable, and the roll-out continues at a faster space. This is already comparable with the fiber rolled out by the rest of the industry over the last 10-15 years. More than 85 % of RJio’s fiber is intra-city fiber i.e. access fiber running up to the towers as of now. Till now, RCOM was believed to have the largest fiber network among private operators, with an intra-city network of 70,000 Rkm. Thus, it is possible that Reliance Jio already has the largest intra-city fiber network in the industry (excluding fiber leased from RCOM here!). Reliance Jio has already built 28,000-30,000 towers of its own including mix of poles and full ground based towers. Reliance Jio’s 4G deployment will also benefit from superior technology efficiency as compared with 2G/3G networks of other operators. Spectral efficiency refers to the amount of data throughput (in bits per second) that a technology can push through a given MHz of spectrum. It can be safer to conservatively assume that 3G is 1.25x better than 2G on spectral efficiency, and LTE is 1.25x better than 3G. Data clearly suggests that top 30 % customer accounts for 70 % of revenues in the India Wireless Industry. The Reliance Chairman clearly indicated at the shareholder meeting, that the company will offer data packages in the range of Rs. 300-500 per month which in just below the global average of Rs. 600- 650. In this backdrop the new entrant Reliance Jio Infocomm’s positioning would be more important to see. The SmartPhone handset changing cycle is less than 24 months for high end customers in India, so it can be safely assume that these customers could shift to 4G LTE handset very soon as long as the handsets are at the right price and Reliance has clearly said to launch its 4G LTE handsets below Rs. 4,000. Good quality video delivery is critical for forming perceptions about network quality. Nearly 50 % of consumers face some issues in data connectivity and quality & most commonly while trying to watch videos (and less frequently while using lower bandwidth apps such as messaging). In fact, 80 % believe that watching videos is important for their mobile usage experience and only 40 % of them have a seamless video watching experience. There is significant room for Reliance Jio to position them on the promise of better data network quality. RJio is betting big on the Fiber to the Home (FTTH) market and is justified looking at the 100,000 Km Intra-City Fiber rolled out which is growing by the day. Reliance Jio Infocomm has received provisional licence to operate as pan India Multi System Operator taking it step closer to becoming a nationwide distributor of television channels. It intends to use Fiber to home connectivity to offer host of services to its prospective customers thus bringing in true IPTV Experience. There are 17 Cr odd television sets in India. Of these, 2 cr are terrestrial like doordarshan, 4 to 4.5 Cr are connected through Direct To Home and around 10 Cr have cable television connections out of which 3 to 3.5 Cr are digitalized. So effectively R-Jio will be vying with the existing MSOs and DTH companies. So basically RJIO is looking to deliever to as much as 68 Cr sets if we assume that India has 17 Cr TV sets and when it is multiplied by four. So even if there are close to 5 Cr devices to offer your content it is too big market to be captured by anyone company. RJio is also expected to come out with Wi-Fi hotspot solutions for a ready market to tap into. Jio plans to start with 1,000 own “Jio Centre” (exclusive retail stores) which when combined with Reliance Retail’s Digital Express stores will bring Jio at par with leading operators. This appears to be in addition to Franchisees and Distributors chain but the answer was not totally clear. The biggest differentiator that R-Jio has talked about in its telecom offering is to be present in the entire value chain of the telecom and e-commerce business—something not done by any telecom company in India before
                                                                                         
Outlook and Valuation:
Reliance Industries (RIL) is one of the world's most vertically integrated and horizontally diversified groups, from its origins in trading in polyester and fibers to a move into textiles and branded showrooms, it has integrated forward and backward into textile intermediates, including fiber, petrochemicals, naphtha crackers, plastics, refining, and oil exploration in stages. Oil and Gas sector in India is dominated by public sector companies. The major players are ONGC, Oil India, Reliance Industries, Crain Energy, GAIL, Bharat Petroleum, Indian Oil, Bharat Petroleum and Hindustan Petroleum. Reliance Industries and Crain Energy are the two major private players in oil and gas sector. The oil and gas sector consists of three segments upstream, midstream and downstream. The upstream segment primarily comprises of companies that are engaged in exploration and production activities, while the midstream segment comprises of players in storage and transportation, and the downstream segment comprises of players that are engaged in refining, processing and marketing of petroleum products. The oil and gas sector is regulated at two levels, policy level and regulatory level. At the policy level, the oil and gas sector is regulated by the finance ministry and planning commission. At the regulatory level, the sector is administered by the Ministry of Petroleum and Natural Gas, Directorate General for Hydrocarbons and Petroleum and Natural Gas Regulatory Board. During FY 2013–14, the total consumption of petroleum products in India was 158.2 million tonnes (MT). The consumption stood at 14.2 MT in March 2014, according to data released by the Petroleum Planning and Analysis Cell, Ministry of Petroleum and Natural Gas. The share of fuels in the country's exports surged from 5.59 % in 2003–04 to 20.05 % during 2013–14. Total exports of fuel products stood at US$ 62.69 billion in value terms during FY 2013–14. The country had total reserves of 1354.76 billion cubic meters (BCM) of natural gas and 758.27 million metric tonnes (MMT) of crude oil at the end of FY 2012–13. The use of shale gas can be the first step in the road to ‘economic freedom’. The petroleum ministry of India feels that the country could do something similar to the US, which became a net exporter of energy from a net importer of energy, on the back of shale gas and oil. By 2015–16, India’s demand for gas is expected to touch 124 MTPA, as per projections of India’s Petroleum and Natural Gas MinistryMore recently, Relaince Industries has diversified into unrelated areas like retail chains, media and telecom through Reliance Jio, which will be launched sooner in 2015. Reliance JIO commercial launch is delayed to December 2015 a combination of significant expected declined in the 4G handset price to Rs. 4,000 by December 2015 and significant capacity of JIO planned at launch date with already 100m wireless subscribers would lead to increased activity in telecom data market. Reliance JIO’s voice strategy remains uncertain as no particular details were shared from company about how it would be providing voice services which currently constitute 80 % of the Indian wireless market revenue. So there can be potential tie up with existing operators for circuit switched fall back (CSFB). Large scale population coverage planned by JIO combined with low 4G handset prices can enable mass adoption of 4G services. However rate of subscriber up-take would be the key as JIO would be largely targeting churn from existing subscribers with proposition of cheaper and better data offering. RIL’s acquisition of control in Network 18 Media & Investments Limited through Independent Media Trust including its subsidiary TV18 Broadcast Limited will differentiate Reliance’s 4G business by providing a unique amalgamation at the intersect of telecom, web and digital commerce via a suite of premier digital properties. TV18 Broadcast ltd had posted excellent result for FY15 inspite of Rs. 220 Cr write-offs. With finance costs also coming down the share price is likely to rise significantly in next 2 quarters. Reliance Retail has continued its growth momentum crossed three significant milestones during past couple of period; it has surpassed turnover of Rs. 4,000 Cr in a quarter with more than 2,000 operating stores and with establishing its presence in over 150 cities. Despite persistent inflation and slow consumption growth, first half of FY 14-15 revenue for Reliance Retail grew by 17.3 % Y-o-Y to Rs. 8,166 Cr. PBDIT for the retail business more than doubled to Rs. 357 Cr from Rs. 165 Cr in the same period last year. All format sectors grew through store additions as well as consistent like for like growth ranging up to 21 %. Reliance witnessed sharp improvement in complex refining margin and delivered record performance taking benefit of being an integrated energy Company. Declining gas production in KG basin as a concern will remain for some more time. However, a positive point could trigger from its start of projects worth $25 billions in next 18 months, also new launch of Reljio and the growth shown by its Retail Business could contribute around $17 billion. The start of downstream expansions could lift Ebitda by around 75 % over next 3 year so it can be expected that RIL Eps can grow double in next three years. The fair value of RIL on Sum of the parts basis comes at Rs. 1050 per share, while the valuation of RIL including its treasury shares comes to Rs. 1140 per share. At the current market price of Rs. 1010.85, the stock is trading at 11.85 x FY16E EPS of Rs 85.30/share and at 9.73 x FY17E EPS of Rs 103.80/share. It is expected that the company’s surplus scenario is likely to continue for the next three years keeping its growth story in the coming quarters also.

SOTP valuation (FY2016E) 
BUSINESS SUBSIDIARYValue per Share (₹
Core Business 
Refining562.00
Petro Chemicals427.00 
E&P INITIATIVES
KG - D6 Gas (KG Basin)44.00
KG - D6 MA1 Oil (KG Basin)13.00
KG - DWN - 2003/1 (D3)12.00
NEC - 25 (Mahanadi Basin)14.00
Sohagpur East & West (CBM)23.00
PMT14.00
INVESTMENTS
In Shale Gas35.00
In RGTIL, RIIL11.00
In SEZ14.00
In BWA36.00
In Reliance Retail84.00
Less: Net Debt239.00
TOTAL VALUE PER ( Ex Treasury stock )1,050.00
Add: Treasury Stock of 29.35 cr shares91.70
TOTAL VALUE PER 1,141.70

KEY FINANCIALSFY14FY15FY16EFY17E
SALES ( Crs)3,90,1003,57,3002,84,8003,42,900
NET PROFIT (₹ Cr)22,00022,70025,00030,800
EPS ()75.2077.5085.30103.80
PE (x)13.1012.7011.509.50
P/BV (x)1.301.201.101.00
EV/EBITDA (x)9.409.809.006.80
ROE (%)11.7011.0011.0012.30
ROCE (%)11.1010.5010.6012.40

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*As the author of this blog I disclose that I do hold RELIANCE INDUSTRIES in my any of the portfolios.

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Tuesday, June 23, 2015

ATUL AUTO LTD: STOCK ON TOP GEAR !!!

Scrip Code: 531795 ATULAUTO
CMP:  Rs. 502.30;Market Cap: Rs. 1,102.20 Cr; 52 Week High/Low: Rs. 721.80 / Rs. 240.28
Total Shares: 2,19,43,200 shares; Promoters : 1,20,84,810 shares –55.07 %; Total Public holding : 98,58,390 shares – 44.93 %; Book Value: Rs. 41.76; Face Value: Rs. 5.00; EPS: Rs. 17.92; Dividend: 75.00 % ; P/E: 28.08 times; Ind. P/E: 23.68; EV/EBITDA: 16.09.
Total Debt: ZERO Cr; Enterprise Value: Rs. 1,057.05 Cr.
                                                                         
ATUL AUTO LIMITED: ATUL AUTO Ltd was incorporated in 1986 and is based in Rajkot, Gujarat, India. The company was earlier known as Atul Auto (Jamnagar) Pvt. Ltd and changed its name to Atul Auto Pvt. Ltd on Aug 1994. The company, in May 2012, gave bonus of equity shares of Face value of Rs. 10 each fully paid up in ratio of 1 new for every 2 equity shares held- the company issued 36,57,200 equity shares as Bonus. Atul Auto Ltd recently on June 26, 2014 declared split in its face value from Rs. 10 to Rs. 5. Atul Auto limited manufactures and sells front engine and rear engine passenger, loading three wheeler auto rickshaws and its spare parts primarily in India. It offers goods carriers; passenger carriers; and special purpose vehicles such as chicken carriers, trippers, water tank carriers, soft drink carriers, mobile shops, hoppers, and bio hazard and vegetable vending vehicles that have applications in courier services, industrial products, laundry construction, dairies, caterers, FMCG distribution, LPG distribution, etc. The company provides its three wheelers under its brands namely: Atul Shakti, Atul Gem, Atul Shakti Smart, and Atul Gemini–Dz brands. The Company is also involved in the generation of electricity with a wind turbine generator at Gandhavi Village, Gujarat. The company has 150 exclusive dealers, more than 100 sub-dealers, 14 regional offices and 3 training centres in 16 states of India. Company exports its 3 wheelers in CBU,SKD,CKD conditions and as per the requirement of Importer. The company also exports its products primarily to Nigeria, Kenya, Egypt, Tanzania, and other African countries. The Company has its plant at Village Shapar at a distance of 18 kms from Rajkot. This plant commenced its commercial production from July 1992 and at present has an installed capacity is 48,000 vehicles per annum. Atul Auto Limited is locally compared with Bajaj Auto Ltd, Hero MotoCorp, Swaraj Mazda Motor Corp, Scooters India Limited, Automobile Corporation of Goa Limited, Commercial Engineers and Body Builders and globally compared with Aftab Automobiles Ltd of UAE, Ford Motor Company of USA, Harley-Davidson Inc of USA, Tesla Motors Inc of USA, Thor Industries Inc, Mitubishi Motor Corp of Japan, Bayer Motoren Werke AG (BMW) of Germany, Piaggio & C. SpA of France, Porsche Automobil Holding SE of Germany, Renault Societe of France, Volkswagen Aktiengesellschaft of Germany.

Investment Rationale:
Atul Auto Ltd is one of the key three-wheeler manufacturing companies in the country and has its manufacturing facility at Rajkot in the state of Gujarat. Atul Auto Ltd was conferred with "IndiaMart Leaders of Tomorrow Award 2013" in Auto Components sector of West Zone presented by ET Now. The Company manufactures popular 3-wheelers in the sub 1 tonne category targeting the passenger and cargo segment. In passenger segment, the Company manufactures the Diesel & CNG powered carrier for carrying 3 to 6 passengers. In the cargo segment, the Company manufactures vehicles with a rated carrying capacity of 0.50 tonne. Both these vehicles have been approved by the Automotive Research Association of India under the Bharat Stage-III. The Company has its existing plant at Village Shapur, near Rajkot. The plant commenced its commercial production from July 1992 and has installed capacity is 48,000 vehicles (from April 2013) per annum. The company has improved its market position in the domestic 3-wheeler industry with incremental market share in the goods as well as passenger carrier in 0.5 Tonne segment (third large player in 0.5 T three wheeler industries). This has happened with established distribution network, increase in capacity and launch of new products. This increase in capacity was achieved through local level innovations and process re-engineering, and did not involve any major capital expenditure. Atul Auto has defied all market hurdles & is growing consistently. The company launched various variants to its vehicle line, thus by increasing its market share to over 7 % from 2 % in FY09. Atul Auto has aggressive expansion plans and more variants are to be launched, which will boost the company top line, and being debt free strengthens the bottom-line as well. The Indian automobile industry has been growing at a remarkable rate over the years, contributing approximately 7 % to the country’s GDP and employing about 19 million people. However in recent years, it has been going through challenging times with both production and domestic sales declining due to weakening economic sentiments caused by the slowing economy, volatile fuel prices and expensive loans. India is one of the largest manufacturers of three-wheelers in the world with an estimated production of 850,000 units annually. Of these, almost 500,000 units are sold in the domestic market, with exports comprising the balance 350,000 units. Three-wheelers play an important part in transporting both passengers as well as goods, providing a cost-effective alternative for last mile connectivity in both urban cities as well as rural towns of the country. With easier permits available for CNG-LPG vehicles, three-wheelers are emerging as a popular alternative for both personal and mass transportation needs. The Indian automobile sector is a fully de-licensed industry and free imports of automotive components are allowed. The outlook for the Indian automobile sector is positive. The sector is expected to resurge in 2015 on the back of revival in demand both from consumers as well as industry. Driven by a renewed confidence in the economy and a general improvement in liquidity and sentiments, demand is expected to rise as early as in the first quarter of FY 2014. The industry estimates demand to pick up to 5 % in the year 2014-15 and return to double digit demand in the year 2015-16. The industry is further hopeful that the new government will favourably consider reduction of excise duty, which would result in unlocking middle-class demand. Faster economic growth coupled with the government's policies is likely to drive volumes and revive the Indian automobile sector. A fall in interest rates and stable fuel prices are expected to create an environment conducive for growth in this industry. Many foreign companies have also started to show their presence in India leading to a very competitive automobile market in the country, which augurs well for the sector's growth. It has been predicted by IHS Automotive, a global market information provider that India will become the third largest automotive market in the world by 2016 ahead of Japan, Germany and Brazil, riding on its domestic automotive sales. Atul Auto Ltd.’s main forte has been rural markets, especially the large diesel segment, which is of a strong 2.5 to 3 lakh unit market. The company has a significant market share in the goods carrier segment in which it is a strong player. Expansion in dealer network in new states has enabled the company to grow above industry rate resulting in an increase in market share from 2.64 % at the end of Mar’07 to 3.81 % at the end of Mar’13. The increase in dealerships across the country could propel faster volume growth. Atul’s market share has grown in its target market across the years. It is interesting to note that Atul has as of now only been able to target 60 % of domestic market due to absence of petrol variant. The entry into petrol segment, increasing capacity and footprint could lead to faster growth in market share in the coming years. Atul Auto Ltd would be launching petrol based three-wheelers in the next 6-8 months to tap growth in export markets and urban markets as several new permits are likely to be issued to markets like Mumbai and New Delhi. The company has been doing a lot in the last few months to increase its export share, where realizations are higher. Company is in the process of launching gasoline three-wheelers which is the correct product for overseas market. Company is also establishing direct marketing network around the prospective geographies. The new product is likely to boost export volumes with the management expecting exports to grow significantly on a low base. The company has already established six distributors in Kenya, Mozambique and Bangladesh which will enhance company's expansion plans. Atul Auto Ltd is expected to witness a product mix improvement in the coming years with the launch of petrol-alternate fuel versions coupled with an entry in export markets. Both these factors could aid in improving average realisations from present levels.

Outlook and Valuation:
Atul Auto Ltd. is one of the youngest players in the 3 wheelers business with humble beginning in 1992 that started with manufacturing of Chhakaras (Rural Transportation Vehicle- RTV). Company produces auto rickshaw under Atul Shakti, Atul Smart, Atul Gem and Atul Gemini-DZ product names. Atul Auto is the only pure play 3-W manufacturer in India. Atul Auto’s growth trajectory has been impressive with volumes growing at a CAGR of 34 % over FY09-15. With 18 % share in the goods carrier segment and 5 % share in the passenger carrier segment, Atul has reached a respectable size in the market. Atul has also gone pan-India with a presence across almost all states. The company launched various variants to its vehicle line which helped company to now command overall market share of 7.3 % as against less than 1 % five years ago, and has posted an average volume growth of 17 % in trailing four quarters compared with industry's average of 2 %. Atul Auto has defied all market hurdles & is growing consistently. Atul Auto has aggressively expanding itself and plans to launch more new variants, which will boost its top line and being a debt free company will strengthen its bottom-line. With the bigger players catering to urban markets, Atul Auto saw opportunity in tier-II and -III cities and built its strategy around them. For instance, it customized its products to meet the expectations of smaller cities and rural areas. India is one of the largest manufacturers for three-wheelers producing volume of 950,000 units p.a. and growing at 6 % to 8 % p.a. having a domestic market of 550,000 units p.a. Three wheelers is an important element of goods transportation in the country as it provides last mile connectivity in the metro and urban markets where entry of large commercial vehicles into city limits is increasingly getting restricted and it is the ideal and most widely used mode for goods transportation in rural and semi urban markets. Also it is a cost effective mode for personal and mass transportation. Atul Auto Ltd.’s passenger segment is likely to see robust growth in domestic markets on account of government focus on improvement in rural road infrastructure and three-wheelers continue to be a popular mode of passenger transportation. New permits for fuels like CNG-LPG driven vehicles are available more easily. Passenger application in the rural and semi urban areas will continue to grow. Moreover availability of easy financing by banks and big NBFCs will provide more impetus to three-wheeler sector in India. It is believed that India’s three-wheeler industry is on the cusp of growth over the next few years and company like Atul Auto which is a dedicated three-Wheeler player will surely be one of the major beneficiaries of revival in the sector. Atul’s cargo segment will also witness good amount of volume growth on the back of added dealership which will provide good penetration to Atul Auto Ltd in the tier II and tier III cities along with improvement in urban areas as well. Growth in key user industries like fmcg, pharma, retail, construction etc. will augur well for the company as major retail push by these industries in tier II and tier III cities and smaller towns where three wheelers serve as the ideal mode of goods transportation. The management has maintained the guidance for double digit growth for the next couple of years. However, they expect volumes to remain subdued in H1FY16E and expect it to pick up from H2FY16E onwards. Erratic rains in Q4FY15 have impacted rural demand from where Atul Auto derives a majority of its volumes. Hence, demand is likely to be under pressure in the near term. The management has guided that the dealer network expansion will continue with 25 to 50 new dealers likely to be added till FY17E. The current count of touch points stands at 325 with primary dealers at 200. On the export front, the company has 7 distributors that are also likely to added, going forward. The land acquired for the new plant is likely to be commissioned in H2FY17E. The current capacity of 48,000 units is likely to get expanded to 60,000 units by carrying out the de-bottlenecking activity. The management has guided that capex for FY16E could be Rs. 50 crore. The company witnessed a three to four month delay in receiving approval from Automotive Research Association of India (ARAI) for its petrol model while the new model currently in the testing phase and is under review. Post the completion of this phase, the company would launch its new petrol engine model, which is likely to take another six to eight months. Atul possesses strong balance sheet strength, with zero debt on the books. For the major capex planned in FY15E, FY16E, the management has guided at meeting the capex need by using existing cash as well as CFOs. Atul’s debt-free status is likely to sustain for more years to come with CFO generation which is likely to remain robust as the demand scenario improves. Atul Auto Ltd's performance has been quite encouraging and consistent with strong top line and bottom line growth. Atul’s specialised focus has clearly paid rich dividends as evidenced by market share gains. India's 3-wheeler growth trajectory looks quite promising going ahead with government thrust on infrastructure and focus on encouraging new and small entrepreneurs, which will boost the sales of 3-wheelers. In a scenario where multiple challenges in the economy and industry have weighed down heavily on the automobile industry, with most players struggling to cope with falling sales and margins, it is believed that the worst is over for automobile industry and the sector is poised to grow well on the back of improving economy with strong government at the center and improving consumer sentiments. At CMP of Rs 502.30, the stock currently trades at 23.20x FY16E EPS of Rs 21.65 and 17.99x FY17e EPS of Rs 27.91, even thought the stock has run up from the recent lows of Rs. 377 odd levels, it's still attractively valued considering the strong prospects of the company in domestic markets as well as its expected ramp up in exports. Atul Auto Ltd’s valuations leave scope of improvement looking at three-wheelers sector prospects and expected profitability. Company can show a conservative growth of about 21 %It is expected that the company’s surplus scenario is likely to continue for the next three years keeping its growth story in the coming quarters also.  

KEY FINANCIALSFY14FY15FY16EFY17E
SALES ( Crs)430.14492.80575.88673.36
NET PROFIT (₹ Cr)29.8040.5747.5261.25
EPS ()13.5818.4921.6527.91
PE (x)14.2030.0020.3015.80
P/BV (x)4.3010.106.204.90
EV/EBITDA (x)19.0018.2012.309.80
ROE (%)31.5033.5030.6031.30
ROCE (%)45.6049.4044.1044.20

 As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % on every purchase(Why Strict stop loss of 8 % ?) - Click Here


*As the author of this blog I disclose that I do not hold ATUL AUTO LTD in my any of the portfolios.

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Disclaimer
This is a personal blog and presents entirely personal views on stock market. Any statement made in this blog is merely an expression of my personal opinion. These informations are sourced from publicly available data. By using/reading this blog you agree to (i) not to take any investment decision or any other important decisions based on any information, opinion, suggestion, expressions or experience mentioned or presented in this blog (ii) Any investment decisions taken if any would be his/hers sole responsibility. (iii) the author of this blog is not responsible.
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Friday, June 19, 2015

MY QUOTES : 3 DAY QUOTES CHALLANGE - DAY 3 !!!

Hii Friends , 
My  Third Quote and Last day for 3 days Quotes challange ... 

Non Other than the Guru of Value Investing Mr. Warren Buffett -  better known as "Oracle of Omaha", "Sage of Omaha" or "Wizard of Omaha" is obviously the most successful investor of all times. He is not only known for his investment philosophy but also for his great quotes on investing. 
But as promised to myself ( & to my dearest friend) that I will try to write beyond markets, so here I am trying to quote Warren Buffetts Quotes which are life inspring, here are some -  

"How you come out of the womb has really nothing to do with what kind of person you are. You decide what kind of person you're going to be."

"You're neither Right nor Wrong because other people agree with you. You're right because your facts are right and your reasoning are right - that's the only thing that makes you right. And if your facts and reasoning are right, you don't have to worry about anybody else"  

" It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently"

" If you're in the luckiest 1 % of humanity, you owe it to the rest of humanity to think about the other 99 %"

" Money to some extent sometimes let you be in more interesting environments. But it can't change how many people Love you or how healthy you are"

And the best one - 




Here is my Day 2 of my 3 day Quote challange


Please do keep on ur support for me & pl do visit again and share the posts :)

 Regards
Bhavikk shah
mumbai  

******************************************************************************************************************************
I have been tagged by my blogger friend Dipanwita, to take part in Three Days Quote Challenge which is - 1) Post a favorite quote of yours for 3 consecutive days, each day new quote. Quote could be from any Book, any Author of your choice, or your own quote. 2) Nominate 3 bloggers with each post to Challenge them. 3) Thanks the person who nominated you.

Thanks Dipanwita for tagging me :) I am tagging my blogger friend Datta Ghose DasDeepa PrabhuSneh Asnani
All the best Friends... I hope u all enjoyed these series :)


Top post on IndiBlogger.in, the community of Indian Bloggers


Thursday, June 18, 2015

MY QUOTES : 3 DAY QUOTES CHALLANGE - DAY 2 !!!

Hii Friends , 
My Second Quotes for 3 days Quotes challange ... 

Steve Jobs, 




Here is my Day 2 of my 3 day Quote challange


Please do keep on ur support for me & pl do visit again and share the posts :)

 Regards
Bhavikk shah
mumbai  

******************************************************************************************************************************
I have been tagged by my blogger friend Dipanwita, to take part in Three Days Quote Challenge which is - 1) Post a favorite quote of yours for 3 consecutive days, each day new quote. Quote could be from any Book, any Author of your choice, or your own quote. 2) Nominate 3 bloggers with each post to Challenge them. 3) Thanks the person who nominated you.

Thanks Dipanwita for tagging me :) I am tagging my blogger friend Jyotsna BhatiaPreethi VenugopalaArchana Chaurasia Kapoor
All the best Friends... I hope u all enjoyed these series :)
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