Expect double-digit volume growth in FY20- Atul auto Ltd

Dated: 8th July 2019

Following are the excerpts from the interview given by Mr Jitendra Adhia, President of Finance, Atul Auto Ltd. on CNBC TV18.
· The volumes are improving month on month. The Pressure is on exports as few contracts have been postponed. He expects that to be normalised in the next few months.
· Domestically, the volumes grew by 6% on a quarterly basis. The first quarter remained lean and particularly for the first two months of April & May due to external factors like liquidity crunch, elections, etc. The company has given guidance of double-digit growth for FY20E.
· The new Ahmedabad plant is likely to be commercialised by the end of CY19. Currently, the company is having a capacity of 60,000 units per annum. The company is operating close to 80% capacity utilisation. The capex will be completed in 2 phases out of which phase 1 will be commercialised by 2019 end with the capacity strength of 30,000 units per annum. Phase 2 of CAPEX will be ramped up once phase 1 will be stabilised. The company aims to target 80% of the capacity utilisation before phase 2 is commercialised
· The company has spent Rs 1,300 mn on CAPEX. This was fully funded through internal accruals and the company still maintains the debt-free status. The company requires another Rs1,000 mn for completion of CAPEX as well as product development expenses. The company expects to fund this additional funding requirement through internal accruals.
Consensus Estimate (Source: market screener website)
· The closing price of Atul auto was Rs 272/- as of 8th July 2019. It trades at a price to earnings (P/E) multiple of 10x/9x the consensus EPS estimates for FY20/21E of Rs 28.2/ 29.7 respectively. 
· Consensus target price of Rs 419/- implies a P/E of 14x on EPS of Rs 29.7 for the year ending Mar-21E.