Buy This Stock For 20% Return, In 1 Year: ICICI Direct Recommends

Renowned brokerage firm ICICI Direct suggested investors buy the stock of Atul Auto for a 20% return in 1 year. The firm stated, that the company has a "History of healthy capital efficiency as well as positive cash flow generation."

Target Price

The Current Market Price (CMP) of Atul Auto is Rs. 175. ICICI Direct has estimated a Target Price for the stock at Rs. 210. The stock is expected to offer a 20% upside, in 1 year.

Stock Outlook
Current Market Price (CMP)	Rs. 175
Target Price	Rs. 210
1 year return	20.00%

Company performance

The company's total operating income in FY 21 was recorded at Rs. 295.9 crore, which is expected to be at Rs. 292.2 crore in FY 22. Their EBITDA in FY 21 stood at 7.6 crore, which is expected to be at 24.4 crore in FY 22. The company's net profits in FY 21 were recorded at Rs. 10.2 crore, which is expected to be at Rs. 26.7 crore in FY 22. Revenues rose 14% QoQ to Rs. 91.3 crore amid 12.5% volume growth to 5,168 units and 2% ASP increase to Rs. 1.76 lakhs/unit. Margins came in negative at -8%, down 235 bps QoQ, consequent loss was at Rs. 8.5 crore. Post loss at PAT (FY21-22E), AAL has been seen clocking ~Rs. 19 crore PAT by FY24E.

Comments by ICICI Direct

ICICI Direct commented, "AAL's share price has de-grown at ~18% CAGR from ~ Rs.| 470 in April 2017, heavily underperforming the Nifty Auto index in that time. We retain our BUY rating on AAL tracking the impending launch in the EV space and believe the company to benefit from the reopening of schools and colleges. We build ~19%, ~22% volume, revenue CAGR, respectively, in FY21-24E on a depleted base aided by economy re-opening, easing of 3-W financing worries. Introduction of own lithium-ion 3-W offering would be key to combat technological disruption in the space."

About the company

Atul Auto (AAL) is a prominent 3-W manufacturer based out of Gujarat with a broad-based presence across segments and fuel types. It is the fourth largest 3-W player with an FY21 domestic market share of 7.1% (10.3% in the cargo segment and 5.1% in the passenger segment). The company had achieved a turnover of Rs. 617.51 Crore in FY 2019-20. They are amongst the fastest-growing 3 Wheeler companies in India, with a presence across 21 states with 200 primary and 130 secondary networks. The company's dealership, sales, service, and spare parts network comprises over 600 touchpoints across the globe.

Disclaimer

The above stock was picked from the brokerage report of ICICI Direct. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.