Buy This Auto Stock For 45% Gain As Recommended By Anand Rathi

Anand Rathi has recommended investors to buy the stock of Atul Auto for a target price of Rs 256 apiece with a potential gain of 45.45%. Atul Auto's Q1 3W volumes grew on better demand at the ground level, and is expected to improve as activity further picks up. Despite the high prevailing RM prices, the gross margin expanded, aiding profitability.

Atul Auto Stock Outlook

The current market price of the stock is Rs 179 apiece with a 52-week high of Rs 268 apiece and 52-week low of Rs 146 apiece. The stock has gained 0.76% in trading today. According to Anand Rathi, if you buy the stock at the current market price of Rs 176, it has the potential to climb to Rs 256 apiece with a potential gain of 45%.

Atul Auto Return Since Last 5 Years

The stock has fallen 10.28% in 1 year, 16% in 3 years, and 60% in 5 years. The stock has gained 3% in 1 month.

Atul Auto Volume Growth

Q1 volumes grew 199% y/y, 14% q/q, to 5,205 units. Revenue grew 204% y/y, 14% q/q, to Rs954m on better demand sentiment. Retail off-take has started to pick up and is expected to improve. Volumes continued to rise in Jul'22 to 1,900 units, 46% y/y; 5% m/m, and near-term replacement demand is expected to kick in, further boosting off-take.

Also, in the quarter, the financing situation, which had been missing due to tepid demand in the last few quarters, started to improve. The company expects to launch L5 lithium-ion electric 3Ws by Sep'22 and swappable battery options in the next 3- 4 quarters, which augurs well for long-term growth.

Atul Auto Margin Performance

Atul Auto Margin Performance: The Q1 FY23 gross margin expanded 177bps to 20% on back of higher proportion of CNG exports, which has better realization of ~Rs300-400 per vehicle vs. its ICE counterparts. The company raised prices 1.5-2% in the quarter (~2% in Apr'22). Commodity prices have started to cool and we expect margin pressures to ease.

With the expected strong volume growth, domestic and export, and the decline in RM costs, we expect margins of 7% in FY23 and 10.6% in FY24.

Atul Auto Valuation

According to Anand Rathi, "We expect a 53% revenue CAGR over FY22-24, leading to an EPS of Rs21.3. We maintain a Buy rating, at an unchanged TP of Rs256 (12x FY24e)." Meanwhile, the risk remains the competition in the evolving 3W space, ICE and EV.

Atul Auto Market Capitalization

The company has a market capitalization of Rs 392 crore.

About Atul Auto

ATUL has emerged as the only player with complete range of 3Wheeler products across the fuel range- Diesel, Petrol, CNG, LPG and Electric. its vehicles are amongst the sturdies, most reliable and low cost three wheelers on Global roads.

ATUL vehicles are redefining the three-wheeler industry. Over more than 1 million ATUL vehicles ply on Global roads, since the first rolled out in 1970s, according to its official website.

Disclaimer

The stock has been picked from the brokerage report of Anand Rathi. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.