We mentioned Atul Auto Ltd. as one of our Muhurat picks, the conviction has grown with more research and feedback on the company. Atul Auto Ltd. looks very promising company with a strong and stable balance sheet.
Atul Auto is one of the leading 3 wheeler manufacturer and is based in Gujarat. They already have a lead in the state of Gujarat & Rajasthan and are now trying to replicate their success across new territories in India & abroad. The company is trying to enter new states and is appointing new dealers. Company has even entered into agreements to enter Bangladesh & Sri Lanka.
Atul Auto has grown @ 40-50% over the last 2 years and seems geared up to maintain good sales momentum going ahead. Here is a snapshot of financials of last 4 years:
|Particulars||FY 2008||FY 2009||FY 2010||FY 2011||6M FY 12||FY 12 Estimate|
*All Financial figures are in crore rupees (except EPS).
Along with the growth over last 2 years the Balance Sheet side has become quite strong:
|Particulars||FY 2008||FY 2009||FY 2010||FY 2011||6M FY 12|
|as a % of turn||24%||15%||15%||9%||8%|
|as a % of turn||5%||3%||4%||3%||3%|
|Net Working Cap||11.76||6.57||5.19||0.74||(6.17)|
Interestingly while more than doubling the turnover between 2009-2012E, the company has:
- Become debt free, repaying a debt of about 32 Crores.
- Reduced inventory levels from 15% of turnover to just 8%.
- Debtors are negligible.
- Become a negative working capital company thanks to the increasing dealer advances. Dealer advances in 2011 have increased to Rs.5.04 vs. Rs.1.24 Crores in 2010. As per 6 months FY 2012 Balance Sheet, the advances have further increased.
- Paid dividend during tough time and increased it in good times.
So the good thing of this business model is that it becomes a cash cow at a certain stage.
Company seems to be getting traction in its markets and has some aggressive growth plans:
- They are in process of doubling their capacity from current 24,000 to 48,000 vehicles per-annum.
- Company plans to enter new territories and increase dealer network.
- Their tie-up with Bangladesh and Sri Lanka looks promising.
- Company intends to set up a 4 wheeler ultra low cost vehicle plant.