Buy Atul Auto, target price Rs 258: Emkay Global

Emkay Global has given a buy rating to Atul Auto with a target price of Rs 258. The share price moved up by 1.31 per cent from its previous close of Rs 195.10. The stock’s last traded price is Rs 197.65.

Atul Auto Ltd., incorporated in the year 1986, is a Small Cap company (having a market cap of Rs 438.32 Crore) operating in Auto sector.

Financials
For the quarter ended 30-06-2020, the company reported a Consolidated sales of Rs 25.83 Crore, down 77.06 % from last quarter Sales of Rs 112.59 Crore and down -82.25 % from last year same quarter Sales of Rs 145.54 Crore Company has reported net profit after tax of Rs -6.78 Crore in latest quarter.

Investment Rationale
Led by lower volume and margin assumptions, the brokerage has reduced FY21E EPS by 22% to Rs7.5 and FY22E EPS by 4% to Rs22.9. The brokerage expects 6%/8% CAGRs for revenue/EBITDA over FY20-23E, with average ROCE of 16%. Valuations are inexpensive at 9x P/E and 1.2x P/B on FY22E, compared to the historical average of 14x P/E and 3x P/B. It maintains Buy with a TP of Rs 258 (Rs238 earlier), based on P/E of 10x Sep’22E (Mar’22E earlier). Key downside risks are demand slowdown in key geographies, high competitive intensity, and adverse commodity/currency rates.

Promoter/FII Holdings
Promoters held 52.7 per cent stake in the company as of June 30, 2020, while FIIs held 0 per cent, DIIs 15.2 per cent and public and others 32.1 per cent.