Buy Atul Auto: target of Rs 215: ICICI Direct

ICICI Direct research report on Atul Auto

Atul Auto (AAL), in over three decades of existence, is a prominent 3-W OEM based out of Gujarat with a presence across passenger, cargo segments (60%, 40% as of FY20, respectively). Domestically, it commands ~6% overall market share (4% in passenger, 16% in cargo). It offers 3-Ws across the fuel range viz. diesel (~80% of sales) and alternative fuels (petrol, CNG, LPG; ~20% of sales) including e-rickshaws; with in-house lithium ion offering slated to be introduced in the next two to three quarters.

Outlook

Hence, at the CMP, AAL provides an attractive risk-reward opportunity with inexpensive valuations, healthy balance sheet and sound capital efficiency. Slower than expected ramp up in future offtake remains a risk to our call.

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