Atul Auto is a testimony to Vijay Kedia’s brilliant stock picking skill and his patience to hold on to a stock through thick and thin.
Vijay Kedia revealed in an interview that he first homed in on Atul Auto in 2005 when it was available at a throwaway valuation of Rs. 9. Thereafter, he held on tight to the stock even as it compounded at a mind-boggling CAGR of 57%, giving Vijay Kedia a return of nearly 5700% on his investment.
Raamdeo Agrawal joined the party in November 2013 when he bought a chunk of 2,00,000 shares at Rs. 129 (adjusted for split). At the CMP of Rs. 424, Raamdeo is looking at magnificent gains of 227% on his investment.
Then, Vijay Kedia adopted the brilliant strategy of inviting other ace whiz-kid investors like Prashant Jain’s HDFC MF, Goldman Sachs, Birla MF etc to take a stake in Atul Auto by selling them a portion of his holding. Vijay Kedia revealed in the ET interview that the reason he did this is because he knew that Atul Auto’s stature in the investing World would rise if the marquee investors take a stake in it.
The position today is that Vijay Kedia’s investment arm’s (Kedia Securities Pvt. Ltd) holding in Atul Auto has fallen from 8,10,500 shares as of 01.04.2014 to 2,53,451 shares as of 31.03.2015. This holding is retained as at 30.06.2015. The holding is worth Rs. 10.74 crore at the CMP of Rs. 424.
Raamdeo Agrawal indulged in a bit of profit booking. He sold 20,000 shares on 20.02.2015 when the price was about Rs. 576. As of 31.03.2015, Raamdeo held 1,80,000 shares worth Rs. 7.63 crore at the CMP of Rs. 424. His holding as of 30.06.2015 is not known.
Atul Auto also enjoys the unique privilege of being called a “potential 100-bagger” in Motilal Oswal’s 19th Wealth Creation Study. Only 7 hand-picked stocks have been conferred this title. The other stocks that have been conferred the privilege are Tata Elxsi, Granules India, Shilpa Medicare, DCB Bank, Suven Lifescience and Aarti Drugs. The criteria for qualification are quite stringent.
There is a detailed research report by Motilal Oswal of 31st March 2014 which recommends a buy on the basis that Atul Auto is “India’s fastest growing three-wheeler company”. The stock is up 135% since then.
Daljeet Kohli has now boarded the band wagon. In his latest report, Daljeet has conducted a systematic analysis of Atul Auto and identified the core factors which make it a buy. The core factors are:
“We believe with further capacity addition and new petrol product launch, Atul can efficiently tap export markets along with urban markets in India and, thereby, continue the strong growth momentum. We expect Atul Auto to register revenue CAGR of 18.7% over FY15‐17E driven by volume CAGR of 14% while earnings are expected to register CAGR of 21.5%. We are upbeat on Atul Auto due to it’s:
1. Strong hold in Tier 2 and Tier 3 cities
2. Strong distribution network
3. New petrol product launch
4. Dividend pay‐out track record
5. Strong return ratio (RoCE close to 40%)
6. Debt free status
7. Ambitious plans to double its capacity (from 60,000 to 120,000) by FY18”
Daljeet also points out that Atul Auto’s valuations are not unreasonable when you consider its high ROE and scorching growth record. It is presently trading at about 15x FY17E EPS. Daljeet has valued Atul Auto at 18x FY17E EPS and arrived at a target price of Rs. 471.
Now, we have to keep a watch to see whether Atul Auto lives up to the lofty expectations reposed on it by the ace investors.
Yes lot of investers has made money and many have booked profit and reduced holding. With big investers trimming down stakes also indicate lack of confidence. With National Green tribunal becoming stringent day by day,it can be turn of autos to take hit after old diesel vehicles ban , as autos are major source of pollution.More over with Ola,Uber etc type hitting roads,sale of these tuk tuk can be in reverse gear.In future with manpower becoming major cost,qualty of ride may improve as cost of vehicle will become less in total transportation cost..After all these are underdevoloed countries vehicle ,India under devolpment mode may not bode well for tuk tuk.Modi govt us also looking into improvement in city transport does not help tuk tuk. More over because of increased awarenes to safety may go against tuk tuk.Better you look into fate of nano before taking a crude ride against advance technology with enhenced saftety.Yes for some time experts may had profitable ride ,but be careful you are not stuck as last passenger and experts no where in site.
Good points.