Atul Auto which is among the leading three-wheeler manufacturer especially rickshaws across India, is seen as money making machine on stock exchanges in near term. For investors, if one is planning to make gains in short term, then Atul Auto is definitely a stock to look forward. On Friday, at around 0955 hours, Atul Auto was trading at Rs 303.15 per piece on BSE, mostly muted compared to previous trading session. The stock has however plunged to an intraday low of Rs 299.05 per piece. Take note, analysts at Equirus Securities Private Limited, have given a buy call with a target price of Rs 461. On current market price, this would mean this automaker is set to rise over 54% ahead. However, the analysts believe to stay invested in the company for long term, can fetch investors 64% gains in 14 months. 

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Ashutosh Tiwari, analysts at Equirus said, “ Our channel interactions indicate that ATA’s CNG 3Ws are doing well in North India as it is a differentiated product. Rather than competing with larger peers with similar offerings, ATA has provided a slightly larger-sized vehicle with the same engine; the better value proposition is thus leading to a good market response. While diesel 3Ws have also done better of late, we feel challenges remain with a diesel ban enforced in many cities due to high pollution levels.”

Exports have also picked up well this year (+80% yoy in 9MFY19), with their contribution to total volumes jumping from 7.6% to 11.3%. 

For Atul Auto, Nepal, Cambodia, Ethiopia and Ecuador have emerged as strong markets for the company in FY19. Tiwari says, “Nepal has been a stable market for the past three years, while the company is doing well in Ecuador over FY18 and FY19. Therefore, these are expected to remain good markets for ATA over the long term.”

Thus, Equirus believes  an increasing exports share will provide support to FY21 volumes when the domestic market turns challenging with a transition to BS-VI norms.

Following above, Tiwari adds, “We raise our FY19/FY20E volumes by 4% each considering better CNG and export volumes, and also increase our EBITDA margin assumptions driven by operating leverage; our FY19/FY20 EPS accordingly stands upgraded by 8%/4%. We roll over to a Mar’20 TP of Rs 461 (Dec TP: Rs 457) set at 17x Mar’20 EPS. Retain LONG.”