
	ATLAS CYCLES

SHARETIPSINFO >>Research Reports >> ATLAS CYCLES (19-05-2011)

LISTING	NSE
CMP	Rs 254
52 WEEK HIGH/LOW	Rs 307/Rs 191
FACE VALUE	Rs 10
PE RATIO	12.2
AVERAGE VOLUME	21, 000
MARKETCAP	Rs 85 crore
DIV YIELD	1.72%
P/BV	0.72

COMPANY OVERVIEW:
Atlas cycle was established in the year 1951. Late Rai Bahadur Shri Jankidas Kapur was the founder of the company, which was established way back in 1950.Atlas bicycles are ridden over 50 countries around the globe. It is one of the largest manufacturers of bicycles in the world.
Atlas Cycles, Sonepat unit caters to the needs of North-East and Central Africa, USA, Latin America, South and Central America including Mauritius, West Indies and Madagascar Island. Company is planning to enter Uganda, Tanzania, Sudan, Libya, Malawi, and Ethiopia in African Continent. USA and Latin American market is also on the list where company wants to have footprint.

Manufacturing Facility:
Company has manufacturing facility in Sonepat. It also has facility in Rasoi and Sahibabad.

PRODUCT RANGE:
Roadsters
Fancy Bikes
Ladies Bikes
Juniors
Children Bikes

INDUSTRY OUTLOOK:
India produces approximately 10% of the world annual bicycle production, which is estimated at 125 Million units.

The annual domestic demand of bicycles in India is approximately 10 million units out of which around 2.5 million units are a government demand for the various welfare schemes. Exports out of India are largely to Africa and the less developed economies and negligible to western markets.

Most cycles manufactured & sold in India are in the low price bracket of Rs. 2,500 to 3000. The market for the premium or the lifestyle bikes targeted towards the lifestyle consumer is just about emerging. The definition of high end bikes itself is changing. Earlier the high-end bikes were considered as those selling between Rs. 5000 to 8000. However now with global brands moving into the country this definition is also changing with price-points starting from Rs.15000 to as high as a few lakhs.
The mass-market segment is experiencing a sluggish growth of between 4-6% annually the premium & lifestyle segment is growing at a CAGR of over 30%. The market size for the lifestyle cycles is estimated at not more than 0.25 million units annually but its only time that this segment will form an important part of the industry

FUTURE GROWTH:
Company foraying into African market will be the next stage growth driver. Foraying in USA and Latin America will drive the sales of the company. Planning to backward integrate the operation and restructure the production process is very positive for the company. The restructuring of production process will help company in improving the margin.

INVESTMENT RATIONAL:
Market cap to sales ratio is quiet attractive. With sales close to Rs 800 crore company has market cap of Rs 85 crore.

Company backward integration in Gurgaon Plant will improve the margin.
Increasing awareness on pollution free environment and health will drive the growth of bicycle.
Increasing Government purchases of bicycle for different programme.
We expect sales in range of Rs 1,350- Rs 1,400 in next 3 years.

Risk:
Rising raw material cost will adversely impact the margin.
Company working on thin margin.

SHAREHOLDING PATTERN:

	NO. OF SHARE	% OF TOTAL
PROMOTERS	1459293	44.87%
INSTITUTION	3929	0.13%
GENERAL PUBLIC	1788697	55.000%
GRAND TOTAL	3251919	100.00%

FINANCIAL:

	31/03/08	31/03/09	31/03/10
TOTAL INCOME	558.66	606.99	671.75
EXPENDITURE	-541.68	-588.1	-649.93
PBDITA	16.98	18.89	21.82
DEPRECIATION	-4.85	-5.97	-5.5
PBIT	12.13	12.92	16.32
INTEREST	-8.05	-9.51	-11.1
PBT	4.08	3.41	5.22
TAX	-1.85	-1.76	-1.73
PAT	2.23	1.65	3.49
*Extra Ordinary Item is excluded from the calculation.

Key Highlights:
Total Income grew at CAGR of 9.65% to Rs 671.75 crore in FY10 over the last 3 years.
PBDITA grew at CAGR of 13.35% to Rs 21.82 crore in FY10 over the last 3 years.
PAT grew at CAGR of 23.1% to Rs 3.49 crore in FY10 over the last 3 years.

RATIOS:

	31/03/08	31/03/09	31/03/10
EPS	6.857489	5.07392712	10.73212
PBDITA MARGIN	3.039416	3.11207763	3.248232
NPM	0.399169	0.27183314	0.519539
INTEREST COVER	1.506832	1.35856993	1.47027

Key Highlights:
EPS grew at CAGR of 25.1% to Rs 10.7 in FY10 over the last 3 years.
PBDITA margin remained flat at 3.24%. A bit of improvement of 21 bps is seen over the last 3 years.
NPM improved from 0.31% in FY08 to 0.51% in FY10.
Interest cover remained at 1.4. Interest cover declined a bit from 1.5 in FY08 to 1.47 in FY10.

COMPARISION OF Q2FY2011 WITH Q4FY2010:

	Q3FY10	% CHANGE	Q3FY11
TOTAL INCOME	162.96	23.93838979	201.97
EXPENDITURE	-157.54		-194.91
PBDITA	5.42	30.25830258	7.06
DEPRECIATION	-1.35		-1.54
PBIT	4.07		5.52
INTEREST	-2.78		-3.51
PBT	1.29		2.01
TAX	-0.4		-0.65
PAT	0.89	52.80898876	1.36

Key Highlights:
Total Income grew by 23.9% in Q3FY11 to Rs 201.97 crore on YoY basis.
PBDITA moved up by 30.25% in Q3FY11 to Rs 7.06 crore on YoY basis.
PAT surged by 52.8% in Q3FY11 to Rs 1.36 crore on YoY basis. Surge in PAT is due to lower base.

VALUATION &OUTLOOK:
We expect Atlas Cycle FY12 expected revenue to be somewhere around Rs 8, 00 crore. The NPM is expected to improve marginally to 0.7% and FY12E PAT to be at Rs 5.6 crore. The FY12 expected EPS to be Rs 17.5. So, the stock is trading at 15X to FY12E EPS. The industry average PE is 30. We value the company at 22X to FY12E EPS, a significant discount to its peers taking into account the uncertainty. The fair value comes at comes at Rs 385.

CONCLUSION:
Investor could add on the stock at current level and also buy on dips. In medium term stock has the potential to give good return. If one hold the stock for long term it might turn out to be multi-bagger. Investor with 8-10 months of investment horizon could take position on the counter. The risk reward ratio is favorable.

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