eicher motors (eicmot) - · pdf fileroyal enfield business drives margins higher! •...

May 15, 2015

ICICI Securities Ltd | Retail Equity Research

Result Update

Royal Enfield business drives margins higher! • Eicher Motors (EML) reported its Q1FY16 results with a topline of

| 2568 crore (up 33.5% YoY), EBITDA margin of 14.3% (up 272 bps) and PAT of | 195 crore (up 40.4% YoY)

• The results were above our estimates with the beat on revenues attributable to higher than estimated ASPs of the RE business. The margins were above our estimates on account of scale benefits in raw material sourcing, higher ASPs in the RE business and favourable raw material prices

• The performance of Royal Enfield (RE) on the margins front has been strong with EBITDA margins of 26.1%. Strong margins of the RE business were marginally offset by VECV EBITDA margins of 7.1%, lower than our estimate of 7.3%

RE – Capturing opportunity in rise in lifestyle biking through ramp up Royal Enfield (RE), the world’s oldest active motorcycle brand, with its uniquely classical and powerful bikes, always had cult status among bike lovers. However, in the recent past, the new India’s emerging higher middle class have taken it to few comparables. Although the share of leisure bikes is still at a measly ~2% currently, new RE launches will continue to grab more mind space among young India (already reflected in increasing first time buyers). Given the situation of demand outstripping supply, as indicated by the strong order book, the company has raised its production guidance for CY15E to 450,000 units and CY16 exit capacity at 600,000 units. We expect the dominant position of RE in the premium/lifestyle bike (>250 cc) segment to continue and forecast a sales volume CAGR of ~40% for CY14-FY17E. Structural growth in VECV In our view, on the business/financial front, the VECV JV boasts of the best business model among its peers, reflected in the fact that even in the worst CV cycle seen by the industry, VECV’s margins have stayed in the positive territory throughout the weak demand scenario, declining to 5.3% in Q4FY13 vis-à-vis incumbents Tata Motors. With new launches of the “Pro-series” trucks, we believe as the market expands in coming years VECV would gain market share in the higher tonnage space, maintain dominance in the ICV space. As the discounting levels taper off and operating leverage plays out we expect EBITDA margins to improve. RE valuations set to trace HOG’s historical path With demand remaining high, high waiting periods reflecting customer loyalty and association, we believe RE is set to trace a similar path to Harley-Davidson’s (HOG) high growth phase (1998-2003). During this period, where topline, bottomline grew ~2.5x, ~3.5x, respectively, with EBITDA margins expanding from ~19% to ~27% and RoEs improving from 23% to 29%, HOG’s average valuations were ~30x on a forward basis. We believe with similar financials for RE, its valuations may also trace a similar premium path akin to HOG. Uncontested business available at fair valuations EML has justifiably commanded a premium over other auto OEs as RE’s business is in full throttle and VECV reaps the benefits of economic revival. We maintain peer valuation parameters (relative valuation vis-à-vis HOG’s high growth phase) and ascribe a higher multiple of 30xFY17E EPS for RE, VECV at 14x FY17E EV/EBITDA, respectively, to arrive at an SOTP target price of | 19519. We have a HOLD recommendation with an upside potential of ~7%.

Rating matrix Rating : HoldTarget : | 19519Target Period : 12 monthsPotential Upside : 7%

What’s Changed?

Target Changed from | 18799 to | 19519EPS FY16E 559.8 EPS FY17E 688.6 Rating Changed from Buy to Hold

Quarterly Performance

Q1FY16 Q1CY14 YoY (%) Q4CY14 QoQ (%)Revenue 2,568.0 1,924.2 33.5 2,293.8 12.0EBITDA 366.0 222.0 64.9 303.1 20.7EBITDA (%) 14.3 11.5 272 bps 13.2 104 bpsPAT 195.3 139.1 40.4 153.8 27.0

Key Financials | Crore CY13 CY14 FY16E FY17ENet Sales 6,685 8,599 15,389 16,864 EBITDA 713 1,115 2,484 2,967 Net Profit 394 615 1,512 1,860 EPS (|) 145.9 227.1 559.8 688.6

* Change in accounting year, FY16E is a 15 month period Valuation summary

CY13 CY14 FY16E FY17EP/E (x) 124.5 80.0 32.5 26.4 Adj. EV/E (x) 142.3 98.2 55.6 25.1 Tgt.Adj.EV/E(x) 132.4 91.3 51.7 23.3 P/BV (x) 23.9 19.6 13.5 9.8 RoNW (%) 19.2 24.5 41.6 37.1 RoCE (%) 18.3 24.5 43.7 38.7

* Change in accounting year, FY16E is a 15 month period Stock data Particular AmountMarket Capitalization | 49093.4 CroreTotal Debt (CY14) | 58.4 CroreCash and Investments (CY14) | 481.5 CroreEV (CY14) | 48670.3 Crore52 week H/L (|) 18460 / 6230Equity capital (| crore) | 27 CroreFace value (|) | 10

Price performance (%)

1M 3M 6M 12MEicher Motors Ltd 12.6 11.2 37.1 178.6Tata Motors Ltd -6.4 -7.0 -0.1 19.3M&M Ltd -3.3 1.2 -3.8 7.5

Eicher Motors (EICMOT) | 18176

Research Analyst

Nishit Zota

[email protected]

Vidrum Mehta

[email protected]


Variance analysis Q1FY16 Q1FY16E Q1CY14 YoY (%) Q4CY14 QoQ (%) Comments

Total Operating Income 2,568 2,516 1,924 33.5 2,294 12.0 Higher than estimates on account of higher ASPs in RE businessRaw Material Expenses 1,350 1,410 1,099 22.8 1,210 11.6 Lower RM expenses driven by scale benefits in raw material sourcingPurchase of traded goods 303 275 182 66.4 283 7.0Employee Expenses 185 146 154 20.0 167 10.9Other expenses 364 338 267 36.5 330 10.2 Increase in other expenses is attributable to the company's investment in new retail

stores, selling & distribution expenses & rise in freight cost

EBITDA 366 347 222 64.9 303 20.7EBITDA Margin (%) 14.3 13.8 11.5 272 bps 13.2 104 bps Margins above estimates as RE business posted 26.1% margins against our estimate

of 24.9%Other Income 34 15 55 -39.1 15 123.4Depreciation 77 69 48 60.7 60 27.9Interest 1 2 6 -79.0 2 -36.9Total Tax 105 78 68 56.0 75 40.2PAT before MI 216 203 156 38.5 181 19.5Minority Interest 21 0 17 23.2 27 -22.9PAT 195 203 139 40.4 154 27.0Key MetricsRoyal Enfield ASP(|) 117,309 110,391 110,391 6.3 109,298 7.3 Increase in ASP led by 45 YoY increase in excise duty, 2% YoY increase in prices &

1% YoY due to better product mixVECV ASP (| lakhs) 13.9 14.0 14.0 -1.1 14.4 -3.3 Higher proportion of heavy duty trucks led to lower net realisations

Source: Company, ICICIdirect.com Research Change in estimates

(| Crore) Old New % Change Old New % Change CommentsRevenue 11,995 15,389 28.3 16847 16,864 0.1 FY16E old & new estimates not comparable due to change in accounting year, FY16E is 15

month periodEBITDA 1,766 2,484 40.7 2992 2,967 -0.9EBITDA Margin (%) 14.7 16.1 142 bps 17.8 17.6 -17 bpsPAT 1,064 1,512 42.1 1901 1,860 -2.2EPS (|) 394 560 42.1 704 689 -2.2

FY16E* FY17E

Source: Company, ICICIdirect.com Research * Change in accounting year, FY16E is a 15 month period Assumptions

Current Earlier CommentsCY13 CY14 FY16E* FY17E FY16E* FY17E

Royal Enfield volumes 177646 302601 563892 641476 433617 588206Royal Enfield ASP/unit (|) 107,257 109,177 117,917 121,488 111,743 116,326 Better ASPs on the back of a better product mix, new launches in CY15E, CY6EVECV volumes 41,421 40,978 62,461 62,931 51,097 63,140VECV ASP/unit (| lakh) 12.6 13.5 14.0 14.8 13.9 15.1

Source: Company, ICICIdirect.com Research * Change in accounting year, FY16E is a 15 month period


Key conference call takeaways Royal Enfield • Royal Enfield’s (RE) business volumes grew 43% YoY, 12% QoQ to

92021 units while average gross selling prices increased 7% YoY • Gross margins increased 420 bps YoY, driven by scale benefits in raw

material sourcing, 2% price increase in prices and favourable raw material prices

• Other expenses have gone up due to an increase in overheads & rents

for stores. There has not been any major increase in other expense due to marketing spends

• The order-book remains extremely strong. Waiting time/order-book

still remains the same at around four to five months, with higher waiting period in the South/West market

• The company plans to produce 450,000 units of Royal Enfield bikes in

CY15. Oragadam Phase 2 would start ramping-up from June 2015 onwards and would be gradually ramped up fully to its capacity of 30,000 units/month

• The planned capex for FY16 is ~| 500 crore, which includes

R&D/product development, front loaded expenses for opening up of new stores, replacement capex in old plant and new capacity creation

• The company will set up two technology centres: (1) in Chennai

which is expected to start by Q2CY16 and (2) in United Kingdom, which is expected to start by end of CY2015

• Going ahead, there would be two new platforms that would be

launched in the >250cc and <750 cc segment range • The company is also focusing on export markets and is eyeing Latin

America and Asean as two key markets for growth • The dealership expansion continues as planned - from ~390 dealers

in CY14, the target is to reach ~500 dealers in CY15 VECV • VECV’s market share in domestic MHCV declined 100 bps QoQ and

increased 70 bps QoQ in the LCV business. The company improved its market share in the bus segment in both MHCV and LCV business. The company has launched the Pro series of trucks and expects its market share to improve with this launch

• The planned capex for CY15 is | 500 crore • Discount levels remain stagnant despite the increase in industry

volumes


Company Analysis Our demographic analysis reveals that in the coming decade (2021) we could witness the share of the 15-40 years age population declining to 60% from 64% of total driveable population (>15<70 years). We observe that the first generation Splendor (Launched 1994) driving population (15>) would have been born <1980s. The same generation in 2014 would be aged ~ 34+ highlighting that as we move into 2021 the same class of buyers would be >42+. We assume that a bulk of 2-W drivers would be young (15-40 years). We, thus, interpret the fact that as we move into the next decade bulk of the young population i.e. (>15<30 years- Gen Z) would have been born in 90s and beyond, thereby having vastly different purchase habits and priorities (e.g. mileage/affordability vs. brand perception/comfort to their fathers (born <1980’s- Gen Y). Royal Enfield (RE), the world’s oldest active motorcycle brand, with its uniquely classical and powerful bikes, was always a cult among bike lovers. However, in the recent past, the new India emerging higher middle class have taken to it with few comparables. Exhibit 1: Young India to be big buyer class in next decade

30 24 20

2728

27

1415

15

18 21 22

5 5 6

5 7 9

0%

20%

40%

60%

80%

100%

2011 2016 20210 year> 15 year> 30 year> 40 year> 60 year> 70 year>

Source: Company, CIA World Fact book, ICICIdirect.com Research Assumed 1.25% CAGR population growth

Exhibit 2: Shift in popular products preferences from Gen Y to Gen Z

Source: Company, ICICIdirect.com Research


Strong performance from “cult” RE, as volumes grow exponentially…

Acquired by the Eicher group in 1993, the company has made investments to build state-of-the-art manufacturing and product development facilities, a wide marketing network and develop a riding culture centred around leisure and adventure, thereby becoming the market leader in the premium motorcycle segment in India. RE’s volume CAGR over CY08-14 has been an astonishing 38%, albeit on a small base. However, large unfulfilled demand for RE products, especially in the 350 cc segments, makes us positive on the sustenance of growth as capacity expands. With newer product launches and export markets likely to be tapped, demand is likely to outstrip supply even with expanded capacity (~6 lakh units in CY16E). With a strong brand presence and long waiting periods, RE’s pricing power coupled with economies of scale have ensured that margins have remained on an uptrend. Going ahead, we expect margins to stabilise upwards of ~25% in FY16E, FY17E in a pattern similar to HOG in the early part of its history.

VECV contribution to profit to rise as cycle & pro-series aids growth Eicher and Volvo entered into a 50:50 JV in 2008 to which Eicher moved its truck & bus business. Also, Volvo invested | 1082 crore in the JV and added its HD trucks distribution business for a 45.6% stake. In the ensuing five years, the JV, VECV trucks outpaced industry growth, increasing market share to ~13% from 9% in FY08. In the bus segment (>5 T), VECV has doubled its market share to ~12%. On the financial front, VECV’s performance has been best in the industry with margins declining to ~5% when margins of its peers dropped to the negative territory (down ~5% for Ashok Leyland and Tata Motors).

We believe a recovery in the CV space is likely to increase VECV’s contribution to overall operating profits. This belief germinates from the fact that the company now has a strong distribution network comparable with incumbents – Tata Motors, Ashok Leyland. The VECV brand name has established itself among fleet owners while the launch of the new state-of the art Pro-series trucks would catalyse market share gains in the coming years. Going ahead, we build in improvement in margins from current levels to ~10-% in FY17E, on the back of a better product mix,

Exhibit 3: Royal Enfield growth trajectory

1,04

9

1,70

2

636

671

1,04

9 3,03

1

961

5,92

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6,94

6

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1,77

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643

728

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4 3,02

6

920

5,63

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6,41

5

746

741

13.9

18.4

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12.1

24.226.1 26.7 27.7

24.9

13.9

-

1,000

2,000

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CY12 CY13 Q1CY14 Q2CY14 Q3CY14 Q4CY14 CY14 Q1FY16 FY16E FY17E

Reve

nue

(| c

rore

) / V

olum

e (1

00s)

-

5

10

15

20

25

30

(%)

Total Operating Income Volume ('100s) EBITDA Margin (%)

* Change in accounting year, FY16E is a 15 month period Source: Company press release, ICICIdirect.com Research


higher utilisation levels and strong volume growth from H2CY14E onwards.

Strong overall financial performance as RE masks VECV weakness

With an increase in competitive intensity amid cyclical weakness in the M&HCV segment, VECV’s performance has declined in the past two years. However, RE’s strong performance has offset the weakness in the truck & bus segment. In our view, VECV’s performance is likely to improve whenever there is a recovery in the domestic M&HCV industry. We expect the topline to grow at ~35% CAGR in CY14-FY17E while PAT is likely to grow at ~63.5% CAGR in CY14-FY17E as margins improve from 13% in CY14 to 17.3% in FY17E. Exhibit 5: Overall financial summary

5,68

4

6,39

0

6,81

0

8,73

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15,6

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CY11 CY12 CY13 CY14 FY16E FY17E

(| c

rore

)

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18

20

(%)

Total Operating Income PAT EBITDA Margin

* Change in accounting year, FY16E is a 15 month period Source: Company, ICICIdirect.com Research

Exhibit 4: VECV volumes and contribution to overall EBITDA

49 49

41

62 63

41.0

87.0

73.5

56.0

34.2 36.3 35.2

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CY11 CY12E CY13 CY14 FY16E FY17E

(000

's)

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(%)

VECV volumes(000's) Contribution to overall EBITDA



Return ratios remain on uptrend margins/profitability improves

With Royal Enfield’s strong franchisee driving profitability, the overall business has been able to maintain decent return ratios despite the weakness in the VECV side of the business, which had seen a sharp drop in capacity utilisation levels. Going ahead, as RE volumes ramp up in the new facility, coupled with better performance from VECV on revival in industrial activity levels, return ratios are likely to remain on the uptrend.

Exhibit 6: Operating margin and raw material cost trends

12.1

13.2

17.3

56.054.4

54.7

5

7

9

11

13

15

17

19

Q3CY

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Q1CY

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CY14

Q1FY

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E

FY17

E

(%)

45

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53

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(%)

OPM (LHS) RM/Net Sales Contribution


Exhibit 7: Return ratio profile

22.1

20.7

17.0 18.3

24.5

43.7

38.7

18.5 19.2

24.5

41.6

37.1

12

17

22

27

32

37

42

47

CY11 CY12 CY13 CY14 FY16E FY17E

(%)

RoCE RoE



Outlook and valuation Eicher’s business performance has been strong with Royal Enfield seeming unfazed by the slowdown in the Indian economy. With Indians lapping up cruiser bikes from Royal Enfield and witnessing huge waiting periods, RE has now enhanced capacity and looks set to make hay as the proverbial sun continues to shine. We believe RE is set to trace a similar path to Harley-Davidson’s (HOG) high growth phase (1998-2003). During this period where topline, bottomline grew ~2.5x, ~3.5x with EBITDA margins expanding from ~19% to ~27% and RoEs improving from 23% to 29%, respectively, HOG’s average valuations were >30x on one-year forward basis/PEG for two-year forward averaged ~0.6x (1998-2003). Prior to this high growth phase, HOG was able to grow its topline only by 2x in the preceding 10 years and exploded in the next five years. All these valuations need to be digested with the mature market multiples the US market would typically enjoy. In case of RE, in the last five years, revenue growth has been ~5x. However, till FY17E, we expect profitability to grow ~3x. We believe with similar financials panning out for RE, its valuations are likely to replicate HOG’s journey. Exhibit 8: Brief on Harley Davidson’s financials during the growth phase (mn USD) CY 95 CY 96 CY 97 CY 98 CY 99 CY 0 CY 01 CY 02 CY 03 CY 04

Revenue 1,350 1,531 1,763 2,064 2,453 3,083 3,588 4,302 4,904 5,320Growth(%) 13 15 17 19 26 16 20 14 8

EBITDA margins (%) 16.3 18.0 18.6 19.4 20.5 21.0 22.7 24.6 27.5 29.6

Net Income 112.5 166.0 174.1 213.5 267.2 347.7 437.7 580.2 760.9 889.8Growth(%) 48 5 23 25 30 26 33 31 17

ROE (%) 24.2 28.7 23.4 23.0 24.4 27.1 27.7 29.1 29.3 28.8

PE-1year forward (x) 17.0 16.8 18.8 26.7 28.3 31.5 28.4 19.2 20.0 17.6PEG-2year forward (x) 0.4 1.0 0.6 0.6 0.6 0.6 0.7 0.6 0.9 0.7 Source: Company, ICICIdirect.com Research

EML has justifiably commanded a premium over other auto OEs as RE’s business is on full throttle, VECV reaps benefits of the economic revival. We maintain peer valuation parameters (relative valuation vis-à-vis HOG’s high growth phase) and ascribe a higher multiple of 30xFY17E EPS for RE, VECV at 14x FY17E EV/EBITDA, respectively. Considering Royal Enfield caters to the second largest two-wheeler market in the world with dominant market share positioning and superior financials vis-à-vis HOG (during 1998-2003), we believe RE could trade at a premium to HOG’s multiple considering the mature market nature of developed economies. Furthermore, on the VECV front, we value it at ~30% premium to domestic CV manufacturers average multiple at 14x FY17E EV/EBITDA, respectively, to arrive at an SOTP target price of | 19519. We recommend Hold on the stock.


Exhibit 9: SOTP valuation FY17E Remarks

Two-wheeler business-Royal EnfieldEPS (|) 550 Target PE multiple(x) 30 Comparable to up-cycle multiples for Harley Davidson during the 1995-2004 phase.

Per share value (|) 16,502

Target market cap (| crore) 44,571

CV business-VECV`EBITDA 1,045 Target EV/EBITDA multiple(x) 14.0 30% premiuim to current average industry multiple*Target EV 14,629 Net Debt VECV * (| crore) (360) Target market cap (| crore) 14,989 Contribution towards EML 0.54 EML has 54.4% stake in VECVTarget market cap towards EML (| crore) 8,154 Per share value-VECV Eicher (|) 3,019 Total target market cap (| crore) 52,725 Per share value (| ) 19,519

Source: Company, Bloomberg,ICICIdirect.com Research

Exhibit 10: Valuation

Net Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE (| cr) (%) (|) (%) (x) (x) (%) (%)

CY13 6685.5 5.6 145.9 21.4 124.5 91.3 19.2 18.3CY14 8598.7 28.6 227.1 55.6 80.0 43.7 24.5 24.5FY16E 15388.6 79.0 559.8 146.5 32.5 19.5 41.6 43.7FY17E 16864.2 9.6 688.6 23.0 26.4 16.3 37.1 38.7



Company snapshot

Target Price 19519

0

5,000

10,000

15,000

20,000

25,000

Dec-

10

Mar

-11

Jun-

11

Sep-

11

Dec-

11

Mar

-12

Jun-

12

Sep-

12

Dec-

12

Mar

-13

Jun-

13

Sep-

13

Dec-

13

Mar

-14

Jun-

14

Sep-

14

Dec-

14

Mar

-15

Jun-

15

Sep-

15

Dec-

15

Source: Bloomberg, Company, ICICIdirect.com Research

Key events Date EventJan-08 Volvo charts out strategy to work on the partnership they are looking to foray into with Eicher Motors

May-08 Announces details of partnership for VECV. Stock hits 20% upper circuit

Oct-08 Approves a buyback for 14 lakh shares at ~| 692/ shareJun-09 Announces launch of two new products on the all new electric technology, to raise capacity to 60,000 unitsJun-10 Volvo-Eicher plans a joint engine plant in Pithampur, which is going to be used by Volvo in its vehicles globallyNov-10 Outlines plans for investments of ~| 800 crore for engine facility, new capacities for Royal Enfield and VECVMay-12 Reports record profit of~ | 109 crore in its history on the back of the strong margin performance of both Royal Enfield & VECV

Apr-13 Commences production from the Oragadam facility. Plans stage-I to raise capacity to 250,000 units with stage-II at 500,000 unitsJul-13 Engine facility gets commissioned at Pithampur. Volvo says initial capacity of 25,000 units to be raised to 100,000 unitsSep-13 Royal Enfield launches the classic "Continental GT". Product receives rave global reviews. Export potential strongNov-13 Reports above expectations results driven by life-time high EBITDA margins of 19.3% in Q3CY13. Further re-rating takes placeSep-14 VECV launches the Pro-series family of trucks Source: Company, ICICIdirect.com Research

Top 10 Shareholders Shareholding Pattern Rank Name Latest Filing Date % O/S Position (m) Change (m)1 Simran Siddhartha Tara Benefit Trust 31-Mar-15 25.08 6.8 0.002 Eicher Goodearth Trust 31-Mar-15 12.07 3.3 0.003 Lal (Anita) 31-Mar-15 11.15 3.0 0.004 Volvo AB 31-Mar-15 3.71 1.0 -1.275 Cartica Capital, Ltd. 31-Mar-15 3.25 0.9 0.126 Brinda Lal Trust 31-Mar-15 1.79 0.5 0.007 TIAA-CREF 31-Mar-15 1.35 0.4 -0.178 Joshi (Rukmani) 31-Mar-15 1.33 0.4 0.009 Amansa Capital Pte Ltd. 31-Mar-15 1.29 0.4 -0.0110 Lal (Simran) 31-Mar-15 1.16 0.3 0.00

(in %) Mar-14 Jun-14 Sep-14 Dec-14 Mar-15Promoter 55.1 55.0 55.0 55.0 55.0FII 19.6 19.9 20.1 19.5 22.1DII 5.3 4.9 4.4 4.7 6.1Others 20.0 20.2 20.5 20.9 16.9

Source: Reuters, ICICIdirect.com Research

Recent Activity

Investor name Value Shares Investor name Value SharesCitigroup Inc 72.21m 0.28m Lal Family Trust -457.57m -4.06m Cartica Capital, Ltd. 31.24m 0.12m Volvo AB -324.39m -1.27m Birla Sun Life Asset Management Company Ltd. 22.22m 0.09m First State Investment Management (UK) Limited -78.09m -0.33m Franklin Advisers, Inc. 21.62m 0.08m TIAA-CREF -43.67m -0.17m ICICI Prudential Asset Management Co. Ltd. 18.53m 0.07m Norges Bank Investment Management (NBIM) -28.88m -0.12m

Buys Sells

Source: Reuters, ICICIdirect.com Research


.

Financial summary

Profit and loss statement | Crore (Year-end March) CY13 CY14 FY16E FY17E

Total operating Income 6,809.7 8,738.3 15,642.4 17,152.6

Growth (%) 6.6 28.3 79.0 9.7

Raw Material Expenses 3,904.1 4,819.6 8,426.0 9,218.1

Employee Expenses 533.3 659.6 996.6 1,023.4

Other Expenses 924.6 1,197.9 1,969.1 1,995.6

Total Operating Expenditure 6,096.6 7,623.5 13,158.2 14,186.0

EBITDA 713.1 1,114.8 2,484.2 2,966.6

Growth (%) 29.9 56.3 122.8 19.4

Depreciation 130.0 219.8 303.5 360.6

Interest 7.9 9.8 8.2 7.0

Other Income 95.3 107.4 167.2 353.3

PBT 670.5 992.6 2,339.7 2,952.2

Others 0.0 0.0 0.0 0.0

Total Tax 145.2 290.9 609.9 738.0

PAT 393.9 615.4 1,512.1 1,859.9

Growth (%) 21.5 56.2 145.7 23.0EPS (|) 145.9 227.1 559.8 688.6


Cash flow statement | Crore(Year-end March) CY13 CY14 FY16E FY17E

Profit after Tax 393.9 615.4 1,512.1 1,859.9

Add: Depreciation 130.0 219.8 303.5 360.6

(Inc)/dec in Current Assets -206.6 -232.2 -1,495.0 -973.3

Inc/(dec) in CL and Provisions 369.8 515.5 1,558.0 -774.7

CF from operating activities 687.0 1,118.6 1,878.5 472.5

(Inc)/dec in Investments -187.0 -91.7 -100.0 -100.0

(Inc)/dec in Fixed Assets -753.6 -828.2 -1,000.0 -650.0

Others 179.3 -220.2 -50.2 848.4

CF from investing activities -761.2 -1,140.1 -1,150.2 98.4

Issue/(Buy back) of Equity 0.0 0.0 0.0 0.0

Inc/(dec) in loan funds 45.0 -25.5 0.0 0.0

Dividend paid & dividend tax 0.0 0.0 0.0 0.0

Others -93.3 -154.0 -395.0 -474.0

CF from financing activities -48.4 -179.6 -395.0 -474.0

Net Cash flow -122.6 -201.1 333.3 96.9

Opening Cash 805.1 682.6 481.5 814.7Closing Cash 682.6 481.5 814.7 911.7


Balance sheet | Crore (Year-end March) CY13 CY14 FY16E FY17E

Liabilities

Equity Capital 27.0 27.1 27.1 27.1

Reserve and Surplus 2,028.4 2,489.7 3,606.7 4,992.6

Total Shareholders funds 2,055.4 2,516.8 3,633.8 5,019.7

Total Debt 83.9 58.4 58.4 58.4

Deferred Tax Liability 247.2 324.3 329.3 329.3

Minority Interest 1039.7 1085.1 1302.8 1657.1

Total Liabilities 3,499.6 4,074.2 5,414.0 7,154.1

Assets

Gross Block 2,155.9 2,670.7 3,670.7 4,320.7

Less: Acc Depreciation 546.5 689.6 929.2 1,225.9

Net Block 1,609.4 1,981.1 2,741.6 3,094.8

Capital WIP 125.3 236.3 236.3 236.3

Total Fixed Assets 1,734.7 2,217.4 2,977.9 3,331.2

Intangibles 385.1 510.7 446.8 382.9

Investments 825.5 1,077.7 1,177.7 1,277.7

Inventory 526.8 645.5 1,293.9 1,848.0

Debtors 512.5 562.2 1,264.8 1,293.7

Loans and Advances 317.9 379.7 451.3 830.4

Cash 682.6 481.5 814.7 911.7

Total Current Assets 2,039.7 2,068.9 3,824.7 4,883.7

Creditors 1,320.5 1,571.5 2,445.3 2,402.6

Provisions 156.1 248.5 386.6 235.7

Total Current Liabilities 1,476.6 1,820.0 2,832.0 2,638.3

Net Current Assets 563.1 248.9 992.8 2,245.4

Misc expenses not w/o 0.0 0.0 0.0 0.0Application of Funds 3,499.6 4,074.2 5,414.0 7,154.1


Key ratios (Year-end March) CY13 CY14 FY16E FY17E

Per share data (|)

EPS 145.9 227.1 559.8 688.6

Cash EPS 194.1 308.2 672.2 822.1

BV 761.6 928.7 1,345.4 1,858.4

DPS 30.1 49.9 125.0 150.0

Cash Per Share 252.9 177.7 301.6 337.5

Operating Ratios (%)

EBITDA Margin 10.7 13.0 16.1 17.6

PBT / Net sales 10.0 11.5 15.2 17.5

PAT Margin 5.4 5.1 5.8 7.2

Inventory days 27.7 24.9 23.0 34.0

Debtor days 28.0 23.9 30.0 28.0

Creditor days 72.1 66.7 58.0 52.0

Return Ratios (%)

RoE 19.2 24.5 41.6 37.1

RoCE 18.3 24.5 43.7 38.7

RoIC 38.2 45.7 74.2 60.7

Valuation Ratios (x)

P/E 124.5 80.0 32.5 26.4

EV / EBITDA 91.3 43.7 19.5 16.3

EV / Net Sales 11.0 5.7 3.1 2.9

Market Cap / Sales 11.1 5.7 3.2 2.9

Price to Book Value 23.9 19.6 13.5 9.8

Solvency Ratios

Debt/Equity 0.0 0.0 0.0 0.0

Current Ratio 1.1 0.9 1.0 1.6Quick Ratio 0.7 0.7 0.8 1.3



ICICIdirect.com coverage universe (Auto & Auto Ancillary) CMP M Cap(|) TP(|) Rating (| Cr) FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E

Amara Raja (AMARAJ) 835 932 Hold 14,262 25.1 34.0 42.3 33.3 24.5 19.7 20.9 16.5 13.1 33.9 34.0 33.0 25.0 26.4 25.6Apollo Tyre (APOTYR) 174 228 Buy 8,751 19.6 22.6 22.8 8.9 7.7 7.6 4.5 4.7 4.7 26.5 20.4 17.3 19.6 17.6 15.4Ashok Leyland (ASHLEY) 71 68 Hold 20,086 1.2 2.1 3.5 57.5 33.8 20.5 21.9 15.3 11.6 6.7 11.0 14.9 6.6 10.8 16.0Bajaj Auto (BAAUTO) 2,167 2,833 Buy 62,706 111.8 155.5 180.0 19.4 13.9 12.0 11.8 9.1 7.3 38.0 39.4 40.4 29.9 34.8 33.7Balkrishna Ind. (BALIND) 756 750 Hold 7,306 48.0 52.7 62.5 13.8 12.5 10.6 8.6 7.4 6.1 15.6 16.4 19.2 20.0 15.6 16.4Bharat Forge (BHAFOR) 1,299 1,178 Hold 30,271 33.9 43.3 52.9 38.3 30.0 24.6 16.5 13.6 11.5 25.2 25.8 26.7 24.5 25.0 25.1Bosch (MICO) 22,800 24,000 Hold 71,592 341.2 463.0 600.0 73.0 53.8 41.5 49.6 36.2 27.9 15.0 17.5 19.1 15.7 18.8 21.2Eicher Motors (EICMOT) 18,170 19,519 Hold 49,077 227.1 559.8 688.6 80.0 32.5 26.4 43.7 19.5 16.3 24.5 43.7 38.7 24.5 41.6 37.1Escorts (ESCORT) 117 131 Hold 1,397 6.9 12.9 22.4 18.5 9.8 5.7 9.0 6.6 3.7 5.3 8.1 12.7 4.3 7.6 11.8Exide Industries (EXIIND) 155 186 Buy 13,133 6.4 8.1 9.5 24.0 19.2 16.3 14.7 12.2 10.5 19.1 20.2 20.5 13.4 15.2 16.1Hero Mototcorp (HERHON) 2,540 2,505 Hold 50,724 119.5 141.2 167.0 21.3 18.0 15.2 11.6 13.0 12.0 45.6 45.3 45.5 36.3 36.5 36.8JK Tyre & Ind (JKIND) 121 171 Buy 2,749 15.2 22.9 26.3 8.0 5.3 4.6 5.3 4.1 3.4 19.9 22.8 24.1 26.7 30.9 28.1M&M (MAHMAH) 1,228 1,457 Buy 72,512 53.2 67.8 83.8 23.1 18.1 14.7 15.8 9.4 7.5 14.9 18.2 20.7 18.1 18.2 19.3Mahindra CIE (MAHAUT) 211 260 Buy 6,817 5.3 9.9 13.2 39.8 21.4 16.0 13.5 10.1 8.2 6.9 12.6 15.7 6.9 11.4 15.3Maruti Suzuki (MARUTI) 3645 4266 Buy 110151.9 122.9 176.4 213.3 29.7 20.7 17.1 17.1 13.5 11.2 17.2 20.1 20.3 15.6 19.1 19.6Motherson (MOTSUM) 495 512 Buy 43694 9.1 16.9 27.3 54.4 29.3 18.2 14.5 10.7 7.3 22.2 27.6 35.8 24.8 36.3 41.6Wabco India (WABTVS) 5475 5999.6 Buy 10403 67.2 117.8 166.7 81.4 46.5 32.8 47.0 31.1 22.1 14.7 20.9 23.2 18.5 24.3 27.6

Sector / CompanyRoE (%)EPS (|) P/E (x) EV/EBITDA (x) RoCE (%)

Source: Company, ICICIdirect.com Research


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Pankaj Pandey Head – Research [email protected]

ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai – 400 093

[email protected]


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