eicher motors (eicmot) - icici directcontent.icicidirect.com/mailimages/idirect_eichermotors... ·...

May 9, 2016

ICICI Securities Ltd | Retail Equity Research

Result Update

Both RE, VECV outperform on margin front • Eicher Motors reported its Q5FY16 numbers, which were below our

estimates on the topline front but a beat on the margin front. Consolidated revenues for Q5FY16 came in at | 3765 crore (up 46.6% YoY, 13.5% QoQ), below our estimates of | 4015 crore mainly due to lower than estimated revenues from the VECV (commercial vehicle business) business. The RE (standalone business) revenues came at | 1545 crore (up 60.7% YoY, 20.3% QoQ) lower than our estimate of | 1577 crore, mainly on account of lower ASPs. VECV revenues came at | 2163 crore (up 37.2% YoY, 9.9% QoQ) lower than our estimates of | 2386 crore

• Consolidated EBITDA margins of 17% (up 275 bps YoY, 141 bps QoQ) came in above our estimates of 15.8% because of higher than estimated standalone margins (29.9% vs. estimate of 28.6%) & VECV margins of 8% vs. our estimate of 7.4%. The RE (standalone) business reported strong margins of 29.9% (up 377 bps YoY, 133 bps QoQ) vs. our estimates of 28.6%, mainly on account of lower than estimated employee expenses & other expenses

• Hence, consolidated PAT (after MI) grew 71.3% YoY, 23.5% QoQ to | 335 crore vs. our estimate of | 350 crore. Standalone PAT was at | 359.3 crore (up 68% YoY, 47% QoQ) vs. our estimate of | 307 crore

RE-growth drivers intact RE has a multi-pronged strategy to continue its growth momentum. 1) Capacity expansion:-EML has revised its capacity guidance from CY16 exit capacity of 620,000 units to a production capacity of 675,000 for FY17. The third plant at Vallam Vadagal will take total capacity to 900,000 units in CY18, 2) dealer expansion:- With the dealership in smaller towns turning viable, the company continues to increase its dealer network. EML plans to add 100 dealers in FY17E. 3) New Launch - EML has added another niche product (The Himalayan-an LS 411 cc tailored for mountain motorcycling) to its product portfolio, 4) EML is looking to capture the under-penetrated 250-750 cc market globally and has already opened exclusive stores in Colombia, two in UK, one each in UAE, France, Spain & Indonesia. VECV - biggest beneficiary of impending growth in ICV segment In FY14-16, the growth in the domestic MHCV industry has been driven by the heavy duty multi-axle vehicle (MAV) and tractor trailer segment. VECV has underperformed the industry growth mainly because of concentration of VECVs product portfolio towards ICV (intermediate commercial vehicle - 7.5-12 tonne), which are mainly used as distribution vehicles. ICV forms ~39% of VECV’s product portfolio. Going ahead, we expect the next phase of growth in MHCV to come from the medium duty vehicles due to the trickle-down effect, which will benefit VECV the most as it is a market leader in the ICV segment. Strong growth businesses demand rich 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 an economic revival. We maintain peer valuation parameters (relative valuation vis-à-vis HOG’s high growth phase) and ascribe a multiple of 31xFY18E EPS for RE, VECV at 11x FY17E EV/EBITDA, respectively, to arrive at an SOTP target price of | 22500. We have a BUY recommendation on the stock with an upside potential of ~11%.

Rating matrix Rating : BuyTarget : | 22500Target Period : 12 monthsPotential Upside : 11%

What’s Changed?

Target Changed from | 19000 to | 22500EPS FY17E Changed from | 567.8 to 608.2EPS FY18E Changed from | 698 to 733.2Rating Unchanged

Quarterly Performance

Q5FY16 Q1FY16 YoY (%) Q4FY16 QoQ (%)Revenue 3,764.9 2,568.0 46.6 3,316.6 13.5EBITDA 639.9 366.0 74.9 517.0 23.8EBITDA (%) 17.0 14.3 275 bps 15.6 141 bpsPAT 334.5 195.3 71.3 270.8 23.5

Change in accounting year, FY16E is a 15 month period Key Financials | Crore CY14 FY16E FY17E FY18ENet Sales 8,599 15,429 16,644 20,021 EBITDA 1,115 2,447 2,955 3,570 Net Profit 615 1,290 1,643 1,980 EPS (|) 227.1 477.4 608.2 733.2

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

CY14 FY16E FY17E FY18EP/E (x) 89.0 42.3 33.2 27.6 Adj. EV/E (x) 164.4 113.3 64.1 28.4 Tgt.Adj.EV/E(x) 147.5 101.7 57.6 25.5 P/BV (x) 21.8 15.8 11.7 8.9 RoNW (%) 24.5 37.2 35.3 32.1 RoCE (%) 24.5 42.6 41.5 38.9

* Change in accounting year, FY16E is a 15 month period Stock data Particular AmountMarket Capitalization | 54600.7 CroreTotal Debt (CY14) | 58.4 CroreCash and Investments (CY14) | 481.5 CroreEV (CY14) | 54177.6 Crore52 week H/L (|) 21620 / 14495Equity capital (| crore) | 27 CroreFace value (|) | 10

Price performance (%)

1M 3M 6M 12MEicher Motors Ltd 5.1 8.7 11.4 26.6Tata Motors Ltd 5.6 16.0 -3.2 -23.4M&M Ltd 8.6 8.3 4.9 12.0

Eicher Motors (EICMOT) | 20215

Research Analyst

Nishit Zota

[email protected]

Vidrum Mehta

[email protected]


Variance analysis Q5FY16 Q5FY16E Q1FY16 YoY (%) Q4FY16 QoQ (%) Comments

Total Operating Income 3,765 4,015 2,568 46.6 3,317 13.5 Lower than estimates on account of lower than estimated VECV revenues on account of lower ASPs

Raw Material Expenses 2,006 2,121 1,350 48.6 1,794 11.8Purchase of traded goods 408 459 303 34.4 338 20.7Employee Expenses 227 234 185 22.7 228 -0.2Other expenses 485 569 364 33.2 440 10.1

EBITDA 640 632 366 74.9 517 23.8EBITDA Margin (%) 17.0 15.7 14.3 275 bps 15.6 141 bps Higher than estimates on account of beat on both the RE & VECV margins. RE

margins came in higher on account of lower than estimated employee & other expense

Other Income 28 43 34 -16.6 31 -8.6Depreciation 109 110 77 41.5 99 9.6Interest 1 2 1 -20.3 2 -55.9Total Tax 176 181 105 67.0 136 29.6PAT before MI 382 402 216 76.8 311 23.1 Below estimates on account of lower than estimated toplineMinority Interest 48 52 21 128.5 40 20.3PAT 335 350 195 71.3 271 23.5Key MetricsRoyal Enfield ASP(|) 117,257 119,466 117,309 0.0 114,871 2.1 Lower than estimates on account of product mixVECV ASP (| lakhs) 13.7 15.4 14.2 -3.5 15.5 -11.7 Lower than estimates due to lower ASPs on account of higher share of light

commercial vehicles relative to previous quarter

Source: Company, ICICIdirect.com Research Change in estimates

(| Crore) Old New % Change Old New % Change CommentsRevenue 16,184 16,644 2.8 19794 20,021 1.1 Topline estimates revised upwards post revised volume guidance of RE. We have also

increased our VECV volume estimatesEBITDA 2,705 2,955 9.3 3331 3,570 7.2EBITDA Margin (%) 16.7 17.8 104 bps 16.8 17.8 100 bps Upward revision of margins as we have revised our RE margins upwards. We have also

revised our VECV margins upwards on account of high capacity utilisation & as we expect strong growth in the ICV segment

PAT 1,534 1,643 7.1 1885 1,980 5.1EPS (|) 568 608 7.1 698 733 5.0

FY17E FY18E

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

Current Earlier CommentsCY14 FY16E* FY17E FY18E FY17E FY18E

Royal Enfield volumes 302601 600175 675016 779650 635457 762400Company has upward revised its volume guidance from exit production capacity of ~620,000 for CY16 to production of ~675,000 for FY17E

Royal Enfield ASP/unit (|) 109,177 115,923 120,599 125,530 119,323 123,239VECV volumes 40,978 63,104 64,361 74,008 60,400 69,907 We expect strong growth in ICV segment, where VECV is a market leaderVECV ASP/unit (| lakh) 13.5 14.5 14.5 15.1 15.5 16.1

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


Key conference call takeaways • Eicher Motor’s (EML) ‘Royal Enfield’ (RE) volumes for Q4FY16 grew

59.6% YoY to 148,185 units while for FY16 volumes were at 508,099 units vs. 331,169 units, up 53.4% YoY

• EML has revised its RE production capacity guidance from 620,000

units in CY16E to 675,000 units for FY17E. However, it has retained its guidance of manufacturing 900,000 units by CY18E/FY19E

• EML has guided an investment of | 600 crore for its ‘RE’ business in

FY17E and is mainly towards product development, setting and developing two technical centres (at UK and Chennai), enhancing capacity at its existing plants and towards market development

• On an average, the waiting period of the RE is about three months.

Same store sales growth (SSSG) for metros is at 15% YoY • The company is expanding its dealership network and is likely to add

100 RE dealers taking its overall network to 600 by FY17E • EML has started its production of ‘Multix’ in June 2015 and has

received good consumer response till date. At present, it has a network of ~34 dealers having presence across eight states

• The medium duty engines (MDE) sales grew 53% YoY to 6,000 units

during Q4FY16. According to the management, EML is the only company that manufactures Euro VI compliant engines on a strong footing and in order to cater to future emission norms

• For Q4FY16, VECV volumes grew 41.1% YoY to 15,553 units while for

FY16 volumes grew 24.4% YoY to 52,025 units. According to the management, VECV has reported strong volume growth and witnessed significant improvement in market share across segments

• For Q4FY16, the industry growth of light and medium duty (5-12 tn)

category came in at 15% YoY while Eicher’s growth was at 31.7% YoY (further improving its market share from 32.2% to 33.8% on a YoY basis). The heavy duty truck industry grew 35% YoY but Eicher reported growth of 72.1% YoY to 3,163 units (gaining market share from 3.4% in Q4FY15 to 4.4% in Q4FY16). In the bus segment, EML’s growth came in at 27.2% YoY to 3,191 units outperforming industry growth of 9% (thereby improving its share from 13.7% to 16% on YoY basis). VECV’s exports grew 65.3% YoY to 1,653 units outperforming the industry exports which grew by 32% YoY. Lastly, Volvo truck sales grew 8% YoY to 277 units.

• For FY17E, VECV would be investing | 400 crore towards product

development and capacity expansion


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). Thus, we 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 nineties 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

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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 CY09-14 has been an astonishing 42.4%, 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 (~6.2 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 FY17E, FY18E in a pattern similar to HOG in the early part of its history.

VECV contribution to profit to remain meaningful 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). VECV 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 ~9.2%/9.3% in FY17E/FY18E, on the back of a better product mix and higher utilisation levels.

Exhibit 3: Royal Enfield growth trajectory

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


Strong overall financial performance as RE masks VECV weakness

With an increase in competitive intensity amid cyclical weakness in the ICV segment of M&HCV, VECV’s performance has dropped off 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 with the recovery in the domestic M&HCV industry. We expect the topline to grow at ~8.3% CAGR in FY16-18E (FY16E is a 15 month fiscal) while PAT is likely to grow at ~14.1% CAGR in FY16-FY18E as margins improve from 15.6% in FY16E to 17.5% in FY18E. Exhibit 5: Overall financial summary

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

Exhibit 4: VECV volumes, contribution to overall EBITDA

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VECV volumes(000's) Contribution to overall EBITDA



Return ratios remain on uptrend margins, profitability improve

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 a better performance from VECV on revival in industrial activity levels, return ratios are likely to remain on the uptrend.

Exhibit 6: Operating margin; raw material cost trends

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Exhibit 7: Return ratio profile

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CY12 CY13 CY14 FY16E FY17E FY18E

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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 improved 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 was ~5x. However, till FY18E, 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 growth phase (mn USD) CY 95 CY 96 CY 97 CY 98 CY 99 CY 0 CY 01 CY 02 CY 03 CY 04Revenue 1350 1531 1763 2064 2453 3083 3588 4302 4904 5320Growth(%) 13 15 17 19 26 16 20 14 8EBITDA margins (%) 16.3 18.0 18.6 19.4 20.5 21.0 22.7 24.6 27.5 29.6Net Income 112 166 174 214 267 348 438 580 761 890Growth(%) 48 5 23 25 30 26 33 31 17ROE (%) 24 29 23 23 24 27 28 29 29 29PE-1year forward (x) 17 17 19 27 28 31 28 19 20 18PEG-2year forward (x) 0.4 1.0 0.6 0.6 0.6 0.6 0.7 0.6 0.9 0.7


EML has justifiably commanded a premium over other auto OEs as RE’s business is on full throttle, VECV reaps the benefits of the economic revival. We maintain peer valuation parameters (relative valuation vis-à-vis HOG’s high growth phase) and ascribe a multiple of 31xFY17E EPS for RE, VECV at 11x 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 domestic CV manufacturers’ average multiple at 11x FY17E EV/EBITDA, respectively, to arrive at an SOTP target price of | 22,500. We have a BUY recommendation on the stock.


Exhibit 9: SOTP valuation FY17E Remarks

Two-wheeler business-Royal EnfieldEPS (|) 645 Target PE multiple(x) 31 Comparable to up-cycle multiples for Harley Davidson during the 1995-2004 phase.

Per share value (|) 20,020

Target market cap (| crore) 54,074

CV business-VECV`EBITDA 1,087 Target EV/EBITDA multiple(x) 11.0 In-line with current average industry multiple*Target EV 11,962 Net Debt VECV * (| crore) (360) Target market cap (| crore) 12,322 Contribution towards EML 0.54 EML has 54.4% stake in VECVTarget market cap towards EML (| crore) 6,703 Per share value-VECV Eicher (|) 2,482 Total target market cap (| crore) 60,777 Per share value (| ) 22,500

Source: Company, Bloomberg,ICICIdirect.com Research

Exhibit 10: Valuation

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

CY14 8598.7 5.6 227.1 21.4 89.0 48.6 24.5 24.5FY16E 15428.8 79.4 477.4 110.2 42.3 22.1 37.2 42.6FY17E 16644.4 7.9 608.2 27.4 33.2 18.4 35.3 41.5FY18E 20021.2 20.3 733.2 20.6 27.6 14.8 32.1 38.9



Company snapshot

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Target Price: | 22500

Source: Bloomberg, Company, ICICIdirect.com Research

Key events Date EventOct-08 Approves 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 & VECVApr-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 trucksMay-15 Eicher acquires UK based Harris perfrommance products, which is basically into chassis developmentMay-15 Eicher overtakes Hero MotoCorp on market capitalisationJun-15 Volvo sells its remaining 3.7% stake in Eicher Motors but it has no impact on its JV named VECVJun-15 Eicher Polaris JV, launches its first personal utility vehicle called Multix


Top 10 Shareholders Shareholding Pattern Rank Name Latest Filing Date % O/S Position (m) Change (m)1 Simran Siddhartha Tara Benefit Trust 31-Dec-15 0.2504 6.8 0.002 Eicher Goodearth Trust 31-Dec-15 0.1205 3.3 0.003 Lal (Anita) 31-Dec-15 0.1113 3.0 0.004 Brinda Lal Trust 31-Dec-15 0.0179 0.5 0.005 Joshi (Rukmani) 31-Dec-15 0.0133 0.4 0.006 The Vanguard Group, Inc. 31-Mar-16 0.0123 0.3 0.007 Lal (Simran) 31-Dec-15 0.0116 0.3 0.008 Lal (Tara) 31-Dec-15 0.0116 0.3 0.009 Lal (Siddhartha) 31-Dec-15 0.0108 0.3 0.0010 Tree Line Advisors (Hong Kong) Limited 31-Dec-15 0.0107 0.3 -0.02

(in %) Mar-15 Jun-15 Sep-15 Dec-15 Mar-16Promoter 55.0 54.9 54.9 54.9 54.9FII 25.8 27.5 28.3 26.6 30.1DII 6.1 4.6 4.3 4.9 3.2Others 13.2 13.0 12.6 13.6 11.9

Source: Reuters, ICICIdirect.com Research

Recent Activity

Investor name Value Shares Investor name Value SharesSands Capital Management, LLC 18.9 0.1 Cartica Capital, Ltd. -218.1 -0.9Norges Bank Investment Management (NBIM) 11.9 0.0 William Blair & Company, L.L.C. -34.6 -0.1BlackRock Institutional Trust Company, N.A. 5.8 0.0 Franklin Advisers, Inc. -34.6 -0.1Schroder Investment Management (Singapore) Ltd. 1.3 0.0 William Blair Investment Management, LLC -14.6 -0.1Sydinvest 0.9 0.0 ICICI Prudential Asset Management Co. Ltd. -13.1 0.0

Buys Sells

Source: Reuters, ICICIdirect.com Research


.

Financial summary

Profit and loss statement | Crore (Year-end March) CY14 FY16E FY17E FY18E

Total operating Income 8,738.3 15,688.7 16,927.8 20,359.3

Growth (%) 28.3 79.5 7.9 20.3

Raw Material Expenses 4,819.6 8,273.4 9,081.7 10,907.9

Employee Expenses 659.6 1,057.5 999.8 1,201.5

Other Expenses 1,197.9 2,062.7 1,969.7 2,369.0

Total Operating Expenditure 7,623.5 13,241.5 13,972.4 16,789.2

EBITDA 1,114.8 2,447.2 2,955.4 3,570.0

Growth (%) 56.3 119.5 20.8 20.8

Depreciation 219.8 440.0 377.1 421.9

Interest 9.8 9.0 10.3 10.3

Other Income 107.4 112.0 148.2 136.7

PBT 992.6 2,110.1 2,716.2 3,274.5

Others 0.0 0.0 0.0 0.0

Total Tax 290.9 646.6 760.5 916.9

PAT 615.4 1,289.5 1,642.7 1,980.4

Growth (%) 56.2 109.6 27.4 20.6EPS (|) 227.1 477.4 608.2 733.2


Cash flow statement | Crore(Year-end March) CY14 FY16E FY17E FY18E

Profit after Tax 615.4 1,289.5 1,642.7 1,980.4

Add: Depreciation 219.8 440.0 377.1 421.9

(Inc)/dec in Current Assets -232.2 -697.3 -753.5 -584.3

Inc/(dec) in CL and Provisions 515.5 861.9 246.1 122.7

CF from operating activities 1,118.6 1,894.2 1,512.5 1,940.7

(Inc)/dec in Investments -91.7 207.3 -100.0 -100.0

(Inc)/dec in Fixed Assets -828.2 -1,025.4 -650.0 -500.0

Others -220.2 -651.4 -558.7 543.6

CF from investing activities -1,140.1 -1,469.6 -1,308.7 -56.4

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

Inc/(dec) in loan funds -25.5 27.5 0.0 0.0

Dividend paid & dividend tax 0.0 0.0 0.0 0.0

Others -154.0 -342.1 -448.0 -474.0

CF from financing activities -179.6 -314.6 -448.0 -474.0

Net Cash flow -201.1 110.0 -244.2 1,410.3

Opening Cash 682.6 481.5 591.5 347.2Closing Cash 481.5 591.5 347.2 1,757.5


Balance sheet | Crore (Year-end March) CY14 FY16E FY17E FY18E

Liabilities

Equity Capital 27.1 27.1 27.1 27.1

Reserve and Surplus 2,489.7 3,437.1 4,631.9 6,138.3

Total Shareholders funds 2,516.8 3,464.2 4,659.0 6,165.4

Total Debt 58.4 85.9 85.9 85.9

Deferred Tax Liability 324.3 338.2 338.2 338.2

Minority Interest 1085.1 1156.9 1469.8 1847.0

Total Liabilities 4,074.2 5,197.4 6,705.1 8,588.7

Assets

Gross Block 2,670.7 3,696.2 4,346.2 4,846.2

Less: Acc Depreciation 689.6 1,065.7 1,378.9 1,736.9

Net Block 1,981.1 2,630.5 2,967.2 3,109.2

Capital WIP 236.3 236.3 236.3 236.3

Total Fixed Assets 2,217.4 2,866.8 3,203.6 3,345.6

Intangibles 510.7 446.8 382.9 319.0

Investments 1,077.7 1,638.3 1,738.3 1,838.3

Inventory 645.5 1,014.3 1,265.8 1,696.3

Debtors 562.2 833.6 912.0 1,206.8

Loans and Advances 379.7 475.7 789.3 732.3

Cash 481.5 591.5 347.2 1,757.5

Total Current Assets 2,068.9 2,915.0 3,314.3 5,392.9

Creditors 1,571.5 2,509.3 2,736.1 3,291.2

Provisions 248.5 83.0 90.5 108.8

Total Current Liabilities 1,820.0 2,592.3 2,826.5 3,400.0

Net Current Assets 248.9 322.7 487.8 1,992.9

Misc expenses not w/o 0.0 0.0 0.0 0.0Application of Funds 4,074.2 5,197.5 6,705.1 8,588.7


Key ratios (Year-end March) CY14 FY16E FY17E FY18E

Per share data (|)

EPS 227.1 477.4 608.2 733.2

Cash EPS 308.2 640.3 747.8 889.4

BV 928.7 1,282.6 1,724.9 2,282.6

DPS 49.9 100.0 150.0 150.0

Cash Per Share 177.7 219.0 128.6 650.7

Operating Ratios (%)

EBITDA Margin 13.0 15.9 17.8 17.8

PBT / Net sales 11.5 13.7 16.3 16.4

PAT Margin 5.4 5.1 5.8 7.2

Inventory days 24.9 19.6 25.0 27.0

Debtor days 23.9 19.7 20.0 22.0

Creditor days 66.7 59.4 60.0 60.0

Return Ratios (%)

RoE 24.5 37.2 35.3 32.1

RoCE 24.5 42.6 41.5 38.9

RoIC 45.7 66.9 55.6 62.8

Valuation Ratios (x)

P/E 89.0 42.3 33.2 27.6

EV / EBITDA 48.6 22.1 18.4 14.8

EV / Net Sales 6.3 3.5 3.3 2.6

Market Cap / Sales 6.3 3.5 3.3 2.7

Price to Book Value 21.8 15.8 11.7 8.9

Solvency Ratios

Debt/Equity 0.0 0.0 0.0 0.0

Current Ratio 0.9 0.9 1.0 1.5Quick Ratio 0.7 0.7 0.9 1.0



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) 929 925 Hold 15862 24.1 30.2 35.0 38.6 26.5 22.0 20.8 16.9 14.4 34.3 32.9 31.3 25.6 24.4 23.2Apollo Tyre (APOTYR) 158 185 Buy 7972 23.0 21.6 23.3 6.9 7.3 6.8 4.1 4.4 4.0 22.6 18.0 17.5 19.8 16.0 15.1Ashok Leyland (ASHLEY) 104 93 Hold 29408 1.2 3.4 4.7 88.5 30.2 22.2 26.4 12.8 10.3 7.2 18.2 21.9 6.5 17.0 19.9Bajaj Auto (BAAUTO) 2440 2650 Buy 70609 97.2 123.9 141.1 25.1 19.7 17.3 16.6 14.1 12.5 35.6 36.6 35.9 26.3 30.1 30.7Balkrishna Ind. (BALIND) 651 625 Hold 6292 50.6 55.3 46.9 11.9 10.9 12.8 7.4 6.8 6.8 17.8 17.1 15.7 21.3 17.1 15.7Bharat Forge (BHAFOR) 785 920 Buy 18299 32.8 31.0 38.3 24.0 25.4 20.5 14.8 15.9 13.0 18.6 17.1 21.6 22.2 19.8 21.3Bosch (MICO) 19054 20000 Buy 59828 426.0 388.6 500.8 38.3 42.0 32.6 24.8 26.6 22.0 18.2 14.8 16.7 19.4 17.2 18.3Eicher Motors (EICMOT) 20197 22500 Buy 54552 227.1 477.4 608.2 88.9 42.3 33.2 48.6 22.1 18.4 24.5 42.6 41.5 24.5 37.2 35.3Exide Industries (EXIIND) 149 165 Buy 12117 6.4 7.5 7.9 22.2 19.1 18.1 13.8 11.5 10.6 18.9 19.3 18.7 13.5 14.3 13.7Hero Mototcorp (HERHON) 2871 2880 Hold 57327 119.5 156.9 168.5 24.0 18.3 17.0 12.1 11.5 10.0 45.9 50.4 43.8 36.5 39.4 35.9JK Tyre & Ind (JKIND) 81 115 Buy 1846 14.5 21.1 22.7 5.6 3.9 3.6 4.9 3.8 3.6 18.7 22.5 21.6 23.3 26.1 22.4M&M (MAHMAH) 1327 1470 Buy 78330 50.7 57.0 71.9 26.2 23.3 18.5 16.9 11.4 9.0 14.5 15.6 18.4 17.1 15.5 17.1Mahindra CIE (MAHAUT) 193 225 Buy 6218 2.7 9.9 12.5 71.3 19.4 15.4 19.9 12.6 10.5 7.5 14.0 15.5 7.4 13.0 15.1Maruti Suzuki (MARUTI) 3837 4285 Buy 115315 122.9 151.3 197.2 31.1 25.2 19.3 17.4 13.0 11.5 17.3 22.7 21.2 15.7 16.9 18.9Motherson (MOTSUM) 254 250 Hold 33604 6.5 9.4 13.1 39.0 27.0 19.4 10.4 9.3 7.8 24.7 26.0 29.8 25.9 31.5 38.7Tata Motors (TELCO) 387 430 Buy 119453 41.2 34.5 47.3 7.5 9.0 6.6 3.1 3.0 2.6 22.8 14.1 15.3 24.9 12.0 14.1Wabco India (WABTVS) 5605 5500 Hold 10650 63.6 105.9 126.5 88.1 52.9 44.3 54.9 37.3 31.4 14.0 19.2 18.9 18.2 23.1 22.3

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



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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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