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ICIC

I S

ecurit

ies –

Retail E

quit

y R

esearch

Result

Update

July 30, 2019

CMP: | 462 Target: | 430 ( -7%) Target Period: 12 months

Escorts (ESCORT)

REDUCE

Margins disappoint; weakness to persist…

For Escorts, revenues declined 5.8% YoY to | 1,423 crore in Q1FY20. Gross

revenue from agri equipment machinery (EAM) de-grew 7.2% YoY to | 1,092

crore (tractor volumes down 14.1% YoY to 21,051 units). Gross revenue

from construction equipment de-grew 13.7% YoY to | 212 crore while

revenue from railway equipment grew robustly by 34.1% YoY to | 118 crore.

EBITDA was at | 142.4 crore (down 23.2% YoY) with attendant margins at

10.0% (down 162 bps QoQ), tracking a 20 bps QoQ increase in raw material

costs. EBIT margins of the EAM segment came in at 10.9%, down 225 bps

QoQ. Consequent PAT in Q1FY20 came in at | 87.5 crore.

Tractor business to consolidate post 50%+ growth in FY16-19!

The tractor industry is cyclical in nature, with periods of healthy growth

regularly being followed by periods of consolidation. The current up-cycle

in the domestic tractor industry started after FY16. Succeeding years,

thereafter, have posted YoY growth of 21%, 22% and 8%, taking domestic

tractor industry volumes to record high of 7.9 lakh units in FY19. Escorts has

outperformed the industry heavily by growing volumes at ~22% CAGR in

FY16-19, also expanding market share to 11.8% as of March 2019. We

believe the industry’s high base and subdued growth in farm incomes will

weigh on tractor sales in FY19-21E, leading to muted growth prospects for

tractor players. Escorts’ construction equipment division is facing flattish

growth for FY20E as per company commentary. The | 400-crore order book

in the railways division, however, provides some revenue visibility. We build

in ~2% blended sales CAGR in FY19-21E.

Negative operating leverage to pressurise margins!

Escorts has transformed its margin profile from 4.1% in FY15 to 11.8% in

FY19 on the back of sustained robust volume growth. However, going

forward, given the expected softness in core tractor business volumes, we

fear the associated lack of meaningful operating leverage would weigh on

Escorts’ margin profile. Margin recovery is also yet to occur in a meaningful

way in the construction equipment business, while management expects

product mix to worsen in railways division. We estimate Escorts will register

10.8% and 11.4% EBITDA margins in FY20E and FY21E, respectively.

Valuation & Outlook

At Escorts, we expect sales and PAT to grow at a moderate CAGR of 1.9%

and -1.0%, respectively, in FY19-21E. We believe anticipated volume

slowdown in tractor segment will arrest growth momentum, with margin

profile expected to recover at a sedate pace. We value the company at | 430

i.e. 8x FY21E EPS of | 53.4/share (adjusted for treasury shares which amount

to ~27% of issued capital) with a REDUCE rating on the stock.

Key Financials FY17 FY18 FY19 FY20E FY21E CAGR (FY19-21E)

Net Sales 4,093.2 4,995.1 6,196.4 6,152.6 6,436.5 1.9%

EBITDA 323.7 557.2 733.3 662.6 732.9 0.0%

EBITDA Margins (%) 7.9 11.2 11.8 10.8 11.4

Net Profit 160.4 344.8 484.9 420.6 475.0 -1.0%

EPS (|) 18.0 38.8 54.6 47.3 53.4

P/E 25.6 11.9 8.5 9.8 8.6

RoNW (%) 10.8 13.8 15.6 12.3 12.3

RoCE (%) 13.7 21.0 21.6 18.0 18.0

Key Financial Summary

Source: ICICI Direct Research, Company

Particulars

Particular Amount

Market Capitalization (| Crore) 5,659.5

Total Debt (FY19) (| Crore) 286.7

Cash & Investments (FY19) (| Crore) 632.3

EV (| Crore) 5,313.9

52 week H/L (|) 944 / 460

Equity capital (| crore) 122.6

Face value | 10

Key Highlights

Decline of 5.8% in revenues

tracking 14.1% drop in tractor

volumes during Q1FY20

Margins down 162 bps QoQ to

10.0% as volume drop pinches in

the background of no material cost

benefit

Core tractor business seen

consolidating with no meaningful

volume upside in FY19-21E, post

50%+ growth in past three years

Assign REDUCE with revised target

price of | 430; valuing core business

at 8x P/E on FY21E

Research Analyst

Shashank Kanodia, CFA

[email protected]

Jaimin Desai

[email protected]

ICICI Securities | Retail Research 2

ICICI Direct Research

Result Update | Escorts

Exhibit 1: Variance Analysis

Q1FY20 Q1FY20E Q1FY19 YoY (Chg %) Q4FY19QoQ (Chg %) Comments

Total Operating Income 1,423.0 1,397.9 1,511.3 -5.8 1,631.7 -12.8

Topline came in ahead of our estimates primarily

tracking beat on farm equipment (tractor) ASPs for

quarter

Raw Material Expenses 904.2 875.8 1,016.0 -11.0 993.2 -9.0

(Inc)/Dec in Stock in Trade and WIP 0.0 0.0 -83.0 37.3

Purchase of Traded Goods 77.5 83.9 88.9 -12.8 92.2 -15.9

Employee Expenses 122.6 120.9 121.1 1.3 118.0 3.8 Employee costs came in on expected lines

Other Expenditure 176.3 170.5 182.8 -3.6 201.2 -12.4Other expenses were a tad higher due to negative

operating leverage

EBITDA 142.4 146.8 185.6 -23.2 189.8 -24.9

EBITDA Margin (%) 10.0 10.5 12.3 -227 bps 11.6 -162 bps

EBITDA margins came in lower-than-expected

primarily tracking lower than anticipated raw

material benefits and higher other expense

Interest 5.9 3.3 2.9 104.2 7.5 -21.9

Depreciation 24.1 24.7 20.6 17.2 21.8 10.5 Depreciation came in on expected lines

Total Tax 41.7 47.6 60.1 -30.7 56.5 -26.3

PAT 87.5 94.6 120.7 -27.5 121.3 -27.9PAT marginally below estimates tracking miss on

margins

Key Metrics

Tractor Segment revenue (|) 1,092 1,026 1,177 -7.2 1,231 -11.3

Farm equipment sales value came in ahead of our

estimates primarily tracking beat on ASPs due to

disproportionate increase in non-farm revenues

under segment head

Construction Equipment revenue (|

crore)

212 271 246 -13.7 293 -27.6

Railway Equipment revenue (| crore) 118 101 88 34.1 104 14.1Railway segment reported healthy 34% YoY growth

in sales

Source: Company, ICICI Direct Research

Exhibit 2: Change in estimates

(| Crore) Old New % Change Old New % Change Comments

Revenue 6,759 6,153 -9.0 7,352.0 6,436 -12.5

Lower our forward estimates tracking muted performance in Q1FY20

and muted demand prospects in domestic market

EBITDA 813 663 -18.5 881.0 733 -16.8

EBITDA Margin (%) 12.0 10.8 (120) bps 12.0 11.4 (60) bpsDecline in volume estimates to further aggravate negative operating

leverage leading to muted margin trajectory

PAT 529 421 -20.5 595 475 -20.2

EPS (|) 59.4 47.3 -20.5 66.9 53.4 -20.2Decline in sales and margin estimates leads to strong 20% decline in

PAT estimates for FY20-21E

FY20E FY21E


Exhibit 3: Assumptions

Comments

FY18 FY19 FY20E FY21E FY20E FY20E

Tractor volumes (nos) 80,417 96,412 90,835 93,106 103,193 110,417

Revise downward our tractor sales volume estimates for FY20-21. We

expect tractor volumes to decline 5.8% in FY20E and then grow 2.5% in

FY21E. This is in the backdrop of 50%+ growth attained by industry &

company in last three years on a product that is capital intensive in

Average ASP (|) 492,166 492,053 511,079 509,966 490,525 494,593 Revise upward our ASPs tracking beat in Q1FY20

Current Earlier





Conference call highlights

Management outlook/guidance and demand

According to the management, industry sentiment remains negative

currently. Delayed onset and uneven distribution of monsoons, lesser

sowing, lower reservoir levels (particularly South & West regions) and

slowdown in commercial activity are some factors weighing on demand.

The slowdown in Q1FY20 was sharper than expected

On the tractor side, Q2FY20E could be slightly better than Q1FY20

(mainly in September) if the festive season lends support. Progress of

monsoons also holds key. Q2FY20E could also register smaller YoY

drop than Q1FY20. A favourable base from last year could benefit

industry’s H2FY20E volumes

Escorts’ retail performance was better than wholesale volumes and

peer’s retails during Q1FY20 as a result of production cuts undertaken

during the quarter. Escorts production was 20% lower than sales

Beginning Q2FY20E, some subsidy-linked demand from Gujarat and

Assam could benefit the industry

In case of construction equipment business, slowdown on the financing

side and delayed payments have impacted volumes. Underlying

demand remains present, however. The management expects a

recovery in H2FY20E (generally stronger half), leading to flattish FY20E

Railway equipment order book was at | 400 crore, which is to be

executed over the next 13-15 months. The management sees 15-20%

growth potential for the business in FY20E. However, an adverse mix

could limit margins in the 17-18% range

Sales, costs and margins

FES margins were hurt by negative operating leverage (every 10,000

units have a 1% swing impact on margins). Gross margins were

impacted to the tune of ~150 bps each on account of lower volumes

and production cut. Production cut impact was one-off in nature. The

20-30 bps positive impact of lower commodity prices is expected to

continue

Escorts has stayed away from excess discounting. The industry has not

been facing a general increase in competitive intensity. The company

took a 1% price hike in April.

FES ASPs were higher QoQ due to non-tractor sales (~| 20,000/unit),

improvement in mix (~| 5,000/unit) & tractor price hike (~| 6,000/unit)

Other

Net debt was at (-) | 409 crore

Channel inventory stood at three to three and a half weeks of sales (vs.

four to five weeks for the industry). Finished goods inventory was at two

to three weeks of sales

FY20E capex guidance is for ~| 250-300 crore

Escorts is hopeful of electric tractor commercial launch by year end




Annual Report FY19 – Key takeaways

Financial performance for FY19

Total revenues up 23.5% YoY to | 6,196 crore, backed by 19.9% YoY

jump in tractor volumes to 96,412 units

Gained tractor market share across all segments; up 70 bps in strong

markets and 120 bps in opportunity markets with blended share at

11.8%

Construction equipment volumes up 23.5% YoY to 5,544 units led by

cranes (up 26%), backhoe loaders (up 22.2%) & compactors (up 20.5%)

Railway equipment revenues up 37.5% YoY to | 394.1 crore. Order book

was at | 490 crore, to be executed in 14-15 months

Highest ever EBITDA of | 733 crore, up 31.6% YoY

Exhibit 4: Segment-wise volumes and revenue breakup for FY19

Tractor volumes

(units)

Construction

volumes (units)

Railway revenues

(| crore)

Total revenues

(| crore)

Net profit (| crore)

Q1 24,494 1,345 88.1 1,511.3 120.7

Q2 21,039 1,331 105.9 1,398.4 102.7

Q3 25,743 1,413 96.6 1,655.1 140.1

Q4 25,136 1,455 103.5 1,631.7 121.4

Source: Company

Developments during the year

Introduced India’s first autonomous tractor concept; collaboration

signed with seven technology leaders including Microsoft,

Samvardhana Motherson Group, Wabco and Bosch to this end

Formed JV with Kubota to develop tractors for India and overseas

Formed JV with Tadano to produce specialised high capacity cranes in

the 20-80 tonnage category

Railway equipment division formed tech transfer collaboration with

YUJIN Machinery Ltd for high speed & metro brake systems

Signed as exclusive distributor in India for sale and service of South

Korea’s Doosan group - global leader in excavators, articulated dump

trucks and wheel loaders

Exhibit 5: Escorts’ manufacturing capabilities

Segment Location Facilities Annual capacity (units)

EAM Faridabad, Haryana 4 plants 1,00,000+

EAM (to be set up under Kubota JV) Faridabad, Haryana 1 plant 50,000

EAM Poland, Europe 1 plant 2,500

Construction Equipment Faridabad, Haryana 1 plant 10,000

Construction Equipment (Tadano JV) Faridabad, Haryana 1 plant -

1,100 couplers; 1,500 air brakes; 200

EP brakes; 88,000 brake blocks

Railway Equipment Faridabad, Haryana 2 plants

Source: Company

Escorts expects market leadership in high tonnage

cranes in medium term following the Tadano JV. It

expects to grow in mid-teens range in medium to

long term on the construction equipment side.

Further, railway equipment division is expected to

grow 15-20%




Business Overview – FES

Exhibit 6: Tractor volumes – Industry and Escorts

Domestic Exports Domestic Exports Domestic Exports

FY15 5.50 0.80 0.58 0.02 10.5 2.8

FY16 4.90 0.80 0.51 0.01 10.3 0.9

FY17 5.80 0.80 0.63 0.01 10.8 1.4

FY18 7.30 0.90 0.78 0.02 10.7 2.2

FY19 7.90 0.90 0.93 0.03 11.8 3.4

Market share (%)Industry (lakh units) Escorts (lakh units)


Exhibit 7: Segment-wise tractor industry volumes and Escorts market share

Industry

lakh units

Escorts market

share (%)

Industry

lakh units

Escorts market

share (%)

Industry

lakh units

Escorts market

share (%)

< 30 hp 0.5 2.1 0.8 3.5 0.8 4.7

31-40 hp 2.0 12.6 2.6 14.5 2.8 16.5

41-50 hp 2.8 11.7 3.4 10.4 3.7 10.8

> 50 hp 0.4 6.9 0.6 7.9 0.6 5.9

Total 5.7 10.8 7.4 10.8 7.9 11.8

FY18 FY19

Segment

FY17


Business Overview – Construction Equipment & Railway Equipment

Earthmoving (backhoe loaders), material handling (cranes) and road

building equipment (compactors) together constitute 60% of

construction equipment industry. Excavators form another ~35%

Exhibit 8: Construction equipment industry volumes by application

Source: Company

Exhibit 9: Construction equipment & Railway equipment performance at Escorts

Year Construction volumes (units) Railway revenues (| crore)

FY15 3,007 183.7

FY16 2,555 227.8

FY17 3,315 242.5

FY18 4,486 286.6

FY19 5,544 394.1

Source: Company

Escorts expects domestic tractor industry to grow in

double digits over next decade, with total industry

volumes touching 12-15 lakh unit mark by 2030

During FY19, Escorts’ flagship tractor brands

Powertrac and Farmtrac grew 23% YoY and 15% YoY

respectively




Financial story in charts

Exhibit 10: Topline trend

3,367

4,093

4,995

6,196

6,153

6,436

(15.5)

21.6 22.0 24.0

(0.7)

4.6

(20)

(15)

(10)

(5)

-

5

10

15

20

25

30

0

1000

2000

3000

4000

5000

6000

7000

FY16 FY17 FY18 FY19 FY20E FY21E

(%

)

(| crore)

Total Operating income Growth (%)


Exhibit 11: EBITDA margin trend

177.0

323.7 5

57.2

733.3

662.6

732.9

5.3

7.9

11.2

11.8

10.8

11.4

-

2

4

6

8

10

12

14

0

100

200

300

400

500

600

700

800


(%

)

(| crore

EBITDA EBITDA Margins (%)


Exhibit 12: Profitability trend

84

160

345

485

421

475

12.1

91.6

114.9

40.6

(13.2)

12.9

(20)

-

20

40

60

80

100

120

140

0

100

200

300

400

500

600


(%

)

(| crore)

PAT Growth (%)


We expect sales to grow at a CAGR of 1.9 % over

FY19-21E with tractor volumes de-growing ~2%

CAGR in this period

We moderate margin expectation to 11.4% in FY21E

from 11.8% in FY19

PAT expected to be flat in period spanning FY19-21E

at | 475 crore




Exhibit 13: Return ratios

8.6

13.7

21.0 21.6

18.0 18.0

6.0

10.8

13.8

15.6

12.3 12.3

0

4

8

12

16

20

24


(%

)

ROCE ROE


Exhibit 14: Segment mix

2,734

3,346

3,958

4,744

4,642

4,748

497

607

780

1,054 1,037 1,121

228

242

287

394 473

568

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000


(| crore)

Tractors Construction Equipment Railway Equipment


Exhibit 15: Gross debt levels

143.1

228.2

27.8

286.7

86.7

36.7

0

100

200

300

400


(| crore)

Debt


Escorts expected to continue to clock stable healthy

return ratios

Tractors continue to dominate total sales with their

share in total sales pie at ~75%

Gross debt levels expected to normalise in coming

years. The company is debt free on net debt basis




Exhibit 16: Escorts market share across major tractor states

Tractor SalesFY18

(units)

FY19

(units)

YoY% Share in total Sales

(FY19)

Andhra Pradesh 74,745 73,761 -1.3% 9.4%

Escorts 3,354 2,795 -16.7% 3.0%

Market Share % 4.5 3.8 (70) bps

Bihar 43,155 57,852 34.1% 7.4%

Escorts 6,907 9,390 35.9% 10.1%

Market Share % 16.0 16.2 22 bps

Gujarat 48,769 55,374 13.5% 7.0%

Escorts 4,190 5,125 22.3% 5.5%


Haryana 36,568 40,874 11.8% 5.2%

Escorts 7,271 8,509 17.0% 9.1%


Karnataka 36,600 41,618 13.7% 5.3%

Escorts 979 1,496 52.8% 1.6%


Madhya Pradesh 72,958 86,041 17.9% 11.0%

Escorts 10,818 13,991 29.3% 15.0%


Maharashtra 73,253 63,100 -13.9% 8.0%

Escorts 3,629 3,506 -3.4% 3.8%


Rajasthan 64,735 65,198 0.7% 8.3%

Escorts 9,572 10,070 5.2% 10.8%


Uttar Pradesh 114,635 134,341 17.2% 17.1%

Escorts 20,162 23,687 17.5% 25.4%


Total Tractor Industry 711,478 785,548 10.4% 100.0%

Escorts (Domestic Sales) 78,423 93,323 19.0% 100.0%


Source: CRISIL, ICICI Direct Research

Exhibit 17: Valuation Summary

Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE

(| cr) (%) (|) (%) (x) (x) (%) (%)

FY17 4093 27.5 18.0 91.6 25.6 12.7 10.8 13.7

FY18 4995 22.0 38.8 114.9 11.9 6.0 13.8 21.0

FY19 6196 24.0 54.6 40.6 8.5 5.1 15.6 21.6

FY20E 6153 (0.7) 47.3 (13.2) 9.8 4.9 12.3 18.0

FY21E 6436 4.6 53.4 12.9 8.6 4.2 12.3 18.0

Source: Bloomberg, ICICI Direct Research

(Note - Per share data is adjusted for treasury shares on company’s books.)

Escorts has gained market share by 85 bps in FY19.

Madhya Pradesh witnessed maximum increase,

with market share gains of 143 bps on YoY basis




Exhibit 18: Recommendation history vs. consensus

0

10

20

30

40

50

60

70

80

90

100

0

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

Jul-19May-19Feb-19Dec-18Sep-18Jul-18May-18Feb-18Dec-17Sep-17Jul-17May-17Feb-17Dec-16Sep-16Jul-16

(%

)(|)

Price Idirect target Consensus Target Mean % Consensus with BUY

Source: Reuters, ICICI Direct Research

Exhibit 19: Top 10 shareholders

Rank Name Latest Filing Date % O/S Position (m) Change (m)

1 Behuria (Sutanu) 31-Mar-19 27.5 33.7 0.00

2 Harparshad & Co., Pvt. Ltd. 16-May-19 8.8 10.7 0.20

3 Jhunjhunwala (Rakesh Radheshyam) 31-Mar-19 8.2 10.0 0.00

4 UTI Asset Management Co. Ltd. 31-Mar-19 2.5 3.1 0.00

5 Mathur (Girish Behari) 31-Mar-19 2.5 3.1 0.00

6 T. Rowe Price International (UK) Ltd. 31-Mar-19 2.4 3.0 0.00

7 The Vanguard Group, Inc. 30-Jun-19 1.5 1.8 0.00

8 Big Apple Clothing Pvt. Ltd. 31-Mar-19 1.4 1.8 0.00

9 AAA Portfolio Pvt. Ltd. 31-Mar-19 1.4 1.7 0.00

10 Lazard Asset Management, L.L.C. 31-Mar-19 1.2 1.5 1.15


Exhibit 20: Recent activity

Investor name Value ($ mn) Shares (mn) Investor name Value ($ mn) Shares (mn)

Lazard Asset Management, L.L.C. 13.19 1.15 Goldman Sachs Asset Management International -24.01 -2.79

Norges Bank Investment Management (NBIM) 3.95 0.39 Amundi Asset Management -4.30 -0.46

Edelweiss Asset Management Ltd. 1.81 0.23 Principal Global Investors (Equity) -1.98 -0.26

Harparshad & Co., Pvt. Ltd. 1.72 0.20 Capital Investment Trust Corporation -1.75 -0.17

IDFC Asset Management Company Private Limited 1.52 0.20 HSBC Global Asset Management (India) Private Limited -1.59 -0.15

Buys Sells


Exhibit 21: Shareholding pattern

(in %) Jun-18 Sep-18 Dec-18 Mar-19 Jun-19

Promoter 40.1 40.1 40.1 40.1 40.2

FII 24.1 22.4 21.7 24.6 20.4

DII 5.7 6.1 4.9 3.3 5.5

Others 30.1 31.4 33.4 32.0 33.8





Financial Summary

Exhibit 22: Profit and loss statement | crore

(Year-end March) FY18 FY19 FY20E FY21E

Total operating Income 4,995.1 6,196.4 6,152.6 6,436.5

Growth (%) 22.0 24.0 -0.7 4.6

Raw Material Expenses 3,147.8 4,040.3 3,893.3 4,067.8

Employee Expenses 431.1 471.7 485.0 509.3

Other expenses 649.0 750.7 774.0 772.4

Total Operating Expenditure 4,437.9 5,463.1 5,490.0 5,703.5

EBITDA 557.2 733.3 662.6 732.9

Growth (%) 155.3 31.6 -9.6 10.6

Depreciation 72.5 85.4 96.2 107.6

Interest 28.6 18.5 18.9 7.3

Other Income 59.4 80.8 75.2 85.8

PBT 508.9 722.4 622.7 703.8

Total Tax 164.1 237.5 202.0 228.7

PAT 344.8 484.9 420.6 475.0

Growth (%) 114.9 40.6 -13.2 12.9

EPS (|) 28.1 54.6 47.3 53.4


Exhibit 23: Cash flow statement | crore


Profit after Tax 344.8 484.9 420.6 475.0

Add: Depreciation 72.5 85.4 96.2 107.6

(Inc)/dec in Current Assets -128.6 -769.0 340.6 -245.2

Inc/(dec) in CL and Provisions 391.7 -49.9 -40.1 125.6

CF from operating activities 680.2 -248.7 817.3 463.1

(Inc)/dec in Investments -484.9 93.8 -300.0 -150.0

(Inc)/dec in Fixed Assets -105.3 -147.3 -247.0 -147.0

Others 0.0 0.0 0.0 0.0

(Inc)/dec in Deferred Tax Asset 47.0 0.0 0.0 0.0

CF from investing activities -608.5 -80.9 -583.0 -371.2

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

Inc/(dec) in loan funds -200.4 258.9 -200.0 -50.0

Dividend paid & dividend tax -19.7 -26.7 -26.7 -32.0

Inc/(dec) in Sec. premium 0.1 0.0 0.0 0.0

Others 231.8 26.7 0.0 0.0

CF from financing activities 11.7 259.0 -226.7 -82.0

Net Cash flow 83.5 -70.6 7.6 9.9

Opening Cash 228.4 311.9 241.2 248.9

Closing Cash 311.9 241.2 248.9 258.8


Exhibit 24: Balance Sheet | crore


Liabilities

Equity Capital 122.6 122.6 122.6 122.6

Reserve and Surplus 2,425.5 2,910.4 3,304.4 3,747.4

ESOP 0.0 0.0 0.0 0.0

Total Shareholders funds 2548.1 3033.0 3427.0 3870.0

Total Debt 27.8 286.7 86.7 36.7

Other non-current Liabilities 29.1 63.7 63.7 63.7

Long-term Provisions 15.3 24.5 24.5 24.5

Total Liabilities 2620.3 3407.8 3601.8 3994.9

Assets

Gross Block 2,371.0 2,501.6 2,651.6 2,901.6

Less: Acc Depreciation 849.1 924.7 1,007.9 1,102.2

Net Block 1,521.9 1,577.0 1,643.7 1,799.4

Capital WIP 46.8 53.1 153.1 53.1

Total Fixed Assets 1568.7 1630.1 1796.8 1852.5

Net Intangible Asset 53.1 53.8 37.8 21.5

Investments 898.7 862.0 1,212.0 1,412.0

Inventory 541.1 821.9 594.0 816.7

Debtors 600.0 932.0 927.1 881.7

Loans and Advances 18.1 20.0 17.8 21.7

Other Current Assets 149.6 298.9 193.3 257.3

Cash 311.9 241.2 248.9 258.8

Total Current Assets 1,620.6 2,314.0 1,981.1 2,236.2

Creditors 1,225.5 1,212.5 1,213.7 1,269.7

Provisions & Other Curr.Liab 406.2 386.8 345.5 415.2

Total Current Liabilities 1,631.7 1,599.3 1,559.2 1,684.8

Net Current Assets -11.1 714.7 421.9 551.4

Deferred Tax Asset -19.7 -52.9 -52.9 -52.9

Other non-current assets 102.5 117.7 103.8 128.0

Application of Funds 2620.3 3407.8 3601.8 3994.9


Exhibit 25: Key ratios


Per share data (|)

EPS 38.8 54.6 47.3 53.4

Cash EPS 46.9 64.2 58.2 65.6

BV 286.7 341.2 385.6 435.4

DPS 1.9 2.5 2.5 3.0

Cash Per Share 95.5 104.0 113.4 124.0

Operating Ratios

EBITDA Margin (%) 11.2 11.8 10.8 11.4

PAT Margin (%) 7.0 7.6 6.8 7.4

Inventory days 39.5 48.4 35.2 46.3

Debtor days 43.8 54.9 55.0 50.0

Creditor days 89.5 71.4 72.0 72.0

Return Ratios (%)

RoE 13.8 15.6 12.3 12.3

RoCE 21.0 21.6 18.0 18.0

RoIC 25.7 23.2 22.1 21.2

Valuation Ratios (x)

P/E 11.9 8.5 9.8 8.6

EV / EBITDA 6.0 5.1 4.9 4.2

EV / Net Sales 0.7 0.6 0.5 0.5

Market Cap / Sales 0.8 0.7 0.7 0.6

Price to Book Value 1.6 1.4 1.2 1.1

Solvency Ratios

Debt/EBITDA 0.0 0.4 0.1 0.1

Debt / Equity 0.0 0.1 0.0 0.0

Current Ratio 1.0 1.6 1.3 1.4

Quick Ratio 0.6 0.9 0.9 0.8


(Note - Per share data is adjusted for treasury shares on company’s books.)




Exhibit 26: ICICI Direct Research coverage universe (Auto & Auto Ancillary)

Sector / Company CMP M Cap

(|) TP(|) Rating (| Cr) FY19 FY20E FY21E FY19 FY20E FY21E FY19 FY20E FY21E FY19 FY20E FY21E FY19 FY20E FY21E

Amara Raja (AMARAJ) 650 590 Reduce 11108 28.3 31.1 33.8 22.3 20.3 18.6 11.0 9.7 8.7 21.2 21.0 20.5 14.5 14.3 14.0

Apollo Tyre (APOTYR) 152 180 Hold 8672 11.9 16.8 21.5 15.8 11.2 8.7 6.8 6.8 5.6 8.2 8.6 10.2 8.3 9.0 10.5

Ashok Leyland (ASHLEY) 69 100 Hold 20226 6.8 5.9 5.3 10.2 11.7 13.1 8.1 8.6 9.0 27.5 24.1 20.9 24.4 19.3 16.5

Bajaj Auto (BAAUTO) 2462 2360 Reduce 71243 161.6 160.5 168.7 15.4 15.5 14.8 11.0 10.3 9.4 21.0 19.2 25.3 19.9 19.1 18.1

Balkrishna Ind. (BALIND) 703 740 Hold 13590 40.5 40.9 45.3 19.2 19.0 17.2 11.8 10.6 9.1 20.4 19.0 19.3 16.7 19.0 19.3

Bharat Forge (BHAFOR) 421 535 Buy 32590 22.2 23.8 25.4 21.0 19.5 18.3 11.9 11.0 10.3 18.4 18.5 19.1 19.1 17.9 17.5

Bosch (MICO) 14378 15550 Reduce 43883 523.6 538.6 573.1 32.5 31.6 29.7 23.3 22.0 20.5 17.5 15.9 15.0 25.8 23.5 22.3

Eicher Motors (EICMOT) 16420 19000 Hold 44761 808.1 902.5 1032.7 23.2 20.8 18.2 16.6 14.5 12.0 32.5 29.5 28.5 24.8 22.6 21.4

Escorts (ESCORT) 462 430 Reduce 4106 54.6 47.3 53.4 8.5 9.8 8.6 5.1 4.9 4.2 21.6 18.0 18.0 15.6 12.3 12.3

Exide Industries (EXIIND) 182 200 Reduce 15428 9.1 9.5 10.4 21.7 22.5 20.8 12.7 11.8 10.7 18.4 17.8 17.5 12.9 12.3 12.1

Hero Moto (HERHON) 2275 2700 Hold 45430 169.5 173.0 192.1 14.8 14.5 13.1 9.2 8.8 7.5 37.1 34.4 34.9 26.3 24.3 24.5

JK Tyre & Ind (JKIND) 70 100 Buy 1598 7.8 4.6 7.9 10.3 17.4 10.1 6.3 7.2 6.2 10.9 9.1 10.5 10.3 6.5 9.5

Mahindra CIE (MAHAUT) 174 230 Buy 6568 13.2 14.1 17.1 14.8 13.8 11.4 7.8 7.8 6.4 12.4 11.1 11.9 13.2 12.6 14.2

Maruti Suzuki (MARUTI) 5523 5000 Reduce 166837 248.3 221.2 250.0 22.8 25.5 22.6 12.3 13.6 11.6 16.3 12.0 13.0 16.3 13.4 13.9

Motherson (MOTSUM) 105 125 Hold 33221 5.1 5.0 6.5 23.5 23.9 18.4 8.5 8.5 6.6 13.5 12.3 16.0 14.7 13.2 15.5

Tata Motors (TELCO) 135 160 Hold 50934 -84.6 9.3 21.4 -1.8 16.1 7.0 3.9 3.6 3.1 5.4 9.1 11.3 7.1 9.8 15.4

Wabco India (WABTVS) 6089 6510 Hold 11549 148.8 157.7 178.3 41.7 39.3 34.8 26.6 24.5 21.5 15.9 14.5 14.3 23.0 21.4 21.0

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





RATING RATIONALE

ICICI Direct endeavors to provide objective opinions and recommendations. ICICI Direct assigns ratings to its

stocks according to their notional target price vs. current market price and then categorizes them as Buy, Hold,

Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined

as the analysts' valuation for a stock

Buy: >15%

Hold: -5% to 15%;

Reduce: -15% to -5%;

Sell: <-15%

Pankaj Pandey Head – Research [email protected]

ICICI Direct 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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