maruti suzuki india (maruti) | 6520static-news.moneycontrol.com/.../01/maruti-suzuki...models i.e....

January 28, 2019

ICICI Securities Ltd | Retail Equity Research

Result Update

Muted growth to limit valuation multiples…

Maruti Suzuki (MSIL) reported a dismal Q3FY19 performance

Total operating income in Q3FY19 was at | 19,668 crore, up 2.0%

YoY. ASP for the quarter came in at | 4.42 lakh/unit, up 0.5% YoY.

However, discounting was aggressive at | 24,300/unit, up 30% QoQ

Volumes for Q3FY19 were at 428,643 units, down 0.6% YoY. Of this,

domestic volumes grew 1.3% YoY to 405,597 units while exports

were down 25.0% YoY to 23,046 units. MSIL had to push extra

90,000 units at the retail level due to higher channel inventory with

consequent inventory levels now normalising at December 2018 end

EBITDA in Q3FY19 was at | 1,931 crore with corresponding EBITDA

margins at 9.8%. EBITDA margins came in subdued primarily

tracking higher raw material costs, adverse foreign exchange rate as

well as higher sales & marketing expenses including launch cost of

new Ertiga. Employee costs came in higher tracking execution of

new wage bill as well as one-time actuarial valuation (~| 48 crore)

PAT in Q3FY19 was at | 1,489 crore, down 17.0% YoY

New facelifts to help revive sales, retain market leadership!

In the recent past, MSIL has launched two new facelifts of its top selling

models i.e. Ertiga and WagonR. MSIL has come out with a refreshed

version loaded with all new age technology and consumer friendly

features bundled at the right price thereby giving strong competition to

upcoming models in the marketplace in the similar segment. We expect

this to help Maruti retain its market leadership with the company already

outperforming the industry in 9MFY19. Total domestic sales growth for

MSIL was at 7.2% vs. 4.4% for the industry, leading to 165 bps gain in

market share to 51.65% as of December 2018 vs. 50% as of FY18. Maruti

still remains the preferred choice for first time buyers and is poised to

benefit from low penetration of passenger vehicles domestically. The

company commands strong support from its nationwide dealer network

of ~3000 dealers with rural slate at ~39%.+.

Single digit volume growth, P/E multiple’s mean reversion to follow!

Purely considering the financials, past study of volume growth and one

year forward P/E multiple at MSIL throws up an interesting insight. MSIL

has never commanded one year forward P/E multiples significantly higher

than 20x while clocking volume growth at <10%. It exactly symbolises

the present times wherein the company is expected to post overall

volume growth of 6.2% in FY19E & 7.2% in FY20E. This is expected to

lead its one year forward P/E multiple to revert back to its mean.

Capital efficiency to the core, healthy B/S, retain HOLD!

MSIL has a capital efficiency business model wherein it realises ~3x asset

turnover, operates with negative working capital cycle as well as realises

~13-15% EBITDA margins thereby realising core RoIC at ~50%+. It also

has a debt free, cash rich B/S with surplus cash at ~| 34,000 crore. Going

forward, however, the demand scenario is expected to be subdued, amid

customers postponing their purchase and increasing penetration of

shared mobility. It is also expected to be muted given peaking penetration

of PVs in metro cities, which have high purchasing power. We expect

volume growth to be muted at MSIL with FY18-20E overall volume CAGR

growth pegged at 6.7%. Consequent net sales & PAT CAGR is expected at

8.0% & 5.5%, respectively. We value MSIL at | 6000 i.e. 21x P/E on FY20E

EPS of | 284 and maintain our HOLD rating on the stock. We draw

comfort from healthy cash flow generation at MSIL with average CFO

yield at ~6% and consequent FCF yield at ~4%.

Rating matrix

Rating : Hold

Target : | 6000

Target Period : 12 months

Potential Upside : -8%

What’s Changed?

Target Changed from | 7250 to | 6000

EPS FY19E Changed from | 291 to | 250

EPS FY20E Changed from | 330 to | 284

Rating Unchanged

Quarterly Performance

(| Crore) Q3FY19 Q3FY18 YoY (%) Q1FY18 QoQ (%)

Revenue 19,668.3 19,283.2 2.0 22,433.2 -12.3

EBITDA 1,931.1 3,037.8 -36.4 3,431.3 -43.7

EBITDA (%) 9.8 15.8 -594 bps 15.3 -548 bps

Reported PAT 1,489.3 1,799.0 -17.2 2,240.4 -33.5

Key Financials

| Crore FY17 FY18 FY19E FY20E

Revenue 68,035 79,763 86,851 93,113

EBITDA 10,353.0 12,061.5 11,602.8 13,250.2

Net Profit 7,337.7 7,721.8 7,561.0 8,592.6

EPS (|) 242.9 255.6 250.3 284.4

Valuation summary

FY17 FY18 FY19E FY20E

P/E (x) 26.8 25.5 26.0 22.9

Target P/E (x) 24.7 23.5 24.0 21.1

EV/EBITDA (x) 16.4 13.5 13.8 11.8

P/BV (x) 5.4 4.7 4.2 3.8

RoNW (%) 20.3 18.5 16.3 16.6

RoCE (%) 20.3 21.1 17.8 18.8

Stock data

Particular Amount

Market Capitalization (| Crore) | 196956.2 Crore

Total Debt | 110.8 Crore

Cash & Investment | 34153.1 Crore

EV | 162913.9 Crore

52 week H/L (|) 9923 / 6502

Equity capital (| crore) | 151 Crore

Face value (|) | 5

Price performance (%)

1M 3M 6M 12M

M&M Ltd -13.3 -6.8 -24.9 -9.8

Maruti Suzuki India -13.5 -3.1 -33.3 -29.8

Tata Motors 0.4 4.8 -32.8 -56.7

Maruti Suzuki India (MARUTI) | 6520

Research Analyst

Shashank Kanodia, CFA

[email protected]

Jaimin Desai

[email protected]


x

Variance analysis

Q3FY19 Q3FY19E Q3FY18 YoY (Chg %) Q2FY19 QoQ (Chg %) Comments

Total Operating Income 19,668 19,506 19,283 2.0 22,433 -12.3 Total operating income was marginally ahead of our estimates primarily tracking

higher other operating income

Raw Material Expenses 14,044 13,364 13,332 5.3 15,285 -8.1 RM to sales came in substantially higher at 71.4% of sales

Employee Expenses 881 758 687 28.3 792 11.3 Employee costs include increment owning to wage settlement as well as one-

time exceptional costs of ~| 50 crore owning to actuarial valuation

Other expenses 2,812 2,557 2,226 26.3 2,925 -3.9 Other expenses also came in higher owing to aggressive discounting as well as

greater sales promotion expenses including Ertiga Launch

Operating Profit (EBITDA) 1,931 2,828 3,038 -36.4 3,431 -43.7

EBITDA Margin (%) 9.8 14.5 15.8 -594 bps 15.3 -548 bps Margins came in substantially lower tracking high costs elements & lack of

operating leverage benefits

Other Income 917 561 245 274.6 527 74.2 Other income came in higher owning to MTM gains

Depreciation 768 720 689 11.4 721 6.4

Interest 21 21 26 -21.7 26 -19.8

Total Tax 570.8 794.4 768.4 -25.7 970.6 -41.2

PAT 1,489 1,854 1,799 -17.2 2,240 -33.5 PAT came in lower primarily tracking lower EBITDA margins

EPS 49.3 61.4 59.6 -17.2 74.2 -33.5

Key Metrics

ASP (|) 441,542 441,815 439,329 0.5 444,508 -0.7 ASPs were broadly in line with our estimates

Discounts (|) 24,300 25,000 17,900 35.8 18,750 29.6 Discounts were aggressive and well as per our expectation

Source: Company, ICICI Direct Research

Change in estimates

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

Total Operating Income 89,203 86,851 -2.6 99,109 93,113 -6.0 Muted performance in 9MFY19 as well as subdued management

commentary leads us to downward revise our sales volume and

consequent net sales estimates for FY19E, FY20E

EBITDA 13,411 11,603 -13.5 15,255 13,250 -13.1

EBITDA Margin (%) 15.0 13.4 -167 bps 15.4 14.2 -116 bps Margins in Q3FY19 were a big disappointment dragging the overall

profitability for FY19E. Consequently, we also moderate our margin

estimates for FY20E

PAT 8,791 7,561 -14.0 9,959 8,593 -13.7

EPS (|) 291 250 -14.0 330 284 -13.7 Downward revision in margin estimates leads to ~14% downward revision

in PAT estimates, going forward

FY19E FY20E


Assumptions

Comments

FY16 FY17 FY18 FY19E FY20E FY19E FY20E

Total Volumes (nos) 1,429,248 1,568,604 1,779,575 1,889,732 2,026,364 1,932,625 2,115,160 Taking cues from muted demand sentiment as well as

muted management commentary, we revise downward our

sales volume estimates, going forward

Average ASPs (|) 394,266 426,353 438,896 443,037 441,837 446,971 454,920

RMC/Unit (|) 271,331 297,336 308,922 319,767 320,018 316,894 321,280

Discount (|) 18,898 16,774 15,895 19,553 20,000 17,853 15,000 We believe muted demand prospects will compel OEM

manufacturers to offer higher discount, going forward, in

FY19E & FY20E

Current Earlier

Company, ICICI Direct Research


Conference Call Highlights

Management outlook/guidance & demand

According to the company, the market remains under pressure

with retail demand still subdued amid worries on the ownership

cost perspective. The industry is now expected to post 4.5% YoY

volume growth in FY19E although the company is poised to

growth faster. Retail sales at MSIL in 9MFY19 stood at 4.9% YoY.

Exports are expected to clock flat volumes in FY20 over FY19E on

the back of import restriction in key markets like Indonesia

The rural segment (39% of overall pie) has exhibited 13% growth

against a flattish urban segment

MSIL undertook significant inventory liquidation efforts in

December to aid dealers post the disappointing festive season

offtake, helping retail 90,000 units

Response to new launches Ertiga and WagonR is strong, with

order levels to the tune of 55,000 units and 14,000 units

respectively. Waiting period of Ertiga is high at 28 weeks

Revenue & margins

Discounts in Q3FY19 amounted to ~| 24,300 per unit

A sequential slide in EBITDA margins of ~300 bps was the result

of higher commodity prices (~100 bps), higher sales promotion

expenses (~100 bps), adverse exchange rate movement (~50

bps) and inventory adjustment efforts (~30 bps)

MSIL also incurred incremental sales & marketing expenses

amounting to ~| 78 crore on QOQ basis.

Depreciation expense increase was owning to commissioning of

some new machineries.

Employee expenses spiked in Q3FY19 owing to implementation

of wage enhancement mechanism and one-off actuarial valuation

impact of ~| 48 crore

Thus far, MSIL has taken a price hike of ~70 bps in Q4FY19

Exports revenue for Q3FY19 was to the tune of | 1,158 crore

Royalty payments for Q3FY19 amounted to ~5.5% of revenues

Others

Six models (Ignis, Dzire, Brezza, Swift, Ertiga and WagonR) have

been shifted to the new rupee denominated royalty formula. The

entire product portfolio is expected to make the switch by 2022

Gujarat plant produced ~58,000 units in Q3FY19 against ~67,000

units in Q2FY19 and ~36,000 units in Q3FY18

MSIL usually enters into a relatively longer dated six month or

three month contracts for procuring its key material i.e. steel,

while it enters into monthly contracts for procuring aluminium


Company Analysis

New facelifts encouraging; to help revive sales, retain market leadership!

MSIL in the recent past has launched to new facelifts of its top selling

models i.e. Ertiga and WagonR. MSIL has come out with refreshed

version loaded with all new age technology and consumer friendly

features bundled at the right price thereby giving strong competition to

the upcoming models in the market place in the similar segment. We

expect this to help Maruti retain its market leadership with company

already outperforming the industry in 9MFY19. Total domestic sales

growth at MSIL was at 7.2% vs. 4.4% for the industry leading to 165 bps

gain in market share to 51.65% as of December 2018 vs. 50% as of FY18.

Maruti still remains the preferred choice for first time buyers and is set to

benefit from low penetration of passenger vehicles domestically. The

company commands strong support from its nationwide dealer network

of ~3000 dealers with rural slate at ~39%.+. We expect volumes at MSIL

to grow at a CAGR of 6.7% in FY18-20E to 20.3 lakh units in FY20E.

Consequently, we expect revenues to grow at a CAGR of 8.0% in FY18-

20E to | 93,113 crore in FY20E (| 79,763 crore in FY18). On the back of

near term headwinds, EBITDA margins are expected to taper to 13.4% in

FY19 and then recover to 14.2% as the rupee stabilises in FY20E. PAT at

MSIL is expected to grow at a CAGR of 5.5% to | 8,593 crore in FY20E.

Exhibit 1: Topline and bottomline trends

43588

43701

49874

57746

68035

79763

86851

93113

23922783

37114571

7338

77227561

8593

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

100000

FY13 FY14 FY15 FY16 FY17 FY18 FY19E FY20E

(| crore)

(| crore)

Topline Bottomline

Source: Company press release, ICICI Direct Research

Exhibit 2: Margins to recover in FY20E

5,089.9

6,605.9

8,978.6

10,353.0

12,061.5

11,602.8

13,250.2

11.6

13.2

15.5 15.2 15.1

13.4

14.2

-

2

4

6

8

10

12

14

16

18

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

FY14 FY15 FY16 FY17 FY18 FY19E FY20E

(%

)

(| crore)

EBITDA Margins (%)



Exports challenging amid currency headwinds and tariffs!

Suzuki is aiming to let MSIL grow as a low-cost brand to target markets

such as Africa. MSIL already contributes ~45% to Suzuki’s global profits.

As such, Suzuki’s strategy to make MSIL its global export hub for low

priced products is logical. Currently, as of FY18, exports form ~7% of

total sales for MSIL. However, in the near term, export volumes are

expected to be muted given adverse foreign exchange rates as well as

inward looking policies (import restrictions) in key export nations.

Market leadership maintained, across segments!

MSIL has been a market leader and outperformed industry in the past. Its

market share increased from ~47% in FY17 to ~50% in FY18 to further

~52% in 9MFY19. It has been done by introducing new and impressive

models at an appropriate time suiting to the market needs. It enjoys

market leadership across segments namely- PC, UV and vans. Currently

its top selling models include Swift, Dzire, Baleno among others and

possesses seven models out of top 10 PV models sold domestically.

Going forward, from a customer perspective, it still remains a prominent

brand owing to: low cost of ownership & high dealer and servicing

network. We expect MSIL to maintain its market leadership position,

going forward.

Exhibit 4: Domestic PV market share for MSIL

47.0 46.8 46.247.2 47.3 47.4

50.5 50.4 50.3 50.0

52.5 52.351.7

20.0

25.0

30.0

35.0

40.0

45.0

50.0

55.0

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18

Q2FY18

Q3FY18

Q4FY18

Q1FY19

Q2FY19

Q3FY19

(%

)

Domestic Market Share


Exhibit 3: Export volumes trend

1006

1051

1054

1171

1305

1445

1654

1779

1915

127

120

101 122

124

124

126

111

111

0

500

1000

1500

2000

2500

FY12 FY13 FY14 FY15 FY16 FY17E FY18 FY19E FY20E

('0

00s)

Domestic Exports



Discounting levels to remain elevated, citing muted demand prospect

In an intensely competitive industry struggling with a demand slowdown,

the increase in discounting levels to gain volumes is expected. As the

market leader, MSIL had also been forced to give incentives to ward off

competition and retain market share. However, we believe the new

products launches and facelifts will lead to an improved product mix that

will limit the aggressive discounts going forward. However, with muted

demand prospects at the marketplace we expect discount levels to

sustain at ~| 20,000/unit in FY19-20E.

Exhibit 5: Annual discount trends and expectations

12266

16951

19,529 18,898

16,774 15,895

19,553 20,000

0

5000

10000

15000

20000

25000

FY13 FY14 FY15 FY16 FY17E FY18 FY19E FY20E

(|)



Outlook and Valuation

MSIL has a capital efficiency business model wherein it realises ~3x asset

turnover, operates with negative working capital cycle as well as realises

~13-15% EBITDA margins thereby realising core RoIC at ~50%+. It also

has a debt free, cash rich B/S with surplus cash at ~| 34,000 crore. Going

forward, however, the demand scenario is expected to be subdued, amid

customers postponing their purchase as well as increasing penetration of

shared mobility. It is also expected to be muted given peaking penetration

of PVs in metro cities, which have high purchasing power. We expect

volume growth to be muted with FY18-20E overall volume CAGR pegged

at 6.7%. Consequent net sales & PAT CAGR is expected at 8.0% & 5.5%,

respectively. We value MSIL at | 6000 i.e. 21x P/E on FY20E EPS of | 284

and retain our HOLD rating on the stock. We draw comfort from healthy

cash flow generation at MSIL with average CFO yield at ~6% and

consequent FCF yield at ~4%.

Exhibit 6: Valuation

Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE

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

FY16 57,746 32.1 151 64.3 43.1 21.8 16.9 22.2

FY17 68,035 17.8 243 60.5 26.8 16.4 20.3 20.3

FY18 79,763 17.2 256 5.2 25.5 13.5 18.5 21.1

FY19E 86,851 8.9 250 (2.1) 26.0 13.8 16.3 17.8

FY20E 93,113 7.2 284 13.6 22.9 11.8 16.6 18.8


Exhibit 7: One year forward P/E (MSIL currently trading at 22.9x)

0

2000

4000

6000

8000

10000

12000

Nov-12

Jan-13

Mar-13

May-13

Jul-13

Sep-1

3

Nov-13

Jan-14

Mar-14

May-14

Jul-14

Sep-1

4

Nov-14

Jan-15

Mar-15

May-15

Jul-15

Sep-1

5

Nov-15

Jan-16

Mar-16

May-16

Jul-16

Sep-1

6

Nov-16

Jan-17

Mar-17

May-17

Jul-17

Sep-1

7

Nov-17

Jan-18

Mar-18

May-18

Jul-18

Sep-1

8

Nov-18

Jan-19

(|)

Price 26.2x 22.9x 21.3x 19.7x 14.8x 11.6x 8.4x

Source: Reuters, ICICI Direct Research


Recommended history vs. consensus

0.0

20.0

40.0

60.0

80.0

100.0

0

2,000

4,000

6,000

8,000

10,000

12,000

Jan-19Oct-18Jul-18May-18Feb-18Nov-17Aug-17May-17Feb-17Nov-16Aug-16May-16Feb-16

(%

)(|)

Price Idirect target Consensus Target Mean % Consensus with BUY

Source: Bloomberg, Company, ICICI Direct Research

Key events

Date Event

Feb-10 Largest recall in Maruti's history for 1 lakh A-star's for faulty parts. Maruti plans to double petrol capacity and investments to ~| 2,500 crore

Jul-10 Q1FY10 marks the change in royalty rates for Maruti from 3.3% to 5.9%, market disappointed

Mar-11 Auto stocks rebound as Union Budget witnesses no change of excise duties. Manesar workers go on strike for first time in May for two weeks

Aug-11 Labour trouble again brews up, production halted. Maruti Q2FY12 skids due to labour problems and high forex impacts as JPY unfavourable

Jan-12 Maruti witnesses strong valuation based bargain hunting as management expects worst to be over

Apr-12 Maruti launches the much awaited MPV product "Ertiga". Maruti announces merger with SPIL to consolidate business on the diesel side

Jul-12 Maruti stock tumbles as workers in Manersar facility turn violent, causes tragic death of HR manager Awanish Kumar Dev

Aug-12 Management lifts lockout post violence receding; production starts albeit slowly

Apr-13 Yen moving beyond 100 vis-à-vis US$ aids Q4FY13 profits as EBIDTA margins rise to 10.4%

Oct-13 Localisation and cost reduction initiatives Maruti surprise on Q2FY14 financials as margins surprise

Jan-14 MSIL board approves Gujarat plant expansion by way of 100% subsidiary of Suzuki Motor Corporation; institutional investors perturbed; stock falls

Mar-14 Management alleviates concerns of minority shareholders and removes uncertainty over the "mark-up" issue

Oct-14 Maruti launches a new product in the sedan segment "Ciaz"

Apr-15 MSIL reports bumper margins of 15.9% in Q4FY15. Announces dividend of | 25 per share

May-15 Maruti Suzuki 'Swift' completed 10 years of debut. The company has sold over 1.3 million car over the last 10 years

Jun-15 Company launches Celerio's diesel variant at |4.65 lakh

Jul-15 Maruti opens booking for premium crossover S-CROSS which is likely to to sold through its NEXA (premium) showrooms

Oct-15 Maruti launches its premium hatchback Baleno to be sold through its NEXA (premium) showrooms


Top 10 Shareholders Shareholding Pattern

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

1 Suzuki Motor Corp 30-Sep-18 56.2 169.8 0.0

2 Life Insurance Corporation of India 30-Sep-18 6.6 19.8 2.4

3 The Vanguard Group, Inc. 31-Dec-18 1.4 4.2 0.0

4 SBI Funds Management Pvt. Ltd. 31-Dec-18 1.1 3.3 0.0

5 BlackRock Institutional Trust Company, N.A. 31-Dec-18 1.1 3.2 0.0

6 Axis Asset Management Company Limited 31-Dec-18 0.9 2.7 -0.1

7 Nomura Asset Management Co., Ltd. 31-Jul-18 0.7 2.2 0.7

8 UTI Asset Management Co. Ltd. 31-Dec-18 0.7 2.2 0.0

9 Aditya Birla Sun Life AMC Limited 31-Dec-18 0.7 2.1 0.0

10 Fidelity Management & Research Company 30-Nov-18 0.7 2.0 0.0

(in %) Dec-17 Mar-18 Jun-18 Sep-18 Dec-18

Promoter 56.2 56.2 56.2 56.2 56.2

FII 26.0 25.4 23.9 23.0 22.7

DII 14.0 14.3 15.7 16.0 13.4

Others 3.8 4.1 4.3 4.9 7.7


Recent Activity

Investor name Value ($ M) Shares(M) Investor name Value ($ M) Shares(M)

Life Insurance Corporation of India 242.6 2.4 Baron Capital Management, Inc. -60.1 -0.6

Nomura Asset Management Co., Ltd. 94.3 0.7 APG Asset Management -35.0 -0.3

Principal Global Investors (Equity) 22.1 0.2 Ivy Investments -26.4 -0.3

Capital World Investors 19.3 0.2 Reliance Nippon Life Asset Management Limited -15.9 -0.1

Aberdeen Standard Investments (Asia) Limited 11.5 0.1 Wellington Management Company, LLP -11.9 -0.1

Buys Sells



.

Financial summary

Profit and loss statement | Crore

(Year-end March) FY17 FY18 FY19E FY20E

Total operating Income 68,035 79,763 86,851 93,113

Growth (%) 18 17 9 7

Raw Material Expenses 46,732 54,975 60,427 64,847

Employee Expenses 2,331 2,834 3,295 3,377

Marketing Expenses 0 0 0 0

Administrative Expenses 0 0 0 0

Other expenses 8,619 9,892 11,526 11,639

Total Operating Expenditure 57,682 67,701 75,249 79,863

EBITDA 10,353 12,062 11,603 13,250

Growth (%) 57 17 -4 14

Depreciation 2,602 2,758 2,953 3,073

Interest 89 346 88 88

Other Income 2,280 2,046 2,281 2,363

PBT 9,941 11,003 10,843 12,453

Others 0 0 0 0

Total Tax 2,604 3,282 3,282 3,860

PAT 7,338 7,722 7,561 8,593

Growth (%) 98 5 -2 14

EPS (|) 243 256 250 284


Cash flow statement | Crore


Profit after Tax 7,338 7,722 7,561 8,593

Add: Depreciation 2,602 2,758 2,953 3,073

(Inc)/dec in Current Assets -346 -50 -1,139 -50

Inc/(dec) in CL and Provisions 1,535 2,584 254 658

Others 89 346 88 88

CF from operating activities 11,219 13,359 9,717 12,361

(Inc)/dec in Investments -26,682 -6,527 -2,400 -4,700

(Inc)/dec in Fixed Assets -3,369 -3,701 -4,000 -4,000

Others 16,663 -218 -318 -311

CF from investing activities -13,388 -10,447 -6,718 -9,011

Issue/(Buy back) of Equity 0 0 0 0

Inc/(dec) in loan funds 406 -373 0 0

Dividend paid & dividend tax -2,727 -2,900 -2,900 -3,262

Inc/(dec) in Sec. premium 0 0 0 0

Others 4,464 419 -88 -88

CF from financing activities 2,143 -2,854 -2,988 -3,350

Net Cash flow -26 58 11 0

Opening Cash 39 13 71 82

Closing Cash 13 71 82 82


Balance sheet | Crore


Liabilities

Equity Capital 151 151 151 151

Reserve and Surplus 36,020 41,606 46,267 51,597

Total Shareholders funds 36,171 41,757 46,418 51,748

Total Debt 484 111 111 111

Deferred Tax Liability 464 559 559 559

Others Liabilties 1,127 1,612 1,652 1,692

Total Liabilities 38,246 44,039 48,740 54,110

Assets

Gross Block 18,656 21,424 26,550 31,050

Less: Acc Depreciation 5,367 8,065 11,018 14,091

Net Block 13,289 13,359 15,532 16,959

Capital WIP 1,252 2,126 1,000 500

Total Fixed Assets 14,542 15,485 16,532 17,459

Investments 28,228 35,290 37,940 42,890

Inventory 3,262 3,161 3,688 3,699

Debtors 1,199 1,462 1,904 1,786

Loans and Advances 3 3 9 9

Other Current Assets 2,119 2,007 2,171 2,328

Cash 13 71 82 82

Total Current Assets 6,596 6,704 7,854 7,904

Creditors 8,367 10,497 10,708 11,480

Provisions 449 560 535 574

Other current Liabilities 3,931 4,274 4,343 4,190

Total Current Liabilities 12,748 15,331 15,586 16,244

Net Current Assets -6,152 -8,627 -7,732 -8,339

Other Assets 1,627 1,891 1,999 2,100

Application of Funds 38,246 44,039 48,740 54,110


Key ratios


Per share data (|)

EPS 242.9 255.6 250.3 284.4

Cash EPS 329.0 346.9 348.1 386.2

BV 1,197.4 1,382.3 1,536.6 1,713.1

DPS 75.0 80.0 80.0 90.0

Cash Per Share 0.4 2.4 2.7 2.7

Operating Ratios

EBITDA Margin (%) 15.2 15.1 13.4 14.2

PBIT / Net sales (%) 11.4 11.7 10.0 10.9

PAT Margin (%) 10.8 9.7 8.7 9.2

Inventory days 17.5 14.5 15.5 14.5

Debtor days 6.4 6.7 8.0 7.0

Creditor days 44.9 48.0 45.0 45.0

Return Ratios (%)

RoE 20.3 18.5 16.3 16.6

RoCE 20.3 21.1 17.8 18.8

RoIC 66.1 91.7 64.0 70.5

Valuation Ratios (x)

P/E 26.8 25.5 26.0 22.9

EV / EBITDA 16.4 13.5 13.8 11.8

EV / Net Sales 2.5 2.0 1.8 1.7

Market Cap / Sales 2.9 2.5 2.3 2.1

Price to Book Value 5.4 4.7 4.2 3.8

Solvency Ratios

Debt/EBITDA 0.0 0.0 0.0 0.0

Debt / Equity 0.0 0.0 0.0 0.0

Current Ratio 0.7 0.6 0.7 0.6

Quick Ratio 0.4 0.3 0.4 0.3



ICICI Direct Research coverage universe (Auto & Auto Ancillary)

CMP M Cap

(|) TP(|) Rating (| Cr) FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E

Amara Raja (AMARAJ) 776 835 Hold 13261 27.6 30.2 39.8 28.1 25.7 19.5 14.8 13.1 10.2 23.3 22.0 24.7 16.0 15.2 17.1

Apollo Tyre (APOTYR) 211 260 Buy 12056 12.7 16.2 21.6 16.7 13.0 9.8 7.5 7.5 6.4 7.8 9.3 11.1 7.4 9.1 10.7

Ashok Leyland (ASHLEY) 83 115 Hold 23335 5.3 7.1 8.9 15.5 11.6 9.3 10.2 8.3 6.2 28.1 32.1 34.6 21.9 25.1 26.2

Bajaj Auto (BAAUTO) 2626 2410 Hold 75999 140.6 153.3 169.5 17.6 16.2 14.6 11.8 10.4 8.9 22.9 22.4 22.3 21.5 20.7 20.4

Balkrishna Ind. (BALIND) 848 1025 Hold 16384 38.2 50.6 59.7 22.2 16.8 14.2 16.5 12.0 10.0 22.4 26.1 26.2 18.1 26.1 26.2

Bharat Forge (BHAFOR) 480 700 Buy 22329 16.2 23.3 28.0 29.6 20.6 17.2 17.6 14.5 12.2 18.2 22.9 25.7 17.3 23.3 23.9

Bosch (MICO) 18526 20500 Hold 58172 449.1 593.7 661.5 41.3 31.2 28.0 27.0 21.9 19.2 14.4 16.4 16.3 21.4 24.4 24.3

Eicher Motors (EICMOT) 20050 25500 Buy 54656 718.9 926.0 1162.1 27.9 21.7 17.3 20.0 17.0 13.2 39.1 35.9 35.0 29.9 27.9 26.9

Escorts (ESCORT) 703 735 Hold 8618 28.1 38.1 46.0 23.9 17.7 14.6 14.3 10.7 8.5 18.8 20.9 21.1 13.5 15.6 16.0

Exide Industries (EXIIND) 230 285 Buy 19563 8.2 9.3 11.5 27.9 24.8 20.0 16.8 14.6 11.8 19.1 18.9 21.2 13.0 13.2 14.7

Hero Moto (HERHON) 2670 3350 Buy 53323 185.1 186.6 209.6 14.4 14.3 12.7 9.5 9.2 7.9 42.4 41.0 41.3 31.4 29.0 29.1

JK Tyre & Ind (JKIND) 96 100 Hold 2175 2.9 12.9 21.9 32.9 7.4 4.4 9.8 6.0 4.6 7.7 12.6 15.4 3.6 15.0 18.6

Mahindra CIE (MAHAUT) 232 280 Buy 8780 9.5 14.5 17.7 24.5 16.0 13.2 13.7 9.9 8.2 9.8 12.9 13.7 11.2 15.0 17.1

Maruti Suzuki (MARUTI) 6520 6000 Hold 196122 255.6 250.3 284.4 25.5 26.0 22.9 13.5 13.8 11.8 21.1 17.8 18.8 18.5 16.3 16.6

Motherson (MOTSUM) 151 165 Hold 47622 5.1 6.2 9.0 29.8 24.2 16.7 10.8 9.0 6.7 16.3 19.6 26.1 17.4 19.4 23.5

Tata Motors (TELCO) 173 200 Hold 51779 26.8 2.3 17.0 6.9 79.0 10.9 2.7 3.2 2.6 9.1 6.1 8.2 10.3 4.3 8.5

Wabco India (WABTVS) 6263 7200 Hold 11899 143.8 192.0 211.9 43.5 32.6 29.6 30.1 24.7 21.1 17.9 19.7 18.0 25.1 27.6 25.4

Sector / Company

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



RATING RATIONALE

ICICI Direct endeavours 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 categorises them as Strong

Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is

defined as the analysts' valuation for a stock.

Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;

Buy: >10%/15% for large caps/midcaps, respectively;

Hold: Up to +/-10%;

Sell: -10% or more;

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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