Eicher Motors (EICMOT) - ICICI Directcontent.icicidirect.com/mailimages/IDirect_EicherMotors... · 2016. 3. 14. · • Eicher - Polaris joint venture (JV) has launched personal utility

July 24, 2015

ICICI Securities Ltd | Retail Equity Research

Result Update

Margin expansion in RE business continues • Eicher Motors (EML) reported its Q2FY16 results with a topline of

| 2917 crore (up 29.9% YoY), EBITDA margin of 14.8% (up 213 bps YoY) and PAT of | 222 crore (up 40.9% YoY)

• The results were below our estimates on the margin and bottomline front. The reported topline was above estimates on account of higher than estimated ASPs of the VECV business. The margins were marginally below our estimates on account of higher than estimated employee expenses. PAT was below estimates due to lower than estimated other income

• The Royal Enfield (RE) business continued its stellar performance, reporting margins of 26.4% against our estimates of 26%, mainly due to benefit of operating leverage. VECV business reported margins of 7.8%, in line with our estimates

RE ramping up to meet the long waiting list Royal Enfield (RE), the world’s oldest active motorcycle brand, has created a league of its own through its differentiated look from other bikes & brand power. Volumes grew at 42.4% CAGR in CY09-14 vs. 8% CAGR in CY00-10. Transformation from a low volume company (51661 units in CY09; 302601 units in CY14) to a strong lifestyle brand in premium segment has been due to strong execution & branding. Launch of Classic brand & inclusion of new engine unit construction engine (UCE) in CY09 spurred demand while growth momentum was maintained through new launches, quality improvements, production ramp up & expansion in dealer network. Although Eicher has been adding capacity aggressively, there is yet an average waiting period of four to five months. Given this situation of demand outstripping supply, the company has raised its exit capacity guidance for CY15E to 600,000 unit, which can be stretched to 7,20,000 in CY16. The company also has land at Vallam Vadagal for its third plant, which will not start producing before CY17. Overall, favourable demographics, increasing urbanisation & dealer network expansion will aid in sustaining volume growth momentum, going ahead. Thus, we forecast sales volume CAGR of ~44.5% in CY14-FY17E. Pro Series may lead to market share gain VECV has a competitive edge over its peers in terms of technology & revenue streams from less cyclical businesses. In our view, on the 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. Great business 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 | 20545. We have a HOLD recommendation with an upside potential of ~1%.

Rating matrix Rating : HoldTarget : | 20545Target Period : 12 monthsPotential Upside : 2%

What’s Changed?

Target Changed from | 19519 to | 20545EPS FY16E Changed from | 559.8 to 562.1EPS FY17E Changed from | 688.6 to 708.1Rating Unchanged

Quarterly Performance

Q2FY16 Q2CY14 YoY (%) Q1FY16 QoQ (%)Revenue 2,916.7 2,245.4 29.9 2,568.0 13.6EBITDA 431.6 284.5 51.7 366.0 18.0EBITDA (%) 14.8 12.7 213 bps 14.3 55 bpsPAT 221.8 157.4 40.9 195.3 13.6

Key Financials | Crore CY13 CY14 FY16E FY17ENet Sales 6,685 8,599 15,708 17,459 EBITDA 713 1,115 2,491 3,168 Net Profit 394 615 1,518 1,913 EPS (|) 145.9 227.1 562.1 708.1

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

CY13 CY14 FY16E FY17EP/E (x) 137.7 88.5 35.8 28.4 Adj. EV/E (x) 149.9 103.4 58.5 26.1 Tgt.Adj.EV/E(x) 146.6 101.1 57.2 25.5 P/BV (x) 26.4 21.6 14.9 10.7 RoNW (%) 19.2 24.5 41.7 37.7 RoCE (%) 18.3 24.5 43.7 41.2

* Change in accounting year, FY16E is a 15 month period Stock data Particular AmountMarket Capitalization | 54282 CroreTotal Debt (CY14) | 58.4 CroreCash and Investments (CY14) | 481.5 CroreEV (CY14) | 53858.9 Crore52 week H/L (|) 21555 / 8162Equity capital (| crore) | 27 CroreFace value (|) | 10

Price performance (%)

1M 3M 6M 12MEicher Motors Ltd 6.5 39.3 35.6 140.3Tata Motors Ltd -7.9 -21.6 -31.1 -16.3M&M Ltd 1.7 13.4 -0.2 13.7

Eicher Motors (EICMOT) | 20097

Research Analyst

Nishit Zota

[email protected]

Vidrum Mehta

[email protected]

ICICI Securities Ltd | Retail Equity Research Page 2

Variance analysis Q2FY16 Q2FY16E Q2CY14 YoY (%) Q1FY16 QoQ (%) Comments

Total Operating Income 2,917 2,869 2,245 29.9 2,568 13.6 Higher than estimates on account of higher ASPs in VECV businessRaw Material Expenses 1,532 1,567 1,293 18.5 1,350 13.5Purchase of traded goods 374 305 205 83.1 303 23.5Employee Expenses 203 192 169 20.2 185 9.5 Higher staff cost as company added staff in the US & tech centresOther expenses 376 376 295 27.4 364 3.2

EBITDA 432 430 285 51.7 366 18.0EBITDA Margin (%) 14.8 15.0 12.7 213 bps 14.3 55 bps Sequential decline of 129 bps QoQ in other expense to sales led to EBITDA margin

expansion on a QoQ basis. Margins came lower than estimates on account of higher employee expenses

Other Income 7 23 18 -61.9 34 -79.8 Lower other income due to deferrment of FMP maturity over next 3 yearsDepreciation 79 64 56 42.6 77 3.5Interest 2 2 1 62.3 1 39.8Total Tax 101 102 67 50.1 105 -4.6PAT before MI 257 266 179 43.8 216 18.7Minority Interest 35 0 21 65.2 21 66.0PAT 222 266 157 40.9 195 13.6 Below estimates on account of lower than anticipated other income & higher than

expected tax rateKey MetricsRoyal Enfield ASP(|) 115,589 118,482 109,258 5.8 117,309 -1.5 Lower than estimates due to poorer product mixVECV ASP (| lakhs) 14.6 14.0 12.7 14.4 14.2 2.4 Higher proportion of heavy duty trucks led to higher net realisations

Source: Company, ICICIdirect.com Research Change in estimates

(| Crore) Old New % Change Old New % Change CommentsRevenue 15,389 15,708 2.1 16864 17,459 3.5 Topline estimates upward revised due to increase in RE volume estimatesEBITDA 2,484 2,491 0.3 2967 3,168 6.8EBITDA Margin (%) 16.1 15.9 -29 bps 17.6 18.1 55 bps Upward revision in FY17E margins, as RE business margins are upward revised from 27.7% to

28.2%PAT 1,512 1,518 0.4 1860 1,913 2.8EPS (|) 560 562 0.4 689 708 2.8

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 591989.6 667596.6 563892 641476Upward revison in volumes as company gave guidance of an exit capacity of 50,000 units per month in CY15 which can be stretched to 60,000 units per month in CY16

Royal Enfield ASP/unit (|) 107,257 109,177 115,734 121,622 117,917 121,488VECV volumes 41,421 40,978 62,121 62,064 62,461 62,931VECV ASP/unit (| lakh) 12.6 13.5 14.5 15.6 14.0 14.8

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


Key conference call takeaways • Eicher Motor’s standalone business (Royal Enfield), for Q2FY16,

revenue grew 47% YoY to | 1,097 crore (volume growth of 44% YoY to 106,613 units). EBITDA margins came in at 26.4%. PAT grew by 37.8% YoY to | 183.6 crore

• Motorcycle capacity is likely to increase to 50,000 units per month by

December 2015 as against 30,000 units in December 2014, and is expandable to 60,000 units per month going forward.

• The company is working on two new platforms, of which one is likely

to be launched over the next six to eight months • The dealer network is likely to be expanded from 400 dealers in CY14

to 500 dealers in CY15E. The incremental dealer addition would be from Tier 2 and Tier 3 cities over the next two years

• In May 2015, the company had acquired UK based Harris

performance, which has a deep expertise in chassis development and other areas of motorcycle, which is likely to support RE in the new product development.

• The company had launched limited edition of Despatch Rider

Collection on July 15, 2015, which was offered through its online platform. The launch received stellar response and was booked within first 26 minutes, of the registration been opened.

• The company will take at least 18 months from the time the company

decides to produce from the new plant at Vallam Vadagal • According to the management, “Pro Series” of vehicles is doing well

for the company. With the demand scenario likely to improve, the company would gain market share going forward

• In the 5-14 tonne segment, overall domestic industry grew by 3% YoY

to ~15,000 units during the quarter; however VECV outperformed the industry growing 6% YoY to ~4,800 units.

• In VECV, tax benefits related to R&D expenditure will lead to tax rate

below 20% • The engine volumes grew by 35% YoY to 4,352 units as against 3,225

units, with majority of the volumes been exported by the company. • Eicher - Polaris joint venture (JV) has launched personal utility vehicle

“Multix”. The initial capacity of the product is 5,000 units per month (plant near Jaipur, Rajasthan) and is likely to be sold from 1st week of August 2015 through network of 30 dealers.


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 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 (~7.2 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 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 ~10.7% in FY17E, on the back of a better product mix & higher utilisation levels.

Exhibit 3: Royal Enfield growth trajectory

1,04

9

1,70

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636

671

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9 3,03

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CY12 CY13 Q1CY14 Q2CY14 Q3CY14 Q4CY14 CY14 Q1FY16 FY16E FY17E

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) / V

olum

e (1

00s)

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

* 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 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 with the recovery in the domestic M&HCV industry. We expect the topline to grow at ~37% CAGR in CY14-FY17E while PAT is likely to grow at ~65.5% CAGR in CY14-FY17E as margins improve from 13% in CY14 to 17.8% in FY17E. Exhibit 5: Overall financial summary

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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, contribution to overall EBITDA

49 49

41

62 62

41.0

87.0

73.5

56.0

34.2 34.6 35.6

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00'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

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17.8

56.054.4

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OPM (LHS) RM/Net Sales Contribution


Exhibit 7: Return ratio profile

22.1

20.7

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43.741.2

18.5 19.2

24.5

41.737.7

12

17

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32

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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 was ~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 | 20,545. We have a HOLD recommendation on the stock.


Exhibit 9: SOTP valuation FY17E Remarks

Two-wheeler business-Royal EnfieldEPS (|) 576 Target PE multiple(x) 30 Comparable to up-cycle multiples for Harley Davidson during the 1995-2004 phase.

Per share value (|) 17,293

Target market cap (| crore) 46,707

CV business-VECV`EBITDA 1,128 Target EV/EBITDA multiple(x) 14.0 30% premiuim to current average industry multiple*Target EV 15,799 Net Debt VECV * (| crore) (360) Target market cap (| crore) 16,159 Contribution towards EML 0.54 EML has 54.4% stake in VECVTarget market cap towards EML (| crore) 8,790 Per share value-VECV Eicher (|) 3,255 Total target market cap (| crore) 55,498 Per share value (| ) 20,545

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 21.4 137.7 101.1 19.2 18.3CY14 8598.7 28.6 227.1 55.6 88.5 48.3 24.5 24.5FY16E 15707.9 82.7 562.1 147.5 35.8 21.5 41.7 43.7FY17E 17459.0 11.1 708.1 26.0 28.4 16.9 37.7 41.2



Company snapshot

Target Price 20545

0

5,000

10,000

15,000

20,000

25,000

Dec-

10

Mar

-11

Jun-

11

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11

Dec-

11

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-12

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12

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12

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-13

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13

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-14

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14

Sep-

14

Dec-

14

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-15

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15

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15

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15

Mar

-16

Jun-

16

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 MotorsMay-08 Announces details of partnership for VECV. Stock hits 20% upper circuitOct-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 globally

Nov-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 trucks

May-15 Eicher acquires UK based Harris perfrommance products which is basically into chassis developmentMay-15 Eicher overtakes Hero Motocorp on market capitalizationJun-15 Volvo sold its remaining 3.7% stake in Eicher Motors; however it has no impact on its JV named VECVJun-15 Eicher Polaris JV, launches its first personal utility vehicle named "Multix"


Top 10 Shareholders Shareholding Pattern Rank Name Latest Filing Date % O/S Position (m) Change (m)1 Simran Siddhartha Tara Benefit Trust 30-Jun-15 25.05 6.8 0.002 Eicher Goodearth Trust 30-Jun-15 12.05 3.3 0.003 Lal (Anita) 30-Jun-15 11.14 3.0 0.004 Volvo AB 31-Mar-15 3.7 1.0 -1.275 Cartica Capital, Ltd. 30-Jun-15 3.46 0.9 0.066 Brinda Lal Trust 30-Jun-15 1.79 0.5 0.007 Joshi (Rukmani) 30-Jun-15 1.33 0.4 0.008 TIAA-CREF 30-Jun-15 1.31 0.4 -0.019 Amansa Capital Pte Ltd. 31-Mar-15 1.29 0.4 -0.0110 Lal (Simran) 30-Jun-15 1.16 0.3 0.00

(in %) Jun-14 Sep-14 Dec-14 Mar-15 Jun-15Promoter 55.0 55.0 55.0 55.0 54.9FII 19.9 20.1 19.5 22.1 27.5DII 4.9 4.4 4.7 6.1 4.6Others 20.2 20.5 20.9 16.9 13.0

Source: Reuters, ICICIdirect.com Research

Recent Activity

Investor name Value Shares Investor name Value SharesCitigroup Inc 77.21m 0.28m Lal Family Trust -457.57m -4.06m BlackRock Institutional Trust Company, N.A. 72.21m 0.25m Volvo AB -324.39m -1.27m Franklin Advisers, Inc. 21.62m 0.08m First State Investment Management (UK) Limited -78.09m -0.33m Lyxor Asset Management 19.62m 0.06m Norges Bank Investment Management (NBIM) -28.88m -0.12m Cartica Capital, Ltd. 17.68m 0.06m Birla Sun Life Asset Management Company Ltd. -24.89m -0.08m

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 15,905.5 17,754.6

Growth (%) 6.6 28.3 82.0 11.6

Raw Material Expenses 3,904.1 4,819.6 8,516.7 9,450.1

Employee Expenses 533.3 659.6 1,022.2 1,055.7

Other Expenses 924.6 1,197.9 2,005.0 2,065.9

Total Operating Expenditure 6,096.6 7,623.5 13,414.8 14,586.7

EBITDA 713.1 1,114.8 2,490.6 3,167.9

Growth (%) 29.9 56.3 123.4 27.2

Depreciation 130.0 219.8 303.5 360.6

Interest 7.9 9.8 8.2 7.0

Other Income 95.3 107.4 187.4 235.7

PBT 670.5 992.6 2,366.3 3,035.9

Others 0.0 0.0 0.0 0.0

Total Tax 145.2 290.9 627.8 759.0

PAT 393.9 615.4 1,518.1 1,912.6

Growth (%) 21.5 56.2 146.7 26.0EPS (|) 145.9 227.1 562.1 708.1


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

Profit after Tax 393.9 615.4 1,518.1 1,912.6

Add: Depreciation 130.0 219.8 303.5 360.6

(Inc)/dec in Current Assets -206.6 -232.2 -1,582.2 -1,035.6

Inc/(dec) in CL and Provisions 369.8 515.5 1,652.9 -752.5

CF from operating activities 687.0 1,118.6 1,892.3 485.1

(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 -73.1 873.9

CF from investing activities -761.2 -1,140.1 -1,173.1 123.9

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 -201.1 324.2 135.0

Opening Cash 805.1 682.6 481.5 805.6Closing Cash 682.6 481.5 805.6 940.6


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 3,612.8 5,051.4

Total Shareholders funds 2,055.4 2,516.8 3,639.9 5,078.5

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 1305.4 1669.8

Total Liabilities 3,499.6 4,074.2 5,422.7 7,225.6

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 1,334.1 1,918.5

Debtors 512.5 562.2 1,291.1 1,339.3

Loans and Advances 317.9 379.7 468.5 858.4

Cash 682.6 481.5 805.6 940.6

Total Current Assets 2,039.7 2,068.9 3,899.3 5,056.8

Creditors 1,320.5 1,571.5 2,496.1 2,487.3

Provisions 156.1 248.5 394.7 244.0

Total Current Liabilities 1,476.6 1,820.0 2,890.7 2,731.3

Net Current Assets 563.1 248.9 1,008.6 2,325.5

Misc expenses not w/o 0.0 0.0 0.0 0.0Application of Funds 3,499.6 4,074.2 5,422.7 7,225.6


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

Per share data (|)

EPS 145.9 227.1 562.1 708.1

Cash EPS 194.1 308.2 674.4 841.6

BV 761.6 928.7 1,347.6 1,880.2

DPS 30.1 49.9 125.0 150.0

Cash Per Share 252.9 177.7 298.3 348.3

Operating Ratios (%)

EBITDA Margin 10.7 13.0 15.9 18.1

PBT / Net sales 10.0 11.5 15.1 17.4

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 41.7 37.7

RoCE 18.3 24.5 43.7 41.2

RoIC 38.2 45.7 74.0 64.2

Valuation Ratios (x)

P/E 137.7 88.5 35.8 28.4

EV / EBITDA 101.1 48.3 21.5 16.9

EV / Net Sales 12.2 6.3 3.4 3.1

Market Cap / Sales 12.3 6.3 3.5 3.1

Price to Book Value 26.4 21.6 14.9 10.7

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) 867 956 Hold 14801 24.3 32.9 41.6 35.6 26.3 20.9 20.3 16.5 13.0 33.7 33.7 33.4 24.4 25.9 25.8Apollo Tyre (APOTYR) 194 228 Buy 9777 19.6 22.6 22.8 9.9 8.6 8.5 4.5 4.7 4.7 26.5 20.4 17.3 19.6 17.6 15.4Ashok Leyland (ASHLEY) 81 75 Hold 22741 1.2 3.2 4.5 68.4 25.1 17.9 21.2 12.5 10.0 7.9 15.9 19.6 6.5 15.8 19.2Bajaj Auto (BAAUTO) 2498 2569 Buy 72295 97.2 136.7 164.2 25.7 18.3 15.2 14.7 11.5 9.4 35.5 38.4 40.1 26.2 32.1 33.1Balkrishna Ind. (BALIND) 697 720 Hold 6737 49.0 57.3 60.0 15.1 12.9 12.3 8.7 7.5 6.9 17.5 19.1 19.2 20.7 17.5 19.1Bharat Forge (BHAFOR) 1110 1277 Buy 25851 32.9 38.0 51.7 33.7 29.2 21.5 20.5 16.4 12.7 19.0 24.7 30.6 23.3 22.9 25.5Bosch (MICO) 23159 23301 Hold 66568 473.7 454.0 582.6 46.8 48.9 38.1 34.1 33.5 25.3 20.2 16.6 18.3 21.4 17.3 20.2Eicher Motors (EICMOT) 20116 20545 Hold 54334 227.1 562.1 708.1 88.6 35.8 28.4 49.1 21.9 17.1 24.5 43.7 41.2 24.5 41.7 37.7Escorts (ESCORT) 144 100 Hold 1713 6.7 11.4 17.1 15.6 9.1 6.1 8.8 6.0 3.5 4.5 6.9 9.4 4.4 6.8 9.3Exide Industries (EXIIND) 151 186 Buy 12801 6.4 8.1 9.5 23.4 18.7 15.9 14.7 12.2 10.5 19.1 20.2 20.5 13.4 15.2 16.1Hero Mototcorp (HERHON) 2735 2505 Hold 54618 119.5 141.2 167.0 22.9 19.4 16.4 11.6 13.0 12.0 45.6 45.3 45.5 36.3 36.5 36.8JK Tyre & Ind (JKIND) 104 131 Buy 2347 14.5 16.4 20.0 7.1 6.3 5.2 5.3 5.0 4.1 18.7 17.9 19.4 23.3 21.6 21.3M&M (MAHMAH) 1325 1403 Buy 78226 50.7 62.0 78.1 26.1 21.4 17.0 16.6 10.1 8.0 14.5 16.9 19.7 17.1 16.6 18.1Mahindra CIE (MAHAUT) 269 260 Buy 8697 -2.4 9.5 13.0 NA 28.5 20.7 18.1 10.4 8.5 -4.1 13.0 16.7 5.9 11.6 16.0Maruti Suzuki (MARUTI) 4234 4266 Buy 127965 122.9 176.4 213.3 34.5 24.0 19.9 17.1 13.5 11.2 17.2 20.1 20.3 15.6 19.1 19.6Motherson (MOTSUM) 340 347 Hold 45011 6.5 10.6 17.9 52.2 32.1 19.0 15.4 12.4 8.6 24.5 28.3 37.9 27.2 36.3 46.2Tata Motors (TELCO) 390 548 Buy 118592 41.2 60.4 71.7 10.7 7.3 6.1 4.0 3.1 2.4 22.8 19.2 19.5 24.9 19.3 18.6Wabco India (WABTVS) 5390 6040 Hold 10241 63.8 117.7 167.8 84.5 45.8 32.1 51.0 32.8 23.5 14.0 20.8 23.2 18.2 24.6 27.5

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



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[email protected]


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