Mahindra & MahindraFebruary 11, 2020content.icicidirect.com/mailimages/IDirect_MahindraMahindra_Q3FY20.pdf · | Mahindra & Mahindra ICICI Direct ResearchResult Update Conference Call

ICIC

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Retail E

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esearch

Result

Update

February 11, 2020

CMP: | 525 Target: | 680 (30%) Target Period: 12 months

Mahindra & Mahindra (MAHMAH)

BUY

Base case valuations to prevail, EV edge a positive…

Mahindra & Mahindra (M&M) reported a muted Q3FY20 performance.

Standalone net sales at | 12,345 crore were down 5.5% YoY (automotive

down 5.5%, tractor down 7.7%) and tracked 7.6%, 7.0% YoY decline in

automotive, tractor volumes, respectively. Standalone EBITDA margins at

13.4% (up 80 bps QoQ) reflected savings in other expenses. Automotive

EBIT margins improved 170 bps QoQ to 5.7% while tractor margins were up

30 bps QoQ to 19.6%. Consequent standalone PAT for the quarter came in

at | 306.0 crore, down 49.5% YoY, impacted by provision for impairment on

certain investments amounting to | 600 crore.

Leader in tractor, UV segment

M&M is a leading tractor manufacturer domestically with leading market

share of ~42% in the domestic market. The company has a strong presence

in the southern as well as western regions, which are expected to stage a

strong recovery courtesy robust rainfall activity and healthy Rabi crop

sowing. Given the underpenetrated market domestically, we expect M&M to

continue its market leadership in farm mechanisation with tractor volumes

expected to grow at CAGR of 7.4% in FY20-22E. In the domestic PV space,

M&M is a prominent player in the UV space with market share at ~20% as

of January 2019. The UV segment has emerged as one of the few bright

spots in the Indian automotive space during the ongoing slowdown

(domestic UV volumes up 6% YoY for 10MFY20 vs. 15.4% PV decline)

courtesy a shift in buyer preferences, compelling products and entry of new

players. The company’s future product plans (internal and jointly developed

with Ford) stand it in good stead to be among the beneficiaries of the market

leader exiting diesel UVs under BS-VI.

Gradual recovery, BS-VI transition to limit margins!

Given demand challenges being faced by domestic automotive segment in

medium term (M&M auto volumes likely to be down ~11% in FY20E), the

company is seen having limited operating leverage benefits. Ability to pass

on BS-VI price hikes (especially diesel) is also seen weighing on margins,

with matters compounded by firming of outlook for commodity prices. We

factor in moderate margin recovery in FY20E-22E to 11.8% in FY22E.

Valuation & Outlook

We expect sales, adjusted PAT to grow at 9.5%, 3.4% CAGR, respectively,

in FY20E-22E. M&M is one of the early movers in the domestic EV category

with products across the 3-W as well as PV segment. Price point of recently

launched e-KUV (~| 8.25 for fleet) is also encouraging to make further

inroads in EV penetration. We maintain BUY rating on the stock. We value

M&M at | 680/share i.e. 6x EV/EBITDA for standalone business (FY22E basis)

and 35% holdco discount on its investments.

Key Financials FY18 FY19 FY20E FY21E FY22E CAGR (FY20E -22E)

Net Sales 48,685.6 53,614.0 49,473.6 54,511.6 59,370.1 9.5%

EBITDA 6,224.1 6,639.6 6,302.5 6,275.6 6,984.8 5.3%

EBITDA Margins (%) 12.8 12.4 12.7 11.5 11.8

Net Profit 4,356.0 4,796.1 4,829.3 4,069.8 4,542.1 -3.0%

Adjusted Net Profit 4,046.5 4,818.6 4,250.6 4,069.8 4,542.1 3.4%

EPS (|) 35.0 38.6 38.8 32.7 36.5

P/E 15.0 13.6 13.5 16.0 14.4

RoNW (%) 13.4 14.1 11.3 10.0 10.3

RoCE (%) 16.6 16.7 13.7 12.4 12.8

Key Financial Summary

Source: ICICI Direct Research, Company

Particulars

Particular Amount

Market Capitalization (| crore) 65,268.0

Total Debt (FY19, | crore) 2,480.3

Cash and Investments (FY19, | crore) 6,733.9

EV (FY19, | crore) 61,014.4

52 week H/L (|) 704 / 503

Equity capital (| crore) (FY19) 595.8

Face value (|) | 5

Key Highlights

Revenues dip 5.5% YoY in Q3FY20

amid 5.5%, 7.7% fall in automotive,

tractor revenues, respectively.

Automotive, tractor volumes

declined 7.6%, 7.0% YoY,

respectively

Overall margins improved 80 bps

sequentially to 13.4%, with both

automotive and tractor EBIT

margins also up QoQ

Presence in fast growing UV

segment; tractor market leadership

to help support overall operations

Maintain BUY with unchanged

target price of | 680 on SOTP basis

Research Analyst

Shashank Kanodia, CFA

[email protected]

Jaimin Desai

[email protected]

ICICI Securities | Retail Research 2

ICICI Direct Research

Result Update | Mahindra & Mahindra

Exhibit 1: Variance Analysis

Q3FY20 Q3FY20E Q3FY19 YoY (%) Q2FY20 QoQ (%) Comments

Total Operating Income 12345.3 12303.3 13070.4 -5.5 11076.1 11.5 Topline broadly in line with our estimates

Raw Material Expenses 8649.2 8436 9407 -8.1 7677 12.7 RM costs came in higher at 70.1% of sales, up 80 bps QoQ

Employee Expenses 759.4 738 778 -2 719 6

Other expenses 1287.2 1,384 1,369 -6.0 1,289 -0.2Savings realised in other expenses, which for the quarter were

at 10.4% of sales, down 120 bps QoQ

EBITDA 1649.5 1,745.0 1,517.2 8.7 1,391.0 18.6

EBITDA Margin (%) 13.4 14.2 11.6 175 bps 12.6 80 bps EBITDA margins came in lower at 13.4% of sales vs. our

estimate of 14.2%, primarily tracking increase in RM costs

Other income 206.3 238.7 340.9 -39.5 827.7 -75.1

Depreciation 553.7 567 474 16.9 540 2.6

Interest 22.4 30 25 -10 30 -26

Tax 372.5 349 203 83.6 436 -14.6Tax rate looks optically higher at 52% of PBT courtesy | 600

exceptional provision on a/c of impairment of investment

PAT 306.5 1037 1077 -71.5 1213 -74.7PAT came in lower tracking lower margins and exceptional

charge (| 600 crore)

EPS 4.6 8.3 9.2 -49.5 9.8 -52.4

Key Metrics

Auto revenues (| crore) 7642.1 7,626 8,084 -5.5 7,030 8.7 Auto segment revenues broadly in line with our estimates

FES revenues (| crore) 4277.8 4,228 4,634 -7.7 3,631 17.8FES segment revenues came in slightly better tracking beat on

ASPs, which for the quarter were at | 5.06 lakh/unit

EBITDA margins (%) 13.4 14.2 11.6 175 bps 12.6 80 bps

Source: Company, ICICI Direct Research

Exhibit 2: Change in estimates

FY22E

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

Revenue 50,996 49,474 -3.0 56,304 54,512 -3.2 59,370

Broadly maintain our topline estimates for FY20-21E.

Introduce FY22E numbers. Expect topline to grow at

CAGR of 9.5% over FY20-22E

EBITDA 6,617 6,302 -4.8 6,539 6,276 -4.0 6,985

EBITDA Margin

(%)

13.0 12.7 -26 bps 11.6 11.5 -9 bps 11.8

Broadly maintain estimates. Optically, margins will

go down over next two years given BS-VI costs

increase and associated increase in vehicle prices

on absolute basis

PAT 5,738 4,829 -15.8 4,287 4,070 -5.1 4,542

EPS (|) 46.2 38.8 -15.8 34.5 32.7 -5.1 36.5

Exceptional loss in Q3FY20 leads to decline in PAT

estimates for FY20E. On normalised basis, expect

PAT to grow at CAGR of 3.4% over FY20-22E

FY20E FY21E


Exhibit 3: Assumptions

Comments

Units FY18 FY19 FY20E FY21E FY22E FY20E FY21E

Automotive volumes 548,664 608,597 544,372 555,780 589,581 556,692 572,165Automotive segment volumes seen growing at 4.1%

CAGR over FY20-22E, albeit post declining ~11% YoY

Automotive ASP's (|) 580,009 580,892 592,229 649,603 659,397 605,374 660,681

FES Volumes 318,538 330,436 306,040 321,342 352,878 308,692 324,127Tractor segment sales volume seen growing at CAGR

of 7.4% in FY20-22E, post declining 7.4% YoY in FY20E

FES ASPs (|) 505,232 510,679 506,586 512,821 520,539 503,688 510,396

EarlierCurrent

Source: ICICI Direct Research




Conference Call Highlights

Demand and management outlook/guidance

M&M said Siam has pegged FY21E automotive volume growth at 3-5% YoY (PV 2-4%, CV 4-6%). On the tractor

side, the company sees 5-7% YoY growth for Q4FY20E, lifting FY20E volume decline to ~7% against ~9% decline

on 9MFY20 basis. FY21E growth is seen at 5% (+/- 2%)

The management sees full domestic recovery as still being a couple of quarters away. However, some green

shoots (such as 8% increase in Rabi acreage) are visible

Sales, costs and margins

Q3FY20 margin performance was helped by improved product mix, soft commodity prices and focused material

cost reduction efforts

Excluding the impairment hit and other one-offs, PBT and PAT were up 1.7% and 6.5% respectively on a

normalised basis

SsangYong update

As per prudent accounting practices, the company provided a non-cash charge of | 602 crore (~57 billion Korean

Won) on its subsidiary SsangYong Motor (SYMC) that has been facing domestic and international headwinds

The management said that SYMC fortunes were hit hard as the company was just about near breakeven territory

before the sharp industry downturn in Q2FY20

The company has invested | 2,450 crore in total in SYMC so far. M&M said that the subsidiary has been CFO

positive every year bar CY19

SYMC board has approved a three-year business plan geared towards achieving breakeven in CY22. As per the

plan the company is looking for a fund infusion of ~450-500 billion Korean Won (could be external borrowings,

investment by M&M or funding by an external partner). Plan focus would be in areas of volumes, costs and

efficiencies. As a tangible development thus far, agreements are in place with labour unions for temporary

reduction in worker compensation. Additionally, the company is targeting 3-4% reduction in material costs p.a.

(worth ~90 billion Korean Won). Further, SYMC will align with M&M for upcoming product development in C & B

segment SUVs and sharpen focus on exports (particularly Russia and Vietnam)

Conversations are ongoing for equity investment by outside parties into SYMC

BS-VI

M&M intimated that cost increase under BS-VI for petrol is at ~|20,000/unit and for diesel at ~| 50,000-70,000/unit

For BS-VI the company has been able to pass on all costs and some margins on petrol models i.e. XUV300,

KUV100. Extent and timing of passing on prices for diesel models would be taken on SKU by SKU basis

Supply of a BS-IV component from China is held up due to ongoing virus outbreak, and affects ~ 2,400 units of

inventory

Products

Over the next 18-24 months, the company would be coming out with following new products –

- Q1FY21: E-KUV100, New Thar

- Q2FY21: Mass mobility EV Atom

- Q4FY21: W601 (crossover SUV)

- Q1FY22: Z101

- Middle of CY21: E XUV300, new tractor platform

The company is developing (with Mitsubishi) a new tractor platform (K2) which will span four hp ranges, for both

domestic and international markets

JV with Ford

Ford would shortly be introducing a connected vehicle jointly developed as part of the JV. C-segment SUV is

expected to deliver ~| 1,000 crore in savings because of the collaboration, with similar savings seen for B-

segment SUV as well. Further, using Ford’s unused capacity for engines is expected to deliver ~| 400 crore in

savings




Electric Vehicles

On electric side, the company currently sells 500 units of lithium ion 3-W (Treo) per month & 1,000 units of lead

acid 3-W (e-Alfa) p.m. It expects 3-W to be the biggest growth segment given commercial viability for operators

Newly launched E KUV100 is seen as breaking even at commercial level for fleet operators at the introductory

price of | 8.25 lakh/unit. For M&M the SKU would become EBITDA positive at volumes of ~500 units per month

Mahindra Electric is expected to turn profitable in FY21E

Others

Maximum capex for FY20E, FY21E and FY22E (combined, including any investment into SYMC) stands at | 17,000

crore

Automotive inventory levels lower than usual, while tractor inventories are at normal levels

Combined cash generation in domestic automotive and tractor businesses stood at the highest level in five years

during Q3FY20

Plant inventory at Mahindra US is down 40%, with dealer inventory down 20%. M&M is hopeful of completing

turnaround here by next year




Financial story in charts

Exhibit 4: Topline trend

44054

48686

53614

49474

54512

59370

7.8

10.5 10.1

(7.7)

10.2

8.9

(10)

(5)

-

5

10

15

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

FY17 FY18 FY19 FY20E FY21E FY22E

(%

)

(| crore)

Total Operating Income Growth (%)


Exhibit 5: Segment wise revenue trend

7,115

9,136

8,188

8,639

8,084

10,442

8,101

7,030

7,642

4,098

3,716

5,007

4,028

4,634

3,206

4,382

3,631

4,278

0

1,500

3,000

4,500

6,000

7,500

9,000

10,500

12,000

Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20

(| crore)

Automotive Farm Equipment


Exhibit 6: Segment wise volume trend

129

165

140

151

143

175

132

120

132

82

71

101

78

91

61

86

72

84

0

20

40

60

80

100

120

140

160

180

200

Q3FY18

Q4FY18

Q1FY19

Q2FY19

Q3FY19

Q4FY19

Q1FY20

Q2FY20

Q3FY20

(000's

)

Automotive Farm Equipment


We expect sales to grow at a CAGR of 9.5% over

FY20E-22E

Segment wise revenue mix for quarter i.e. Q3FY20

was at automotive: tractor:: 64:36

In Q3FY20; automotive segment volumes declined

7.6% YoY to 132k units while sales for tractors

declined 7.0% YoY to ~84k units




Exhibit 7: EBITDA and EBITDA margin trend

4515

6224

6640

6302

6276

6985

10.2

12.8

12.4

12.7

11.5 11.8

8

10

12

14

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000


(%

)

(| crore)

EBITDA EBITDA Margins (%)


Exhibit 8: Profitability (adjusted PAT) trend

3220

4046

4819

4251

4070

4542

2.1

25.7

19.1

(11.8)

(4.3)

11.6

(15)

(10)

(5)

-

5

10

15

20

25

30

-

1,000

2,000

3,000

4,000

5,000

6,000


(%

)

(| crore)

PAT Growth (%)


Exhibit 9: Return ratios trend

14.0

16.6 16.7

13.7

12.4

12.8

12.0

13.4

14.1

11.3

10.0 10.3

8

11

14

17

20


(%

)

RoCE RoE


We build in 12.7%, 11.5% & 11.8% as EBITDA

margins in FY20E, FY21E and FY22E, respectively

Adjusted PAT CAGR is expected to grow at 3.4%

CAGR over FY20E-22E to | 4,542 crore.

RoCE profile at M&M seen deteriorating to ~13% by

FY22E




Exhibit 10: Valuation matrix (SOTP Valuation)

Automotive Business (UV+PV+CV+Tractors) | crore |/share

Standalone business

FY22E EBITDA 6,985

Assigning EV/EBITDA Multiple of 6x 6.0

Enterprise Value 41,909 337

Net Debt (6,095) -49

Value of Standalone Business (A) 48,004 386

Mahindra Vehicle Manufacturers Ltd

Investment made by M&M (wholly owned subsidiary) 4,065

Assigning 1x P/B on investment value 1.0

Value of MVML attributable to M&M (B) 4,065 34

Total value of automobile business (C= A+B) 420

Value of Investments (listed companies)

M&M

stake

Estimated

value

Contribution

to M&M Remark

(%) | crore | crore |/share

Tech Mahindra 26 80,310 20,929 168 IDirect Target market cap*

M&M Financial Services 51 26,257 13,443 108 IDirect Target market cap*

Mahindra Life space 52 2,062 1,063 9 IDirect Target market cap*

Mahindra CIE 11 8,717 997.2 8 IDirect Target market cap*

Mahindra Holidays & Resorts 67 3,024 2035.2 16 Current market cap*

SsangYong Motors 75 1,740 1,305 10 Current market cap*

Other subsidiaries & investments 9,850 79

Total Value of subsidiaries & associates (D) 49,622.1 400

Value of investments post 35% holding company discount (E = 0.65*D) 260

M&M Target Price (value of equity per share , C+E) 680

Valuation Matrix (SOTP)

Source: ICICI Direct Research

Exhibit 11: Valuation Summary

Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE

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

FY19 53,614 10.1 38.6 10.1 13.5 9.2 14.1 16.7

FY20E 49,474 (7.7) 38.8 0.7 15.4 9.7 11.3 13.7

FY21E 54,512 10.2 32.7 (15.7) 16.0 9.6 10.0 12.4

FY22E 59,370 8.9 36.5 11.6 14.4 8.5 10.3 12.8

Source: Bloomberg, ICICI Direct Research




Exhibit 12: Recommendation history vs. consensus

78.0

80.0

82.0

84.0

86.0

88.0

90.0

92.0

0

200

400

600

800

1,000

1,200

1,400

Feb-20

Jan-20

Dec-19

Nov-19

Oct-19

Sep-1

9

Aug-19

Jul-19

Jun-19

May-19

Apr-19

Mar-19

Feb-19

Jan-19

Dec-18

Nov-18

Oct-18

Sep-1

8

Aug-18

Jul-18

Jun-18

May-18

Apr-18

Mar-18

Feb-18

Jan-18

Dec-17

Nov-17

Nov-17

Oct-17

Sep-1

7

Aug-17

Jul-17

Jun-17

May-17

Apr-17

Mar-17

Feb-17

(%)

(|)

Price Idirect target Consensus Target Mean % Consensus with BUY


Exhibit 13: Top 10 shareholders

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

1 PRUDENTIAL MGMT & SE 30-06-2019 11.38 141.52M 0

2 M & M BENEFIT TRUST 03-06-2019 6.79 84.47M -19.20M

3 FIRST STATE INVESTME 30-06-2019 4.56 56.74M -0.66M

4 MAHINDRA & MAHIN EMP 13-01-2020 4.06 50.46M -0.12M

5 SBI FUNDS MANAGEMENT 31-01-2020 2.61 32.45M +0.53M

6 BLACKROCK 06-02-2020 2.09 26.01M +0.07M

7 VANGUARD GROUP 31-12-2019 1.71 21.31M -0.22M

8 ICICI PRUDENTIAL ASS 31-12-2019 1.60 19.92M +0.07M

9 REPUBLIC OF SINGAPOR 30-06-2019 1.40 17.45M -0.29M

10 FRANKLIN RESOURCES 07-02-2020 1.20 14.87M +0.10M


Exhibit 14: Shareholding pattern

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

Promoter 21.6 21.5 19.9 19.8 19.9

FII 33.0 31.3 34.5 34.2 34.0

DII 21.9 23.4 24.1 27.8 24.2

Others 23.6 23.8 21.6 18.1 22.0





Financial Summary

Exhibit 15: Profit and loss statement | crore

(Year-end March) FY19 FY20E FY21E FY22E

Total operating Income 53,614.0 49,473.6 54,511.6 59,370.1

Growth (%) 10.1 -7.7 10.2 8.9

Raw Material Expenses 38,256.5 34,875.0 39,598.1 43,127.4

Employee Expenses 2,980.2 2,984.4 3,050.5 3,172.5

Other Expenses 5,737.7 5,311.8 5,587.4 6,085.4

Total Operating Expenditure 46,974.4 43,171.1 48,236.0 52,385.3

EBITDA 6,639.6 6,302.5 6,275.6 6,984.8

Growth (%) 6.7 -5.1 -0.4 11.3

Depreciation 1,860.4 2,201.6 2,453.0 2,671.7

Interest 113.4 108.9 97.5 83.1

Other Income 1,689.0 1,637.6 1,715.7 1,842.2

PBT 6,354.8 5,629.6 5,440.9 6,072.3

Others (incl exceptional item) 29.7 -766.5 0.0 0.0

Total Tax 1,529.0 1,566.7 1,371.1 1,530.2

PAT 4,796.1 4,829.3 4,069.8 4,542.1

Adjusted PAT 4,818.6 4,250.6 4,069.8 4,542.1

Growth (%) 10.1 0.7 -15.7 11.6

EPS (|) 38.6 38.8 32.7 36.5


Exhibit 16: Cash flow statement | crore


Profit after Tax 4,796.1 4,829.3 4,069.8 4,542.1

Add: Depreciation 1,860.4 2,201.6 2,453.0 2,671.7

(Inc)/dec in Current Assets -1,803.9 1,033.0 -992.6 -957.3

Inc/(dec) in CL and Provisions 1,230.8 -1,701.3 1,165.8 1,125.2

CF from operating activities 6,083.4 6,362.6 6,696.0 7,381.6

(Inc)/dec in Investments -1,341.3 -2,700.0 -2,100.0 -2,100.0

(Inc)/dec in Fixed Assets -3,373.7 -3,000.0 -3,000.0 -3,000.0

Others 734.7 21.8 -26.6 -25.6

CF from investing activities (3,980.4) (5,678.2) (5,126.6) (5,125.6)

Issue/(Buy back) of Equity -195.9 0.0 0.0 0.0

Inc/(dec) in loan funds -384.1 -300.0 -300.0 -300.0

Dividend paid & dividend tax -1,268.1 -1,268.1 -1,056.7 -1,243.2

Others 582.9 0.0 0.0 0.0

CF from financing activities (1,265.2) (1,568.1) (1,356.7) (1,543.2)

Net Cash flow 837.8 -883.7 212.7 712.8

Opening Cash 2,893.7 3,731.5 2,847.9 3,060.6

Closing Cash 3,731.5 2,847.9 3,060.6 3,773.4


Exhibit 17: Balance Sheet | crore


Liabilities

Equity Capital 595.8 595.8 595.8 595.8

Reserve and Surplus 33,613.4 37,174.6 40,187.7 43,486.6

Total Shareholders funds 34,209.2 37,770.4 40,783.5 44,082.4

Total Debt 2,480.3 2,180.3 1,880.3 1,580.3

Deferred Tax Liability 634.1 634.1 634.1 634.1

Others 1,487.9 1,372.9 1,512.8 1,647.6

Total Liabilities 38,811.5 41,957.9 44,810.7 47,944.4

Assets

Gross Block 21,974.6 25,394.4 28,394.4 31,394.4

Less: Acc Depreciation 11,892.9 14,094.5 16,547.5 19,219.1

Net Block 10,081.7 11,300.0 11,846.9 12,175.3

Capital WIP 2,419.8 2,000.0 2,000.0 2,000.0

Total Fixed Assets 12,501.5 13,300.0 13,846.9 14,175.3

Other investments 19,032.1 21,032.1 23,032.1 25,032.1

Liquid Investments 3,002.4 3,702.4 3,802.4 3,902.4

Inventory 3,839.3 3,659.7 4,032.4 4,391.8

Debtors 3,946.3 4,066.3 4,480.4 4,879.7

Loans and Advances 673.4 374.0 412.1 448.8

Other current assets 2,321.8 1,647.8 1,815.6 1,977.4

Cash 3,731.5 2,847.9 3,060.6 3,773.4

Total Current Assets 15,068.6 13,151.9 14,357.3 16,027.4

Creditors 9,678.2 8,403.7 9,259.5 10,084.8

Provisions 688.7 682.0 751.5 818.5

Total Current Liabilities 10,366.9 9,085.8 10,011.0 10,903.3

Net Current Assets 4,701.8 4,066.2 4,346.3 5,124.1

Application of Funds 38,811.5 41,957.9 44,810.7 47,944.4


Exhibit 18: Key ratios


Per share data (|)

EPS 38.6 38.8 32.7 36.5

Cash EPS 53.5 56.6 52.5 58.0

BV 275.2 303.8 328.1 354.6

DPS 8.5 8.5 8.5 10.0

Cash Per Share 30.0 22.9 24.6 30.4

Operating Ratios (%)

EBITDA Margin 12.4 12.7 11.5 11.8

PBT / Net sales 8.9 8.3 7.0 7.3

PAT Margin 8.9 9.8 7.5 7.7

Inventory days 26.1 27.0 27.0 27.0

Debtor days 26.9 30.0 30.0 30.0

Creditor days 65.9 62.0 62.0 62.0

Return Ratios (%)

RoE 14.1 11.3 10.0 10.3

RoCE 16.7 13.7 12.4 12.8

RoIC 17.7 13.3 11.5 12.2

Valuation Ratios (x)

P/E 13.6 13.5 16.0 14.4

EV / EBITDA 9.2 9.7 9.6 8.5

EV / Net Sales 1.1 1.2 1.1 1.0

Market Cap / Sales 1.2 1.3 1.2 1.1

Price to Book Value 1.9 1.7 1.6 1.5

Solvency Ratios

Debt/Equity 0.1 0.1 0.0 0.0

Current Ratio 0.8 0.9 0.9 0.9

Quick Ratio 0.5 0.5 0.5 0.5





Exhibit 19: ICICI Direct 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

Apollo Tyre (APOTYR) 170 165 Hold 9725 11.9 8.0 10.2 14.3 21.3 16.7 8.1 8.1 6.6 8.0 4.7 6.4 8.3 4.4 5.5

Ashok Leyland (ASHLEY) 81 75 Hold 23778 6.8 3.9 4.1 12.0 20.5 20.0 7.1 10.9 10.2 26.9 14.5 14.2 24.3 13.9 13.1

Bajaj Auto (BAAUTO) 3163 3300 Hold 91528 161.6 171.3 175.0 19.5 18.4 18.0 14.9 13.8 12.8 21.0 19.7 24.4 19.9 20.3 18.7

Bharat Forge (BHAFOR) 485 465 Hold 22580 22.2 17.9 17.4 21.9 27.2 27.9 12.7 16.3 15.8 17.9 12.8 12.7 19.1 14.0 13.3

Eicher Motors (EICMOT) 20420 19750 Hold 55665 808.1 756.0 798.2 25.3 27.0 25.6 18.1 21.6 19.3 32.5 23.4 22.2 24.8 19.6 17.7

Escorts (ESCORT) 855 810 Hold 10481 39.6 39.5 43.3 21.6 21.7 19.8 12.6 12.8 11.5 21.7 18.1 17.4 15.6 14.2 13.4

Exide Industries (EXIIND) 185 220 Buy 15725 9.9 9.6 10.3 18.6 19.3 17.9 10.9 10.8 9.9 18.4 16.3 16.2 12.9 12.8 12.3

Hero Moto (HERHON) 2425 2800 Buy 48427 169.5 191.4 176.7 14.3 12.7 13.7 8.9 9.8 8.8 37.1 29.1 28.8 26.3 23.7 22.3

M&M (MAHMAH) 525 680 Buy 65268 38.6 38.8 32.7 13.6 13.5 16.1 9.2 9.7 9.6 16.7 13.7 12.4 14.1 11.3 10.0

Maruti Suzuki (MARUTI) 7038 5850 Sell 212604 248.3 201.4 227.7 28.3 34.9 30.9 16.0 21.8 19.0 16.3 8.7 9.7 16.3 12.3 12.9

Tata Motors (TATMOT) 184 200 Hold 65790 -84.6 4.0 21.3 -2.2 45.9 8.6 4.4 4.1 3.2 5.4 8.1 12.0 7.1 6.1 14.7

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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