Wabco India (WABIND) | 6290content.icicidirect.com/mailimages/IDirect_WabcoIndia_Q3FY19.pdfenhances safety, efficiency and connectivity of commercial vehicles. It has recently signed

January 30, 2019

ICICI Securities Ltd | Retail Equity Research

Result Update

Healthy Q3 despite M&HCV blip!

Wabco India (WIL) reported a healthy Q3FY19 performance

WIL's revenue grew 7.7% YoY to | 700 crore. While net sales

amounted to | 653.2 crore (up 6.1% YoY), other operating income

grew 35.8% YoY to | 46.7 crore. We estimate that the core Air

Actuation System segment and exports would each have grown

~5% YoY. Other operating income includes income from

Merchandise Exports from India Scheme (MEIS)

EBITDA at | 100.5 crore was flattish YoY with corresponding EBITDA

margins at 14.4% (down 107 bps YoY)

Its other income for the quarter was at | 9.7 crore against its recent

run rate of ~| 25 crore

Subsequently, reported PAT dipped 6.3% YoY to | 59.8 crore

Wabco product profile catering to safety norms, structural play

Wabco is a leading braking system solution provider to domestic M&HCV

OEM space and has a near monopoly in this segment. Wabco derives in

excess of 50% of its sales from this segment with the rest being exports

(~30%) and replacement market (~15%). The company is a clear

beneficiary of stringent regulations over safety norms with a jump in sales

in FY16 post the government making it mandatory for new M&HCV

vehicles to possess antilock braking system (ABS) from April 2015. Since

then, the growth trajectory has been largely linear with the company able

to outperform the M&HCV industry growth rates by steadily increasing its

content per vehicle. With existing fleet prior to April 2015 still lacking

ABS, we expect a large untapped opportunity, which will ensure growth

will largely sustain, going forward.

M&HCV volumes miss a temporary blip, BS-VI growth support in FY20E

M&HCV cycle is on an uptrend after 2016 primarily tracking a pick-up in

infrastructure development as well as industrial activity. Domestic M&HCV

volumes in FY16 were at 3.02 lakh units, up 29.9% YoY while the same in

FY18 was at 3.40 lakh units, up 12.5% YoY. Growth was robust in H1FY19

with volumes at 1.90 lakh units, up 47.9% YoY. However, given the

liquidity crises in the NBFC space domestically, coupled with a rise in fuel

costs as well as new axle load norms encouraging lower tonnage

purchases, the industry witnessed a decline in Q3FY19 with volumes de-

growing ~ 7.1% YoY. With the high base of Q4FY18, we expect volumes

to remain muted in Q4FY19E with demand reviving in FY20E on account

of pre-buying before implementation of new BS-VI norms from April

2020, which will substantially increase the vehicle costs by ~10%+.

Consequently, we expect sales to grow 15.1% YoY in FY20E, over and

above 18.3% growth expectation in FY19E.

MNC parent, healthy B/S, quality product profile, retain HOLD!

Wabco India is a subsidiary of the Wabco group, which is a global

supplier of technology that enhances safety, efficiency and connectivity of

commercial vehicles. It possesses a debt free, cash surplus balance sheet

and realises healthy 20%+ return ratios thereby providing good margin of

safety. Incorporating Q3FY19 numbers, revising our estimates, we now

expect sales & PAT to grow at a CAGR of 16.3% & 21.5%, respectively in

FY19E-FY20E. We value Wabco at | 6800 i.e. 32x P/E (in line with the

company’s long term one-year forward multiple of ~30x) on FY20E EPS

of | 212.3/share and assign a HOLD rating to the stock. We also draw

comfort from healthy cash flow generation at Wabco with present CFO

yield at ~2.5% and FCF yield at ~2%.

Rating matrix

Rating : Hold

Target : | 6800

Target Period : 12 months

Potential Upside : 8%

What’s Changed?

Target Changed from | 7200 to | 6800

EPS FY19E Changed from | 192 to | 172.2

EPS FY20E Changed from | 211.9 to | 212.3

Rating Unchanged

Quarterly Performance

(| Crore) Q3FY19 Q3FY18 YoY Q2FY19 QoQ

Revenues 699.9 649.9 7.7 742.8 -5.8

EBITDA 100.5 100.3 0.2 123.1 -18.4

EBITDA (%) 14.4 15.4 -107 bps 16.6 -222 bps

PAT 59.8 63.8 -6.3 95.5 -37.4

Key Financials

| Crore FY17 FY18 FY19E FY20E

Net Sales 1,960 2,436 2,830 3,298

EBITDA 326.4 394.2 454.8 558.5

Net Profit 213.5 272.8 326.6 402.7

EPS (|) 112.5 143.8 172.2 212.3

Valuation summary

FY17 FY18 FY19E FY20E

P/E (x) 55.9 43.7 36.5 29.6

Target P/E (x) 60.4 47.3 39.5 32.0

EV/EBITDA (x) 34.8 28.2 24.3 19.3

P/BV (x) 9.4 7.8 6.5 5.4

RoNW (%) 16.9 17.9 17.8 18.2

RoCE (%) 23.6 25.1 25.7 26.0

Stock data

Particular Amount

Market Capitalization (| Crore) | 11930.6 Crore

Total Debt (FY18) (| Crore) | 0 Crore

Cash & Investments (FY18) (| Crore) | 801.8 Crore

EV (| Crore) | 11128.9 Crore

52 week H/L (|) 8320/6000

Equity capital (| crore) | 9.5 Crore

Face value (|) | 5

DII Holding (%) 13.1

FII Holding (%) 2.9

Price performance (%)

1M 3M 6M 12M

Wabco India Ltd -10.1 -0.7 -8.1 -17.9

Bosch Ltd -7.4 -2.8 -2.5 -8.6

Motherson Sumi Systems -12.6 -6.6 -33.0 -42.3

Wabco India (WABIND) | 6290

Research Analyst

Shashank Kanodia, CFA

[email protected]

Jaimin Desai

[email protected]

ICICI Securities Ltd | Retail Equity Research Page 2

Company Analysis

Variance analysis - Standalone

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

Total Operating Income 699.9 611.0 649.9 7.7 742.8 -5.8 Other operating income was up 35.8% YoY to | 47 crore and included income from

merchandise exports from India scheme (MEIS)

Raw Material Expenses 443.7 393.1 401.4 10.5 455.9 -2.7

Employee Expenses 65.4 57.4 57.9 13.0 66.5 -1.7

Other expenses 90.4 80.3 90.4 0.1 97.3 -7.1

Operating Profit (EBITDA) 100.5 80.2 100.3 0.2 123.1 -18.4

EBITDA Margin (%) 14.4 13.1 15.4 -107 bps 16.6 -222 bps On a QoQ basis, margin contraction was led by increase in RM cost (201 bps).

However, some of the impact was mitigated by lower other expenses (-18 bps)

Other Income 9.7 20.1 6.4 51.3 25.7 -62.2 Other income was far lower than usual run rate of | 25 crore

Depreciation 18 17 15 16.1 17 4.7

Interest 0 0 0 0

Total tax 33 24 28 18.7 36 -10.2

PAT 59.8 59.5 63.8 -6.3 95.5 -37.4 Higher than anticipated raw material expenses crimped on profitability even though

operating income and EBITDA margins were above estimates

EPS 31.5 31.4 33.6 -6.3 50.4 -37.4

Source: Company, ICICI Direct Research

Change in estimates

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

Revenue 2,895 3,038 4.9 3,291 3,496 6.2

Upward revision in revenues factoring in increase in exports and BS-VI pre buy led

domestic volume growth

EBITDA 477 455 -4.6 545 559 2.5

EBITDA Margin (%) 16.5 15.0 -150 bps 16.6 16.0 -58 bps Higher other expenses to weigh on margins

PAT 364 327 -10.3 402 403 0.2 Increase in tax rate in line with recent quarters

EPS (|) 192.0 172.2 -10.3 211.9 212.3 0.2

FY19E FY20E


Assumptions

Current Earlier Introduced Comments

FY17 FY18 FY19E FY20E FY19E FY20EFY20E

Revenue (| crore)

OEM 1,068 1,298 1,591 1,849 1,625 1,843 We largely maintain our estimates

Replacement 317 363 401 442 403 450

Exports 578 777 839 1,007 868 998



Monopoly braking systems business to drive sales growth

Wabco is an attractive ancillary company due to the near monopoly

positioning in braking and advanced safety components, which we

believe will remain critical for all OEMs. We believe WIL would witness a

better demand scenario in the automotive space in coming years

considering that, in the past, demand conditions were weak.

M&HCV cycle is on an uptrend after 2016 primarily tracking pick-up in

infrastructure development as well as industrial activity. According to

Siam, domestic M&HCV volumes in FY16 was at 3.02 lakh units, up 29.9%

YoY while the same in FY18 was at 3.40 lakh units, up 12.5% YoY. The

growth was robust in H1FY19 with volumes at 1.90 lakh units, up 47.9%

YoY. However, given the liquidity crises in the NBFC space domestically,

coupled with rise in fuel costs as well as new axle load norms

encouraging lower tonnage purchases, the industry witnessed decline in

Q3FY19 with volumes de-growing ~ 7.1 % YoY. With a high base of

Q4FY18, we expect the volumes to remain muted in Q4FY19E with

demand reviving in FY20E on account of pre-buying before the

implementation of new BS-VI norms from April 2020 which will

substantially increase the vehicle costs by ~10%+.

Implementation of nationwide scrappage policy, going forward, could

provide an additional volume boost. WIL is also increasing the overall

(braking related) content per vehicle in India, which is at ~ $500/vehicle,

far below international averages in major auto markets.

We believe M&HCV production volume will grow by 12-15% in FY20E.

WIL is a unique proxy to a CV revival. Thus, we estimate overall revenues

to report CAGR of 16.3% in FY19E-20E.

Exhibit 1: Revenue growth trend for WIL

917.4

1,045.8

1,271.5

1,739.9

1,959.9

2,436.2

2,830.2

3,298.3

(8.7)

14.0 21.6

36.8

12.6

24.3

16.2 16.5

-20

-10

-

10

20

30

40

-

300

600

900

1,200

1,500

1,800

2,100

2,400

2,700

3,000

3,300

3,600

FY13 FY14 FY15 FY16 FY17 FY18 FY19E FY20E

(%

)

(| crore)

Net Sales Growth (%)



Exhibit 2: Revenue break-up across segments

59

42 4

9 52

54

53 56

56

19

18

17 16 16

15 14

13

22

40 3

4

32 29

32

30

31

30

40

50

60

70

80

90

100


(%

) OEM Replacement Exports


Remains preferred source for its parent

Of total export revenues, US, Europe, Asia account for 40%, 40%, 20%,

respectively. WIL’s parent’s strategy is to source from the low cost

countries such as India, China, Brazil & Poland. Contribution from these

countries improved from ~10% in 2000 to 44% in 2015, thus benefiting

WIL. The parent Wabco Holdings is a global supplier of technology, which

enhances safety, efficiency and connectivity of commercial vehicles. It

has recently signed an agreement for supply of automated manual

transmission (AMT) control technology in addition to another long term

agreement for providing advanced driver assistance systems and

efficiency technologies to major global CV manufacturers.

Possible royalty reworking norms not a drag on WIL margins

In April 2016, the board of WIL decided to hike its royalty payment from

~1% to 4% for using licensed intangibles and technical know-how from

its parent. The royalty is applicable only on the domestic business and

would not be levied on exports that are largely to its parent and other

related group entities. There is the possibility of new norms that restrict

royalty payments by Indian companies to 4% of domestic sales in the

case of technology transfer collaborations. In case of WIL, royalty and

technical fees as a percentage of revenue has not exceeded the 3% mark.

Thus, we do not expect any impact on margins in the event of

implementation of proposed norms. We expect EBITDA margins to be in

the range of 15-16% in FY19E and FY20E.

Growth in OEM share was boosted by addition of ABS from

FY15 onwards. ABS is likely to contribute ~| 411,

~| 452 in FY19E & FY20E, respectively

Exhibit 3: EBITDA and margin movement over the years …

219.9

194.1

166.2

203.4

292.7

326.4

394.2

454.8

558.5

21.0 20.1

15.0 15.1 15.9 15.8 15.3 15.0

16.0

-

5

10

15

20

25

-

100

200

300

400

500

600

FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19E FY20E

(%

)

(| crore)

EBIDTA EBIDTA Margin (%)



Strong CFOs; robust return ratios; “zero-debt” ancillary

WIL’s financials remain in good shape as it is debt-free, generating strong

cash flow from its operations every year and a lean working capital cycle.

Domestic M&HCV industry weakness had reduced return ratios in FY13-14

below erstwhile 20% run rate. However, the same has again moved up

from FY15 onwards and is expected to continue its trend, going forward.

For FY20E, we expect its RoE & RoCE at 18% & 26%, respectively.

Exhibit 4: Healthy CFO/EBIDTA

160.4

93.1

154.5

137.6

289.3

226.5

366.1

224.7

419.7

73.0

48.0

93.0

67.7

98.8

69.4

92.9

49.4

75.1

8

18

28

38

48

58

68

78

88

98

108

-

50

100

150

200

250

300

350

400

450


(%

)

(| crore)

CFO CFO/EBIDTA


Exhibit 5: Comfortable working capital situation

58

84

66

61

53

57

35

50 50

40

51

37

32

35

26

19

20

20

55

72

76

81 8

7 91

92

90

90

38

39

47

52

69

60

76

60

60

-

10

20

30

40

50

60

70

80

90

100


(days)

Inventory Days Debtor Days Creditor Days Operating Cycle



Exhibit 6: Return ratio profile improves

48.5

40.1

28.0

20.9

20.1

25.5 23.6

25.1 25.7

26.0

33.0

29.0

20.2

15.6

14.0

19.4

16.9

17.9 17.8 18.2

10

20

30

40

50

FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19E FY20E

(%

)

RoCE RoE


Profitability to remain at elevated level

We believe higher revenue growth will aid profitability. We expect a major

improvement in PAT margins from 9% in FY15 to 11.5% (up 250 bps) in

FY20E. We expect PAT to post a CAGR of 21.5% in FY19E-20E to | 403

crore.

Exhibit 7: Profitability to improve, going forward

130.8

117.5

120.7

204.4

213.5

272.8

326.6

402.7

13.5

10.6

9.0

11.1

10.3 10.6 10.8

11.5

8

9

10

11

12

13

14

-

50

100

150

200

250

300

350

400

450


(%

)

(| crore)

PAT PAT Margin (%)



Outlook and valuation

With profitability expected to grow at 21.5% CAGR in FY19E-20E and the

company in low capex mode over the next two or three years, FCFs are

likely to remain strong. With Wabco managing strong return ratios even

when the truck industry was under severe duress, we believe the strength

of the balance sheet and the healthy return ratio profile is commendable.

WIL’s strong monopoly position in braking components is likely to sustain

in both the OEM and after-market segments.

Wabco India is a subsidiary of Wabco group, which is a global supplier of

technology that enhances safety, efficiency and connectivity of

commercial vehicles. It possesses a debt free, cash surplus balance sheet

and realises healthy 20%+ return ratios thereby providing good margin of

safety. Incorporating Q3FY19 numbers, revising our estimates, we now

expect sales & PAT to grow at a CAGR of 16.3% & 21.5%, respectively, in

FY19E-20E. We value Wabco at | 6800 i.e. 32x P/E (in line with the

company’s long term one-year forward multiple of ~30x) on FY20E EPS

of | 212.3/share and assign a HOLD rating on the stock.

Exhibit 8: Valuation

Revenues Growth EPS Growth PE EV/EBITDA RoNW RoCE

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

FY17 2067.5 12.5 112.5 4.5 55.9 34.8 16.9 23.6

FY18 2568.9 24.3 143.8 27.8 43.7 28.2 17.9 25.1

FY19E 3037.7 18.3 172.2 19.7 36.5 24.3 17.8 25.7

FY20E 3496.1 15.1 212.3 23.3 29.6 19.3 18.2 26.0


Exhibit 9: One year forward P/E (WIL currently trading at 29.6x)

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 49.3x 41.3x 37.3x 33.3x 21.3x 13.3x 5.4x

Source: Bloomberg, ICICI Direct Research


Recommended history vs. consensus

0.0

20.0

40.0

60.0

80.0

100.0

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

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

(%

)(|)

Price Idirect target Consensus Target Mean % Consensus with SELL

Source: Bloomberg, Company, ICICI Direct Research

Key events

Date Event

Jan-10 Wabco India expands into vehicle control systems

May-10 Venu Srinivasan steps down as Chairman of the company

Jul-11 Changes the name to Wabco India from Wabco TVS

Sep-12 Wabco unveils manufacturing facility at Chennai's Mahindra World City aiming at exports

Jan-13 Weakness in OEM volumes starts showing impact as topline de-grows

May-13 Media reports state possibility of notification of mandatory ABS implelmentation for commercial vehicles

Oct-13 Q2FY14 marred by lowest operating profit in nearly three years at ~13%

Dec-13 Expectation of improvement in M&HCV segment volumes in fourth quarter on the back of a sequential improvement in volumes

Jun-14 Government notification for mandatory ABS implementation in medium & heavy truck bus segment in FY16E

Dec-14 Wabco India equity shares get delisted from Madras Stock Exchange


Top 10 Shareholders Shareholding Pattern

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

1 Wabco Asia Pvt. Ltd. 31-Dec-18 75.0 14.2 0.00

2 Axis Asset Management Company Limited 31-Dec-18 4.0 0.8 0.03

3 Franklin Templeton Asset Management (India) Pvt. Ltd. 31-Dec-18 1.1 0.2 -0.01

4 Sundaram Asset Management Company Limited 31-Dec-18 1.0 0.2 -0.03

5 UTI Asset Management Co. Ltd. 31-Dec-18 0.8 0.2 0.00

6 The Vanguard Group, Inc. 31-Dec-18 0.6 0.1 0.00

7 Aditya Birla Sun Life AMC Limited 31-Dec-18 0.6 0.1 0.00

8 Tata Asset Management Limited 31-Dec-18 0.5 0.1 0.00

9 Motilal Oswal Asset Management Company Ltd. 30-Nov-18 0.5 0.1 0.00

10 Dimensional Fund Advisors, L.P. 31-Dec-18 0.3 0.1 0.00

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

Promoter 75.0 75.0 75.0 75.0 75.0

FII 2.7 2.6 2.7 2.8 2.9

DII 12.9 13.1 13.0 13.1 13.1

Others 9.4 9.3 9.3 9.1 9.0

Source: Reuters, ICICI Direct Research

Recent Activity

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

Axis Asset Management Company Limited 3.338 0.033 Sundaram Asset Management Company Limited -3.155 -0.032

Stanley-Laman Group, Ltd. 2.386 0.025 L&T Investment Management Limited -1.549 -0.015

The Vanguard Group, Inc. 0.184 0.002 Union Asset Management Company Private Limited -0.606 -0.006

BlackRock Asset Management Ireland Limited 0.073 0.001 Franklin Templeton Asset Management (India) Pvt. Ltd. -0.551 -0.005

BlackRock Institutional Trust Company, N.A. 0.043 0.000 Julius Baer International Ltd. -0.154 -0.002

Buys Sells

Source: Reuters, ICICI Direct Research


.

Financial summary

Profit and loss statement | Crore

(Year-end March) FY17 FY18 FY19E FY20E

Total operating Income 2,067.5 2,568.9 3,037.7 3,496.1

Growth (%) 12.5 24.3 18.3 15.1

Raw Material Expenses 1,238.1 1,601.9 1,934.2 2,203.2

Employee Expenses 191.1 229.1 260.3 299.0

Other Expenses 311.9 343.7 388.4 435.4

Total Operating Expenditure 1,741.1 2,174.7 2,582.9 2,937.6

EBITDA 326.4 394.2 454.8 558.5

Growth (%) 11.5 20.8 15.4 22.8

Depreciation 61.6 61.7 68.3 82.2

Interest 0.5 1.6 0.0 0.0

Other Income 36.2 51.0 84.5 98.9

PBT 300.5 381.8 470.9 575.3

Exceptional items 0.0 0.0 0.0 0.0

Total Tax 87.0 109.0 144.3 172.6

PAT 213.5 272.8 326.6 402.7

Growth (%) 4.5 27.8 19.7 23.3

EPS (|) 112.5 143.8 172.2 212.3


Cash flow statement | Crore


Profit after Tax 213.5 272.8 326.6 402.7

Add: Depreciation 61.6 61.7 68.3 82.2

(Inc)/dec in Current Assets -53.6 -137.3 -151.8 -154.8

Inc/(dec) in CL and Provisions 4.6 167.2 -18.5 89.7

CF from operating activities 226.5 366.1 224.7 419.7

(Inc)/dec in Investments -77.9 -147.5 -75.0 -250.0

(Inc)/dec in Fixed Assets -67.9 -93.5 -100.0 -100.0

Others -35.0 6.3 -5.3 -5.1

CF from investing activities -171.1 -262.0 -189.9 -364.6

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

Inc/(dec) in loan funds 0.0 0.0 0.0 0.0

Dividend paid & dividend tax -16.1 -18.3 -20.6 -22.9

Others 14.8 3.4 0.0 0.0

CF from financing activities -1.3 -14.9 -20.7 -22.9

Net Cash flow 54.2 89.2 14.1 32.2

Opening Cash 212.7 266.9 356.1 370.2

Closing Cash 266.9 356.1 370.2 402.4


Balance sheet | Crore


Liabilities

Equity Capital 9.5 9.5 9.5 9.5

Reserve and Surplus 1,256.9 1,516.4 1,822.4 2,202.2

Total Shareholders funds 1,266.4 1,525.9 1,831.9 2,211.7

Total Debt 0.0 0.0 0.0 0.0

Deferred Tax Liability 25.1 30.3 30.3 30.3

Total Liabilities 1,291.6 1,556.3 1,862.2 2,242.0

Assets

Gross Block 649.8 752.5 894.9 994.9

Less: Acc Depreciation 331.9 393.6 462.0 544.1

Net Block 317.9 358.9 433.0 450.8

Capital WIP 61.7 52.4 10.0 10.0

Total Fixed Assets 379.6 411.3 443.0 460.8

Investments 298.1 445.7 520.7 770.7

Inventory 145.3 132.4 166.5 191.6

Debtors 518.0 648.3 749.0 862.1

Loans and Advances 70.9 87.3 103.2 118.8

Other current assets 2.7 6.3 7.4 8.5

Cash 266.9 356.1 370.2 402.4

Total Current Assets 1,003.9 1,230.4 1,396.3 1,583.3

Creditors 341.9 532.4 499.4 574.7

Provisions 16.5 26.5 26.5 26.5

Other Current Liabilities 92.9 80.0 94.6 108.8

Total Current Liabilities 451.4 638.9 620.4 710.1

Net Current Assets 552.5 591.4 775.8 873.2

Other non-current Assets 20 53 62 72

Application of Funds 1,291.6 1,556.3 1,862.2 2,242.0


Key ratios


Per share data (|)

EPS 112.5 143.8 172.2 212.3

Cash EPS 145.0 176.4 208.2 255.6

BV 667.7 804.5 965.8 1,166.0

DPS 7.0 8.0 9.0 10.0

Cash Per Share 140.7 187.7 195.2 212.2

Operating Ratios (%)

EBITDA Margin 15.8 15.3 15.0 16.0

PBIT / Net sales 12.8 12.9 12.7 13.6

PAT Margin 10.3 10.6 10.8 11.5

Inventory days 25.7 18.8 20.0 20.0

Debtor days 60.4 75.7 60.0 60.0

Creditor days 91.4 92.1 90.0 90.0

Return Ratios (%)

RoE 16.9 17.9 17.8 18.2

RoCE 23.6 25.1 25.7 26.0

RoIC 37.7 47.5 40.3 45.1

Valuation Ratios (x)

P/E 55.9 43.7 36.5 29.6

EV / EBITDA 34.8 28.2 24.3 19.3

EV / Net Sales 5.5 4.3 3.6 3.1

Market Cap / Sales 5.8 4.6 3.9 3.4

Price to Book Value 9.4 7.8 6.5 5.4

Solvency Ratios

Debt/Equity 0.0 0.0 0.0 0.0

Current Ratio 2.1 1.6 2.1 2.1

Quick Ratio 1.7 1.4 1.7 1.7



ICICI Direct 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) 670 700 Hold 8213 28.1 40.7 44.1 23.8 16.5 15.2 14.2 10.6 9.3 18.8 20.9 20.8 13.5 16.5 15.3

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) 6250 6800 Hold 11875 143.8 172.2 212.3 43.5 36.3 29.4 28.0 24.1 19.1 17.9 17.8 18.2 25.1 25.7 26.0

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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