August 8, 2017
ICICI Securities Ltd | Retail Equity Research
Result Update
Margins to recover from Q2FY18!
Apollo Tyres’ (ATL) Q1FY18, consolidated revenues were at | 3,283
crore (down 0.9% YoY) vs. our estimate of | 3,649 crore. Revenue
was impacted mainly after 1) the domestic business reported volume
de-growth of 4% volume impacted by transition to BS IV norms &
implementation of GST in Q1FY18 while 2) currency fluctuations
impacted European operations. Revenues from Asia Pacific Middle
East and Africa (APMEA) grew 0.9% YoY to | 2,584 crore while
revenue from Europe declined 3.6% YoY to | 1016 crore
EBITDA margins came in at 8.3% (down 795 bps YoY & 280 bps
QoQ) mainly due to higher cost raw material inventory, which
impacted the gross margin (down 1045 bps YoY & 312 bps QoQ).
Subsequently, consolidated PAT declined 72% YoY to | 88.3 crore
below our estimate of | 254.7 crore
ATL expects OEM & replacement (being impacted by GST) demand
to revive gradually. It expects the benefit of low cost inventory to
accrue from Q2FY18 onwards. The start-up cost of its Hungary plant
& Truck radial sale will exert some pressure on margins in European
operations
Re-stocking (post GST), ADD supplementing demand
ATL is well placed to benefit from the radialisation story in India. It enjoys
a 25% market share in truck tyre segment (in both TBB & TBR). The
company is likely to improve radial volumes and is increasing its radial
capacity, (phase 1 of radial capacity has been commissioned in Q4CY16)
with full capacity set to come on stream in mid-2018, thus driving its
growth. Further, the Directorate General of Anti-dumping & Allied Duties
(DGAA) has recommended imposition of anti-dumping duty of $245/MT
to 452/MT on TBR tyres imported from China. We believe if the same is
implemented it would be positive for Indian TBR players (like ATL) as 1) it
would narrow the pricing gap (10%-12%) between cheaper Chinese &
Indian TBR tyres; 2) thereby helping Indian players to increase their
market share in the overall pie. The management believes though the
quantum of Chinese TBR has reduced (from high of 155,000/month in the
past) due to demonetisation; the TBR import still are at high level of
~100,000/month & can go down <70,000/month with the duty. The re-
stocking of tyre inventory by the dealer (post GST) will further boost
demand. Thus, management is positive on demand outlook, going ahead.
Margin impacted in Q1FY18E but expected to recover
Average prices of natural rubber (NR) from its lows in February 2016
(| 94/kg) moved northwards to | 159/kg in February 2017 and are
currently at | 131/kg. Q1FY18 margins were impacted mainly due to high
cost raw material inventory as - average NR cost for ATL was at | 170/kg
(includes | 15/kg logistics cost) while that of synthetic rubber & carbon
black was at | 170/kg and | 65/kg, respectively. ATL expects benefits of
low cost inventory to accrue from Q2FY18 onwards thereby supporting
margins on a QoQ basis. The start-up cost in Hungary plant & truck radial
sale is likely to impact margins in the near term. However, they are
expected to move southwards as the volume picks up, going forward.
Thus, we expect lower margins in FY18E with an improvement in FY19E.
Decent business case as valuations remain fair!
ATL is investing in more diversified, rapid growth areas coupled with a
larger scale of business in coming years. Further, the management
expects demand to recover, going forward. Thus, we maintain BUY
rating, valuing ATL at 13x FY19E EPS to arrive at a target price of | 315.
Rating matrix
Rating : Buy
Target : | 315
Target Period : 12 months
Potential Upside : 13%
What’s Changed?
Target Changed from | 280 to | 315
EPS FY18E Changed from | 19.7 to | 17.3
EPS FY19E Changed from | 23.3 to | 24.2
Rating Unchanged
Quarterly Performance
(| Crore) Q1FY18 Q1FY17 YoY Q4FY17 QoQ
Revenues 3,282.5 3,311.6 -0.9 3,325.6 -1.3
EBITDA 273.3 538.8 -49.3 369.9 -26.1
EBITDA (%) 8.3 16.3 -795 bps 11.1 -280 bps
Reported PAT 88.3 315.2 -72.0 228.2 -61.3
Key Financials
| Crore FY16 FY17E FY18E FY19E
Net Sales 11,740 13,063 14,107 15,690
EBITDA 1,997.5 1,846.4 1,646.9 2,114.4
Net Profit 1,123.0 1,099.0 866.0 1,222.2
EPS (|) 22.3 21.8 17.2 24.2
Valuation summary
FY16 FY17E FY18E FY19E
P/E (x) 12.9 12.8 16.3 11.5
Tgt P/E (x) 14.1 14.5 18.3 13.0
EV/EBITDA (x) 7.2 9.0 10.7 8.2
P/BV (x) 2.1 1.9 1.8 1.6
RoNW (%) 16.5 15.1 10.8 13.5
RoCE (%) 18.8 13.6 10.2 13.0
Stock data
Particular Amount
Market Capitalization (| Crore) | 14115 Crore
Total Debt (FY17) (| Crore) 3,244.5
Cash & Investments (FY17) (| Crore) 731.3
EV (| Crore) 16,627.7
52 week H/L (|) 288 / 166
Equity capital (| crore) | 50.4 Crore
Face value (|) | 1
Price performance (%)
1M 3M 6M 12M
Apollo Tyres Ltd 10.3 16.1 56.3 63.2
JK Tyres -2.0 -6.2 40.2 61.8
CEAT Ltd -4.7 9.3 58.3 99.7
MRF Ltd -2.8 -0.5 34.5 83.0
Balkrishna Industries Ltd -3.2 8.7 44.6 123.4
Research Analyst
Nishit Zota
Vidrum Mehta
Apollo Tyres (APOTYR) | 280
ICICI Securities Ltd | Retail Equity Research Page 2
Variance analysis- Consolidated
(| crore) Q1FY18 Q1FY18E Q1FY17 YoY (%) Q4FY17 QoQ (%) Comments
Total Operating Income 3,282 3,649 3,312 -0.9 3,326 -1.3 Revenues came in lower mainly after 1) domestic business witnessed 4%
volume de-growth mainly impacted by transition to BS IV norms &
implementation of GST and 2) currency fluctuations impacted European
operations
Raw Material Expenses 1,947 1,942 1,619 20.3 1,869 4.2 Higher raw material cost, which impacted gross margin of the company
(down 1045 bps YoY & 312 bps QoQ)
Employee Expenses 431 478 449 -3.9 412 4.7
Other expenses 630 753 705 -10.6 675 -6.5
EBITDA 273 475 539 -49.3 370 -26.1
EBITDA Margin (%) 8.3 13.0 16.3 -795 bps 11.1 -280 bps Higher input cost dragged margins
Depreciation 126 131 106 18.7 137 -7.9
Interest 34.0 30.1 26.9 26.4 25 37.3
Other income 8.8 34.9 27.8 -68.5 50.0 -82.5
Tax 33.8 94.2 118.1 -71.4 30 11.6
PAT 88.3 254.7 315.2 -72.0 228.2 -61.3 Lower-than-expected topline & margin resulted in lower profits against our
estimates
EPS (|) 1.8 5.1 6.3 -72.0 4.5 -61.3
Key Metrics
Revenue (| crore)
India 2,585 2,561 0.9 2,691 -4.0 Revenue grew 1% YoY; after volume declined 4% while value (on the back of
price hikes) grew 5% in Q1FY18
Europe 1,016 1,055 -3.6 988 2.9 Its core European operations grew 3% YoY but currency fluctuation impacted
overall performance
EBIT Margin (%)
India 4.4 14.1 -968 bps 8.5 -411 bps Margins were lower mainly due to high cost raw material inventory
Europe 2.4 8.8 -646 bps 3.9 -152 bps Margins were lower mainly due to high cost raw material inventory
Source: Company, ICICIdirect.com Research
Change in estimates
(| Crore) Old New % Change Old New % Change Comments
Revenue 15,014 14,254 -5.1 16,420 15,871 -3.3 Revenue estimates revised lower
EBITDA 1,808 1,647 -8.9 2,100 2,114 0.7
EBITDA Margin (%) 12.0 11.6 -49 bps 12.8 13.3 53 bps Lower-than-expected margins in Q1FY18; has prompted us to revise FY18
estimates. However,margins are likely to improve in FY19E, which is largely
in line with the management expectations
PAT 992 866 -12.7 1,177 1,222 3.8
EPS (|) 19.7 17.2 -12.7 23.3 24.2 3.9
FY18E FY19E
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 3
Key conference call takeaways
The management is positive on the demand outlook, going forward.
The re-stocking of the tyre inventory by dealer (post GST) will further
boost replacement demand while it expects the OEM segment to
gradually recover, going forward
The management expects the benefit of low cost inventory (raw
material cost down 5-9%) to come in from Q2FY18 onwards thus
supporting margins. However, the start-up cost of its Hungary plant &
truck radial sale will exert some pressure on margins in European
operations
For Q1FY18, the standalone business (India) grew ~1%, as volumes
declined 4% but value (price) grew 5% YoY. According to the
management, in Q1FY18 truck volumes declined ~10% (mainly due
to transition from BS III to BS IV norms) while passenger vehicle
volumes witnessed marginal growth. The replacement segment was
impacted as dealer liquidated the stock ahead of implementation of
GST
For Q1FY18, revenue from its core European operations Vredestein
was at €110 million (mn) vs. €107 mn last year. Revenues from
Reifencom were at €36 million (mn) vs. €40 mn. The currency
fluctuation impacted the European operations
According to the management, imposition of anti-dumping duty will
narrow the price gap between the Chinese & Indian TBR tyres by 10-
12%. The current Chinese TBR import is at 100,000/month and can
move <70,000/month if the duty is levied
Average landed cost for various raw material for Q1FY18 is at – NR at
| 170/kg, synthetic rubber | 170/kg, fabric | 300/kg and carbon black
at | 65/kg
ICICI Securities Ltd | Retail Equity Research Page 4
Company Analysis
Global player – with good business diversification across geographies!
A quick glance at Apollo’s consolidated performance shows an increase
in contribution of the European subsidiary from FY10 onwards. Revenue
from Europe has increased from ~24% in FY10 to ~30% in FY15. The
share had dropped to 27% in FY16 primarily due to internal factors
(namely implementation of SAP impacting sales volumes, resulting in
increase in inventory and working capital) and due to external factor
(unfavourable winter season and currency movement). However, the
management remained optimistic on demand, which recovered in FY17
along with large part of internal issues sorted out thereby increasing its
share back to 30%. In terms of segment mix, replacement: OEM share
stands at 77: 23 respectively. In the category mix, T&B accounts for 42%
of its revenue, PV accounts for 40% of revenue and the remaining 10%,
6% and 2% is derived from off-highway, LCV & other segments,
respectively.
Exhibit 1: Revenue break-up - Geography-wise
5,037
5,490
8,158
8,507
8,712
8,938
8,682
8,934
9,737
10,609
1,990 2,234
2,850 2,992
3,943 4,032 3,284
4,091
4,559
5,081
1,097 1,183
1,308 1,502
1,271 321
-
-
-
-
-
3,000
6,000
9,000
12,000
15,000
18,000
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17E
FY18E
FY19E
(| c
rore)
India Europe South Africa
Source: Company, ICICIdirect.com Research
Exhibit 2: Profitability contribution - Geography-wise
661
413
499
736
930
1,106
1,346
1,179
1,040
1,175
224
298
386
432 5
57
479
256
307
236
261
-
400
800
1,200
1,600
2,000
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E
(| c
rore)
India Europe
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 5
Revenue growth strong on radial TB side!
We have factored in revenue growth at ~10% CAGR in FY17-19E, mainly
led by mix of both volume & value. We believe the domestic market will
improve but the radialisation trend in the truck bus segment. The
radialisation trend has promoted the companies for higher capacity within
the segment in India. ATL’s truck bus radial (TBR) capacity is currently
operating at >90% utilisation level. Therefore, it is expanding its capacity
from 6,000 units to 12,000 units in a phased manner over the next 12-18
months. Further with the expectation of anti-dumping duty on the
Chinese TBR segment will favour domestic tyre players (specifically ATL
which is the market leader in the T&B segment). ATL also has smartly
used its nylon capacity (that was under utilised given the radialisation
trend) and is producing off-highway tyres, which has resulted in strong
growth in FY17. ATL witnessed high growth as demand from mining
segment revived and its business grew 60% in FY17.
Exhibit 3: We build modest revenue growth at 10% CAGR in FY17-19E
8,868
12,153
12,795
13,413
12,785
11,849
13,180
14,254
15,871
9.2
37.0
5.3 4.8
-4.7
-7.3
11.2
8.1
11.3
-15
-10
-5
0
5
10
15
20
25
30
35
40
-
3,000
6,000
9,000
12,000
15,000
18,000
FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E
(%
)
(| c
rore)
Sales % growth
Source: Company, ICICIdirect.com Research
Higher cost inventory drag margin in Q1FY18; though expected to recover!
ATL’s margins have expanded from 9.6% to 15.1% from FY12 to FY15
and further increased to 16.7% in FY16 on the back of a reduction in raw
material prices. Prices of natural rubber (NR - account for ~40% of raw
material cost) declined from | 250/kg in 2011 to ~| 94/kg in February
2016. From its lows in February 2016 the price moved northwards to
| 159/kg in February 2017 to | 131/kg in July 2017. According to the
management, Q1FY18 margins were impacted mainly due to high cost
raw material inventory as - average NR cost for ATL was at | 170/kg
(includes | 15/kg logistics cost) while that of synthetic rubber & carbon
black was at | 170/kg and | 65/kg, respectively. ATL expects benefits of
low cost inventory to accrue from Q2FY18 onwards thereby supporting
margins QoQ. The start-up cost in Hungary is likely to impact margins in
the near term. However, as volumes pick up, the same is expected to
move higher, going forward. Thus, we expect margins to remain soft in
FY18E though they are expected to sharply recover in FY19E to >13%.
ICICI Securities Ltd | Retail Equity Research Page 6
Exhibit 5: Margin movement with RM trend
58.9
58.6
57.2
56.7
56.0
52.4
56.9
50.8
53.4
49.5
49.9
49.2
51.9
52.7
57.2
52.7
13.2
16.0
14.3
13.2
14.9
15.8
16.6
17.7
16.1
17.2
16.016.3
14.2 14.4
11.1
8.3
36
40
44
48
52
56
60
64
4
6
8
10
12
14
16
18
20
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
Q4FY15
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
Q1FY18
(%
)
(%
)
Raw materials/Sales Contribution OPM (LHS)
Source: Company, ICICIdirect.com Research
Exhibit 6: Natural rubber prices have been volatile!
212
94
160
80
100
120
140
160
180
200
220
240
260
Sep-11
Feb-12
Jul-12
Dec-12
May-13
Oct-13
Mar-14
Aug-14
Jan-15
Jun-15
Nov-15
Apr-16
Sep-16
Feb-17
Jul-17
(|/Kg)
Production cut by top natural rubber
producing countries like Thailand,
Indonesia and Malaysia led to rise in
NR prices
Floods in Thailand & demand
from China led NR prices to
move northwards
Source: Company, ICICIdirect.com Research
Exhibit 4: EBITDA margins to recover, going forward
978
1,166
1,457
1,876
1,931
1,997
1,846
1,647
2,114
11.0
9.6
11.4
14.0
15.1
16.9
14.0
11.6
13.3
-
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
-
500
1,000
1,500
2,000
2,500
FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E
(%
)
(| c
rore)
EBITDA EBITDA Margins (%)
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 7
Strong capital structure in capital intensive, cyclical business!
Despite the capital intensiveness and cyclicality of the business, ATL has
managed to maintain decent balance sheet strength. With FY16, D/E at
comfortable 0.4x levels, we believe this is the company’s greatest
strength in the good RoCE business. We believe the company has a huge
expansion plan of over >| 6,000 crore over FY17-19E, with an investment
of ~€475 million in Eastern Europe over FY17-19E. For FY18E, its capex is
likely to be at | 2,500 crore, with an investment of ~€180 million in
Europe, which will help the company to serve the increasing demand,
going forward. Despite this, we believe it would be maintained at a decent
level of D/E of ~0.4x. This is because CFO generation remains strong and
would contribute to the bulk of the expenditure.
Exhibit 7: Comfortable debt position in high RoCE business!
0.8 0.8
0.7
0.2
0.0 0.0
0.3
0.4
0.4
14.8 15.1
17.6
23.2
24.7
18.8
13.6
10.2
13.0
-
5
10
15
20
25
30
-
0.2
0.4
0.6
0.8
1.0
FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E
(%
)
(x)
Nebt Debt/Equity RoCE
Source: Company, ICICIdirect.com Research
Strong CFO generation with manageable debt levels, despite capex plans!
From ~| 295 crore in FY11, the CFO has increased to ~| 1764 crore in
FY17, mainly due to lower input cost (natural rubber) and more price
discipline maintained by domestic players in the past. With OEM demand
reviving, we expect volumes to improve, going forward. This would
further sustain CFOs, even as ATL embarks on capex in FY17-19E in
Eastern Europe and on enhancing capacity in the domestic business.
Exhibit 8: CFOs on up trend!
295
387
773
1,534
1,795
1,683
1,475
1,626
1,806
1,042
907
533
433
784
1,171
3,847
2,500
1,500
2,222
2,550
2,651
1,613
801 1,389
3,245 4,045
3,845
-
400
800
1,200
1,600
2,000
2,400
2,800
FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E
(| c
rore)
CFO Capex Debt
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 8
Profitability to remain at elevated levels as demand returns!
With the expected demand revival, we believe volumes will improve as
OEM demand is likely to increase, thereby driving its revenue, going
forward. Further, according to the management, the margin pressure is
likely to ease out, going forward, as the benefit of low cost inventory will
accrue from Q2FY18 onwards thereby supporting bottomline. Thus,
profitability is likely to remain at decent levels, with PAT margins likely to
come in at >7%, going forward.
Exhibit 10: EBITDA growth vs. interest/depreciation trend
978
1,166
1,457
1,876
1,931
1,997
1,846
1,647
2,114
185
287
313
284
183
93
103
143
150
272
326
397
411
411
427
462
499
524
-
500
1,000
1,500
2,000
2,500
FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E
(| c
rore)
EBITDA Interest Depreciation
Source: Company, ICICIdirect.com Research
Exhibit 9: Profit margins to remain as operational improvement kicks in!
440
432
601
1,044
1,015
1,091
1,099.2
866.0
1,222.2
5.0
3.6
4.7
7.8 7.9
9.2
8.3
6.1
7.7
2
3
4
5
6
7
8
9
10
-
200
400
600
800
1,000
1,200
1,400
FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E
(%
)
(|
crore)
PAT PAT Margin (%)
Source: Company press release, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 9
Outlook and valuation
ATL’s revenue growth remained subdued in FY15 & FY16. However, it has
seen a recovery in FY17, on the back of a demand revival in the OEM
space. The company is further investing in its TBR capacity (where its
current utilisation is >90% and there is a shift in trend from bias to radial
tyres in India). This is likely to drive its volume growth, going forward.
Similarly, in Europe, its new facility is slated to aid the current capacity
crunch faced by Vredestein coupled with strong domestic demand, which
is expected to improve in the coming years. With a decent D/E profile,
return ratios and strong operating cash flow, the company is much better
placed in this business cycle vis-à-vis previous up cycles due to its largely
diversified and global scale of business.
ATL is investing in more diversified, rapid growth areas coupled with a
larger scale of business in coming years. Going forward, the management
expects demand to recover on the back of re-stocking of tyres (de-
stocking happened ahead of implementation of GST) and favourable shift
from Chinese players to Indian OEM’s (specifically ATL, which is among
the leading player in T&B segment and the new capacity in place to cater
the need). Hence, we build in revenue CAGR of 10% in FY17-19E. The
margins are also expected to move northwards (from 8.3% in Q1FY18)
thereby driving profitability going forward. Also, positive development
from the government in terms of restricting import of Chinese tyres will
benefit ATL. Thus, we maintain BUY recommendation and value the stock
at 13x FY19E EPS to arrive at a target price of | 315.
Exhibit 11: Valuation
Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE
(| cr) (%) (|) (%) (x) (x) (%) (%)
FY16 11,849 (7.3) 22.3 17.6 12.6 7.2 16.5 18.8
FY17E 13,180 11.2 21.8 (2.1) 12.8 9.0 15.1 13.6
FY18E 14,254 8.1 17.2 (21.2) 16.3 10.7 10.8 10.2
FY19E 15,871 11.3 24.2 41.1 11.5 8.2 13.5 13.0
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 10
Recommended history vs. consensus
0.0
20.0
40.0
60.0
80.0
100.0
0
50
100
150
200
250
300
350
Aug-17Apr-17Dec-16Aug-16Apr-16Dec-15Aug-15
(%
)(|)
Price Idirect target Consensus Target Mean % Consensus with BUY
Source: Bloomberg, Company, ICICIdirect.com Research
Key events
Date Event
Oct-10 Rubber prices start moving up on production concerns in Thailand on excessive rains
Aug-11 Rubber prices begin to stabilise as production picks up
Jun-13 Apollo announces Cooper Tire deal acquisition
Oct-13 Cooper deal under pressure on China labour strike
Oct-13 Cooper Tire files suit against Apollo
Dec-13 Cooper Tire terminates deal with Apollo; court dismisses Cooper appeal
Feb-14 Cooper Tire files suit against Apollo
Jun-14 Apollo to invest ~|400 crore at its Kerala facility to expand its Off-highway tyre capacity
Sep-14 Company to invest greenfield facility at Hungary and is likely to invest Euro 475 million over next 4 to 5 years
Sep-14 Apollo Tyre Africa voluntarily decides to cease its business operations
Oct-14 RBI hikes FII limit for investment upto 45% of paid up capital in Apollo Tyre
May-15 Apollo plans to invest |1500 crore to expand its Truck bus radial (TBR) capacity at its Chennai plant from 6000 units/ day to 9000 units/day
Aug-15 Board approves ATL's plans to raise debt of | 2,000 crore by way of rupee term loan, foregin currency term loan, NCDs from time to time
Source: Company, ICICIdirect.com Research
Top 10 Shareholders Shareholding Pattern
Rank Name Latest Filing Date % O/S Position (m) Change (m)
1 Neeraj Consultants Pvt. Ltd. 31-Mar-17 0.14 72.1 29.63
2 Apollo Finance, Ltd. 31-Mar-17 0.07 36.8 0.00
3 Sunrays Properties & Investment Company Pvt. Ltd. 12-May-17 0.07 36.3 0.58
4 Sacred Heart Investment Company Pvt. Ltd. 31-Mar-17 0.05 24.4 14.98
5 Franklin Templeton Asset Management (India) Pvt. Ltd. 31-Mar-17 0.04 18.7 -11.03
6 Motlay Finance Pvt. Ltd. 12-May-17 0.03 16.9 0.22
7 Templeton Asset Management Ltd. 30-Jun-17 0.03 15.5 1.38
8 Classic Auto Tubes, Ltd. 31-Mar-17 0.03 14.5 0.00
9 Mehta (Ashwin Shantilal) 31-Mar-17 0.03 13.5 0.00
10 Dimensional Fund Advisors, L.P. 30-Jun-17 0.02 12.4 0.00
(in %) Jun-16 Sep-16 Dec-16 Mar-17 Jun-17
Promoter 44.2 44.2 44.2 44.2 44.2
FII 33.0 33.0 33.4 31.6 27.3
DII 10.3 10.9 10.3 11.8 15.3
Others 12.7 12.0 12.2 12.4 13.3
Source: Reuters, ICICIdirect.com Research
Recent Activity
Investor name Value Shares Investor name Value Shares
Neeraj Consultants Pvt. Ltd. 95.36 29.63 Constructive Finance Pvt. Ltd. -95.36 -29.63
Sacred Heart Investment Company Pvt. Ltd. 48.22 14.98 Apollo International, Ltd. -53.24 -16.54
DSP BlackRock Investment Managers Pvt. Ltd. 11.69 3.30 Franklin Templeton Asset Management (India) Pvt. Ltd. -35.51 -11.03
Sundaram Asset Management Company Limited 10.50 2.96 Kanwar (Onkar Singh) -2.84 -0.80
Amit Dyechem Pvt. Ltd. 5.02 1.56 Union Investment Luxembourg S.A. -2.13 -0.66
Buys Sells
Source: Reuters, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 11
.
Financial summary
Profit and loss statement | Crore
(Year-end March) FY16 FY17E FY18E FY19E
Total operating Income 11,848.6 13,180.0 14,253.6 15,870.7
Growth (%) -7.3 11.2 8.1 11.3
Raw Material Expenses 5,954.8 6,890.1 7,761.1 8,435.1
Employee Expenses 1,570.8 1,742.1 1,903.6 2,054.7
Other Expenses 2,325.5 2,701.5 2,942.0 3,266.5
Total Operating Expenditure 9,851.1 11,333.6 12,606.7 13,756.3
EBITDA 1,997.5 1,846.4 1,646.9 2,114.4
Growth (%) 3.5 -7.6 -10.8 28.4
Depreciation 426.8 461.8 498.9 523.7
Interest 92.6 102.9 143.4 149.9
Other Income 68.0 154.1 161.3 210.9
PBT 1,593.8 1,435.8 1,166.0 1,651.6
Exceptional items 0.0 0.0 0.0 0.0
Total Tax 467.7 336.5 299.9 429.4
PAT 1,123.0 1,099.0 866.0 1,222.2
Growth (%) 17.6 -2.1 -21.2 41.1
EPS (|) 22.3 21.8 17.2 24.2
Source: Company, ICICIdirect.com Research
Cash flow statement | Crore
(Year-end March) FY16 FY17E FY18E FY19E
Profit after Tax 1,123.0 1,099.0 866.0 1,222.2
Add: Depreciation 426.8 461.8 498.9 523.7
(Inc)/dec in Current Assets -457.6 -772.0 -17.0 -356.8
Inc/(dec) in CL and Provisions 590.8 685.9 278.4 416.6
CF from operating activities 1,683.0 1,474.7 1,626.3 1,805.6
(Inc)/dec in Investments -401.8 107.3 0.0 0.0
(Inc)/dec in Fixed Assets -1,171.1 -3,847.0 -2,500.0 -1,500.0
Others -569.4 297.6 54.4 82.0
CF from investing activities -2,142.3 -3,442.0 -2,445.6 -1,418.0
Issue/(Buy back) of Equity 0.0 0.0 0.0 0.0
Inc/(dec) in loan funds 588.6 1,855.4 800.0 -200.0
Dividend paid & dividend tax -130.2 -145.0 -161.1 -177.2
Others 0.0 0.0 0.0 0.0
CF from financing activities 458.4 1,710.4 638.9 -377.2
Net Cash flow -0.8 -257.3 -180.3 10.5
Opening Cash 595.0 594.2 336.9 156.6
Closing Cash 594.2 336.9 156.6 167.0
Source: Company, ICICIdirect.com Research
Balance sheet | Crore
(Year-end March) FY16 FY17E FY18E FY19E
Liabilities
Equity Capital 50.9 50.9 50.9 50.9
Reserve and Surplus 6,553.7 7,239.1 7,944.0 8,989.0
Total Shareholders funds 6,604.6 7,290.0 7,994.9 9,039.9
Total Debt 1,389.2 3,244.5 4,044.5 3,844.5
Deferred Tax Liability 701.2 766.1 828.5 922.5
Total Liabilities 8,946.4 11,907.2 13,517.0 14,520.1
Assets
Gross Block 9,986.2 11,557.8 15,430.1 17,430.1
Less: Acc Depreciation 5,430.2 5,519.6 6,018.5 6,542.2
Net Block 5,057.7 6,432.6 9,806.1 11,282.3
Capital WIP 969.4 2,872.3 1,500.0 1,000.0
Total Fixed Assets 6,027.1 9,305.0 11,306.1 12,282.3
Investments 505.9 396.2 396.2 396.2
Goodwill on consolidation 198.2 177.4 177.4 177.4
Inventory 1,939.1 2,645.5 2,538.3 2,695.8
Debtors 1,084.3 1,127.5 1,210.6 1,347.9
Loans and Advances 84.7 45.0 48.6 54.2
Other current assets 398.0 460.1 497.6 554.1
Cash 594.2 336.9 156.6 167.0
Total Current Assets 4,100.3 4,615.0 4,451.7 4,819.0
Creditors 1,543.2 1,731.8 1,874.4 2,087.1
Provisions 329.2 404.3 437.6 487.2
Total Current Liabilities 1,872.3 2,136.0 2,312.0 2,574.3
Net Current Assets 2,228.0 2,479.0 2,139.7 2,244.7
Application of Funds 8,946.4 11,907.2 13,517.0 14,520.1
Source: Company, ICICIdirect.com Research
Key ratios
(Year-end March) FY16 FY17E FY18E FY19E
Per share data (|)
EPS 22.3 21.8 17.2 24.2
Cash EPS 30.7 31.0 27.1 34.6
BV 131.0 144.6 158.6 179.3
DPS 0.2 0.3 0.4 0.3
Cash Per Share 11.8 6.7 3.1 3.3
Operating Ratios (%)
EBITDA Margin 16.9 14.0 11.6 13.3
PBT / Net sales 13.3 10.5 8.1 10.0
PAT Margin 8.0 5.0 3.4 4.8
Inventory days 59.7 73.3 65.0 62.0
Debtor days 33.4 31.2 31.0 31.0
Creditor days 47.5 48.0 48.0 48.0
Return Ratios (%)
RoE 16.5 15.1 10.8 13.5
RoCE 18.8 13.6 10.2 13.0
RoIC 23.5 15.9 9.6 11.8
Valuation Ratios (x)
P/E 12.9 12.8 16.3 11.5
EV / EBITDA 7.2 9.0 10.7 8.2
EV / Net Sales 1.2 1.3 1.2 1.1
Market Cap / Sales 1.2 1.1 1.0 0.9
Price to Book Value 2.1 1.9 1.8 1.6
Solvency Ratios
Debt/Equity 0.2 0.4 0.5 0.4
Current Ratio 1.9 2.0 1.9 1.8
Quick Ratio 0.8 0.8 0.8 0.8
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 12
ICICIdirect.com coverage universe (Auto & Auto Ancillary)
CMP M Cap
(|) TP(|) Rating (| Cr) FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E
Amara Raja (AMARAJ) 804 930 Hold 13733 28.0 33.2 40.4 28.7 24.2 19.9 17.3 14.9 12.4 25.8 27.4 28.0 18.5 19.3 19.6
Apollo Tyre (APOTYR) 280 315 Buy 14094 21.8 17.2 24.2 12.8 16.3 11.5 10.7 10.7 8.2 13.6 10.2 13.0 15.1 10.8 13.5
Ashok Leyland (ASHLEY) 113 120 Buy 31965 4.3 4.4 6.3 26.3 25.7 17.8 13.3 12.3 9.4 23.9 25.1 29.7 25.0 18.8 22.7
Bajaj Auto (BAAUTO) 2936 2780 Hold 84956 132.3 136.6 164.7 21.3 20.6 17.1 17.0 16.5 13.3 30.3 29.0 30.9 22.5 21.1 22.2
Balkrishna Ind. (BALIND) 1617 1800 Buy 15629 74.0 80.2 105.5 21.6 20.0 15.2 13.9 12.7 9.5 23.0 23.9 26.8 20.2 23.9 26.8
Bharat Forge (BHAFOR) 1187 1300 Buy 27666 29.9 40.1 47.6 39.7 29.6 24.9 20.8 13.9 11.7 16.1 22.2 26.9 14.6 17.9 21.2
Bosch (MICO) 24204 26400 Buy 76000 570.5 564.0 658.9 41.5 42.0 35.9 35.8 30.1 25.0 16.9 16.4 17.0 24.8 24.1 25.4
Eicher Motors (EICMOT) 31795 30500 Buy 85878 655.9 833.2 1019.4 48.5 38.2 31.2 24.8 18.4 14.7 39.2 41.1 39.1 36.0 33.6 30.9
Exide Industries (EXIIND) 215 270 Buy 18258 8.2 8.8 10.5 26.3 24.5 20.5 16.2 13.8 11.6 18.5 19.0 20.3 14.0 13.7 14.8
Hero Moto (HERHON) 3934 4475 Buy 78560 156.9 169.1 198.3 25.1 23.3 19.8 16.4 15.5 13.1 48.7 44.0 46.0 35.8 33.4 33.9
JK Tyre & Ind (JKIND) 162 215 Buy 3670 16.6 18.1 31.0 9.8 8.9 5.2 8.1 6.5 4.6 11.2 11.8 16.7 15.8 18.2 24.4
M&M (MAHMAH) 1401 1630 Buy 86984 67.0 68.2 83.2 20.9 20.6 16.8 16.8 13.2 10.6 16.4 19.2 21.1 13.7 14.5 15.6
Mahindra CIE (MAHAUT) 245 280 Buy 7897 4.5 9.7 12.9 54.7 25.1 19.0 20.0 13.3 11.0 5.4 10.3 12.1 6.9 10.7 12.9
Maruti Suzuki (MARUTI) 7757 8500 Buy 234430 242.9 284.5 354.1 31.9 27.3 21.9 22.1 18.5 14.9 26.3 27.5 28.8 20.3 20.7 21.8
Motherson (MOTSUM) 337 450 Hold 47294 11.1 16.7 22.9 30.4 20.1 14.7 15.1 10.5 7.8 16.0 22.2 28.4 19.6 23.1 25.0
Tata Motors (TELCO) 430 560 Buy 129727 22.3 42.9 52.6 21.5 11.2 9.1 6.6 4.8 4.2 11.6 16.8 17.1 15.0 22.0 21.1
Wabco India (WABTVS) 5498 6250 Buy 10445 112.5 130.2 168.6 48.8 42.2 32.6 29.2 26.0 20.1 16.9 16.7 18.0 23.6 23.1 24.9
Sector / Company
RoE (%)EPS (|) P/E (x) EV/EBITDA (x) RoCE (%)
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 13
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com 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]
ICICIdirect.com Research Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
ICICI Securities Ltd | Retail Equity Research Page 14
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