annual investor meet 25th may 2006 - home | ashok … efficiency improvement - not a concern •...
TRANSCRIPT
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Annual Investor Meet25th May 2006
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The Hinduja Group
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The Hinduja Group Profile
• The Group was established in 1914 in Mumbai
• Entered Middle East in 1919 to grow trading initiatives
• Privately owned by the Hinduja Family• Presence in more than 25 countries and
operates across the globe• Entered India for major activities in 1987• Employs over 30,000 personnel
worldwide
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Hinduja Group : Business Activities
Media & Entertainment
IT/ITES
Automotive Banking & Finance
Real Estate
Energy & Chemicals
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Presentation Outline
• Indian CV Industry Outlook • Ashok Leyland
– Performance and Plans
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Indian CV Industry Outlook
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CV Demand Drivers
• Economy – Growth in FY06– Industrial Production : 8.2 %– Agriculture Growth : 2.5%– Imports / Exports : 31.7% / 25%
Freight generating sectors witnessed significant growth
Source: CMIE
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CV Demand Drivers (Contd..)
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CV Demand Drivers (Contd..)
• Infrastructure– Road construction projects - NHAI
launched in 1999
• Total coverage increased to 18,372 Kms - pan India
• 35% completed by 31.03.06• 40% under implementation• 25% to be implemented
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M&HCV TIV Volumes
207,446179,32028,126FY 06
198,506172,86825,638FY 05
161,395136,80424,591FY 04
115,71195,74119,970FY 03
16,814
24,785
Bus
89,99973,185FY 02
81,96057,175FY 01
TotalTruck
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M&HCV TIV Growth Trends
0
2 5 , 0 0 0
5 0 , 0 0 0
7 5 , 0 0 0
1 0 0 , 0 0 0
1 2 5 , 0 0 0
1 5 0 , 0 0 0
1 7 5 , 0 0 0
2 0 0 , 0 0 0
2 2 5 , 0 0 0
2 0 0 0 - 0 1 2 0 0 1 - 0 2 2 0 0 2 - 0 3 2 0 0 3 - 0 4 2 0 0 4 - 0 5 2 0 0 5 - 0 6
B u s T r u c k T o t a l
• Truck volume trebled in last 5 years• Bus volumes stagnated
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CV Demand Drivers (Contd…)
• Legislation• Recent Supreme Court decision on
overloading to trigger demand.– “Growth in MHCVs partially on account
of positive impact of the supreme court’s order, accompanied by strong freight availability ,allowing operators to increase freight rates “ – CRIS INFAC.
– “One time demand upto 28,000 vehicles”
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Freight Rate Movement
Uptrend in freight rates indicates absorption in market
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Freight Rate Buoyancy and Operators’ Cost Structure
0%5%
10%15%20%25%
30%35%
South North East West
Inc.
ove
r 12
mon
ths
Inc. in Freight Rates
Inc. in Diesel Price
18%
4%
58%
13%7%
Capital cost Staff Expense
Fuel Expenses Maintenance
Others
No significant impact of adverse interest rates
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Railways Efficiency Improvement - Not a concern
• Proposed dedicated Freight Corridor – looking to build partnerships with road transporters to move to interior areas - will boost demand for CVs– Investment Rs.650 Billion: Phase I Rs.224 Billion– Time frame : 10 years – Phase I completion by 2011– Coverage – 9000 kms – Phase I - 2900 kms
• Similarity with Chinese market – Massive expansion in Railway network in China during 1992 to 2002, accompanied by CV growth rate of 8.9%. Similar trend expected in Indian market.
• Structural change in industry with higher sales of HCVs for highway transport and LCVs for last mile transport
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Outlook for FY07
• “Growth up to 9-10%“ – CRIS INFAC.• Industry Analysts’ projection – Average
growth >10%
AL targets to outperform industry
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Ashok Leyland’s Performance
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Composition of Sales Q4FY06
Q 4 F Y 0 6 Q 4 F Y 0 5 Y O Y %D o m e s t i c - C i v i l i a n
B u s 3 5 5 8 3 3 5 5 6 . 1 T r u c k 1 5 1 6 4 1 2 1 8 0 2 4 . 5 T o t a l 1 8 7 2 2 1 5 5 3 5 2 0 . 5
D e f e n c e 5 0 0 1 4 6 2 4 2 . 5 E x p o r t s 1 1 8 0 2 6 4 8 ( 5 5 . 4 ) T o t a l V e h i c l e s 2 0 4 0 2 1 8 3 2 9 1 1 . 3 E n g i n e s 2 4 9 7 2 2 4 3 1 1 . 3 S p a r e s i n c l . D e f e n c e ( R s . M n ) 1 7 8 8 1 9 1 1 ( 6 . 4 )
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Composition of Sales FY06
F Y 0 6 F Y 0 5 Y O Y %D o m e s t i c - C i v i l i a n
B u s 1 4 1 6 8 1 0 7 3 0 3 2 . 0 T r u c k 4 2 1 0 6 3 7 0 5 2 1 3 . 6 T o t a l 5 6 2 7 4 4 7 7 8 2 1 7 . 8
D e f e n c e 5 0 2 1 4 6 2 4 3 . 8 E x p o r t s 4 8 7 9 6 8 1 2 ( 2 8 . 4 ) T o t a l V e h i c l e s 6 1 6 5 5 5 4 7 4 0 1 2 . 6 E n g i n e s 7 2 6 1 6 2 5 4 1 6 . 1 S p a r e s i n c l . D e f e n c e ( R s . M n ) 7 8 3 8 5 4 6 0 4 3 . 6
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M&HCV: AL’s Market Share
%Y e a r P a s s G o o d s T o t a lF Y 0 6T I V 2 8 , 1 2 6 1 7 9 , 3 2 0 2 0 7 , 4 4 6 A L 1 3 , 4 0 8 4 2 , 5 8 5 5 5 , 9 9 3 M S % 4 7 . 7 % 2 3 . 7 % 2 7 . 0 %F Y 0 5T I V 2 5 , 6 3 8 1 7 2 , 8 6 8 1 9 8 , 5 0 6 A L 1 0 , 4 6 9 3 7 , 1 3 7 4 7 , 6 0 6 M S % 4 0 . 8 % 2 1 . 5 % 2 4 . 0 %F Y 0 4T I V 2 4 , 5 9 1 1 3 6 , 8 0 4 1 6 1 , 3 9 5 A L 1 1 , 0 2 5 3 3 , 4 7 1 4 4 , 4 9 6 M S % 4 4 . 8 % 2 4 . 5 % 2 7 . 6 %
• MS gains across all regions• Stronger in high growth segments
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Financial Results FY06
• Improved margins despite raw material cost increase
• Dividend increased to 120%
F Y 0 6 % F Y 0 5 % Y O Y F Y 0 4 %N e t S a l e s / I n c o m e f r o m O p e r a t i o n s 5 2 , 4 7 7 1 0 0 . 0 4 1 , 8 1 9 1 0 0 . 0 2 5 . 5 3 3 , 9 2 0 1 0 0 . 0 G r o s s O p e r a t i n g M a r g i n 5 , 4 0 1 1 0 . 3 4 , 2 2 9 1 0 . 1 2 7 . 7 3 , 9 4 6 1 1 . 6 F i n a n c i a l E x p e n s e s 1 6 5 0 . 3 2 8 0 . 1 4 8 9 . 3 2 0 8 0 . 6 G r o s s P r o f i t 5 , 5 6 6 1 0 . 6 4 , 7 3 8 1 1 . 3 1 7 . 5 3 , 9 2 4 1 1 . 6 D e p r e c i a t i o n 1 , 2 6 0 2 . 4 1 , 0 9 2 2 . 6 1 5 . 4 9 6 5 2 . 8 P r o f i t B e f o r e T a x 4 , 5 2 3 8 . 6 3 , 5 5 0 8 . 5 2 7 . 4 2 , 8 6 5 8 . 4 N e t P r o f i t - P A T 3 , 2 7 3 6 . 2 2 , 7 1 4 6 . 5 2 0 . 6 1 , 9 3 6 5 . 7
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Operations Highlights in FY06
• Capacity enhanced to 77,200 vehicles p.a.• Introduction of BS3 variants• Volume growth at 17.6%, outperformed industry
growth of 4.5% • Market share improvement by 300 bp -
Improvement across all regions / segments• Turnover Rs.52 Bn. (US $ 1.1 Bn.)• No borrowal during 2005-06 • Asset base Rs.23 Bn.• Market capitalization :Rs.55 Bn. (US$ 1.2 Bn.)
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Operations Highlights FY 06 (Contd…)
• Loan funds excluding FCCN - Rs 3.5 Bn.• Net interest bearing loans - Rs 1.8 Bn.• Capital expenditure - Rs 2.4 Bn.• Net Working capital - Rs 4.2 Bn.
Better asset utilisation
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Performance Highlights – 5 yrs
0.2
6.7
4.0
55.7
19.9
31.0
2.46
FY06
9.612.420.121.2RONW (%)
0.781.011.632.04EPS - Diluted (In Rs.)
2.63.65.75.9WC Turns (Times)
0.3
3.6
50.0
26.2
FY05
1.00.80.5Debt : Equity
1.41.82.7Asset Turnover (Times)
58.055.852.0Dividend Payout (%)
11.613.420.9R O C E (%)
FY02FY03FY04
Significant growth over five years
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Other Business Initiatives
• Component / aggregates business including exports to US / European countries – turnover target at US$ 100 million in the next three years
• Engine business expansion - volume increase by 100% in FY 07. Potential for further growth.
Improving shareholder returns with minimum investment
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Plans
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Plans
• Capacity expansion• Product launches• Performance improvement through
– Focus on non-cyclical portfolios– Efficiency improvements
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Capacity Expansion
• Vehicle assembly capacity to be augmented to 100,000 in next 2 years
• Production / sales target FY07 - 75,000 vehicles
• Cabin facility to 40,000 • Indigenisation of “J “ series engines• R&D facilities to reduce time-to-market
Capex spend around Rs.6 billion over FY07 and FY08
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New Product Launches
• ICV - 1512 with H Series engine • Semi Forward Control in Tipper and
Haulage segments• Tractor range - 6x2 / 6x4 with 210-350 hp
engine and GTW up to 49T• Tipper 8x4 with 350 hp engine• InterCentury Luxura bus• Branded Buses• Defence sector - HMV and other logistics
vehicles
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Non-Cyclical Business
22.025.722.9Total
2.12.32.1Indl. / Marine Engines
8.413.28.3Exports
11.410.112.4Defence / Spare Parts
FY 04FY 05FY 06
Share of revenue (% of turnover)
• Non-cyclical revenue streams growing in absolute quantum as also in share of total revenue.
• FY 05 includes one-time order from Iraq
• From FY 07, component business expected to grow exponentially
• Non-cyclical revenue targeted to grow >30%
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Efficiency Improvements• Material cost reduction
– Emphasis on e-sourcing and global sourcing to play a beneficial role
– Continued focus on value engineering initiatives to improve margins in all existing / new products
• Mission Gemba– Shop floor-led team initiative with focus on
creating value through empowerment and improving resource utilisation
Target to achieve 300 bp improvement in operating margins over 2 years
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Ashok Leyland Stock Performance
05 0 0
1 0 0 01 5 0 02 0 0 02 5 0 03 0 0 03 5 0 04 0 0 0
Mar -03
May - 03Ju l -0
3
Sep - 0 3Nov - 0 3
Jan - 04Mar -0
4
May -04Ju l -0
4
Sep -04Nov - 0 4
Jan-05Mar -0
5
May - 05Ju l -0
5
Sep - 0 5Nov - 0 5
Jan - 06Mar -0
6
Poin
ts
0 . 0 05 . 0 01 0 . 0 01 5 . 0 02 0 . 0 02 5 . 0 03 0 . 0 03 5 . 0 04 0 . 0 04 5 . 0 0
(Rs.
per
Sha
re)
n i f t y
A L L
AL stock outperforms NIFTY movement
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Shareholding Pattern
F o r e i g n I n s t i t u t i o n s
1 6 %
C o r p o r a t e s2 %
P u b l i c & O t h e r s
1 2 %
P r o m o t e r s5 1 %
D o m e s t i c I n s t i t u t i o n s
1 9 %• FIIs holdings doubled over 1 year
• FCCN conversion as on date : 84% (Including Promoters)
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Thank you