ASHOK LEYLAND LTD.

Company Analysis

6 sep 2008

Ashok Leyland – Business Overview

PRODUCT SEGMENTS

Buses

TRUCKS

DEFENCE VEHICLES, Spares

Entering into Design & OEM services

5000 Crore Company in Indian CV Industry No. 2 Manufacturer or Commercial Vehicles Market Share 28 % and No 1 in bus segment Current capacity of 84000 Vehicles which

would be doubled by 2010. 6 plants and another 1 coming up at

Uttaranchal

Indian Automobile Industry - overview

Auto companies continue to reel under pressure on the back of turbulent macro economic factors

BSE Auto Index turned in a relatively better performance in FY2008 underperformed the broader markets by 6.8% while the Sensex lost ground by almost 14%.

However, during first quarter of 2009, the Auto Index declined another 20.8% after the 20.2% fall witnessed during 4QFY2008

Growth Divers

Strong Performance of Indian Economy

Regulations on overloading and over-aged vehicles will be Tightened

Private bus demand will continue to grow with better road connectivity

Efficient Infrastructure Investments• Golden Quadrilateral Project 5864 Kms

• NSEW corridor Project 7300 Kms

• Port Connectivity & others 1016 Kms

• 48 New Project covering more than 10000 Kms coming up

source : NHAI

Concern Areas

Inflation, Interest Rates & Liquidity• RBI hiked CRR by 125 bps & Repo by 75 bps in last 3 months so financing

rates gone up by 300 bps YTD

• Conversion Ratio dropped by 45 % in last 4-5 months

Fuel Price Hike• Fuel Accounts for 25 % & 50% for total ownership cost of PV’s & CV’s

• Almost 15% Hike in Fuel Prices In 2008

• direct impact on the ownership cost, freight operator's profitability and volume growth of the Auto sector

Soaring Raw Material Prices • Accounts for 70 % of total cost for Manufacturers

• Prices on a upward trend since last 2 years

• Badly affecting the margins as these costs cannot be passed on to customers due to high competition

Impact of Interest Rates

Ashok Leyland – Shareholding Pattern

Ashok Leyland Capacity Expansion plan

Financial Performance

FY07 FY08 ChangeRevenues Rs. Cr 8514 9179 7.81%EBITDA 708 895 26.48%EBIT 555 721 29.75%PAT 364 469 29.11%EPS 3.33 3.53 6.01%ROCE 16.87 20.11 19.20%DPS 1.5 1.5

MarginsOperating Profit margin 9.32 10.09Gross Profit margin 7.27 7.86Net Profit margin 5.94 5.83

Peer Comparison

Ashok Leyland Tata Motors Swaraj Mazda

CMP 34 (Face Value = 1) 420 296

P/E 9.61 8.64 10.83

NPM % 5.83 6.96 3.75

Last Dividend 150 % 150 % 55 %

EPS 3.53 49.65 24

ROE 22.3 25.98 27

ROCE 20.11 19.8 21.50

Valuation CMP = 34

FCFF Valuation 44.44 (Undervalued)

Weighted Average Method 52.78(Undervalued)

PV method 30 (Over Valued)

Valuation - FCFF

THANK YOU

Enquires & comments R S RaghavICFAI Business Schoolraghav777@gmail.com