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TRANSCRIPT
July 24, 2017
ICICI Securities Ltd | Retail Equity Research
Result Update
Weak performance continues…
Bajaj Auto reported its Q1FY18 results, which were below our
estimates on the operational front. Revenues were at | 5442 crore
(down 5.3% YoY, up 11.1%QoQ) vs. our estimate of | 5378 crore.
The beat is attributable to higher than estimated domestic & export
realisations
Total volumes for Q1FY18 were at 888434 units (down 10.7% YoY,
up 12.8% QoQ). Domestic volumes declined 23.3% YoY, up 3.3%
QoQ to 478909 units. Domestic realisations grew 8.2% YoY against
our estimate of 7.1%. Export volumes increased 10.5% YoY, 26.4%
QoQ to 324051 units. Export realisations grew 9.1% QoQ vs. our
estimate of 4.6%. In export markets, the sales mix of high end
motorcycles improved to 30% vs. 26% in Q1FY17
Reported EBITDA margins were at 17.2% (down 322 bps YoY, 126
bps QoQ) against our estimate of 19.5%. The miss is mainly
attributable to lower than estimated gross margins. Of the ~210 bps
decline in gross margins, renewal of contract with steelmakers has
had ~110 bps impact. Margins in the domestic motorcycle segment
declined as the company reduced prices of entry level bikes and
increased marketing expense in the premium segment
Reported PAT declined 5.7% YoY, up 15.1% QoQ to | 923 crore vs.
our estimate of | 916.6 crore. The beat is attributable to higher than
estimated other income, which increased 56% QoQ to | 457 crore
due to one-time dividend of | 135 crore from KTM
Struggling in domestic business
BAL’s domestic volumes grew 5.4% in FY17, outpacing industry growth
of ~3.7%. This was mainly on account of new launches like the Dominar,
V series & Avengers. However, volumes from these new models have
come off sharply (Avenger: Q1FY17-56391 units, Q1FY18-23583 units;
V12/V15: Q1FY17-82387 units, Q1FY18-40937 units). The market share
has fallen across segments in the motorcycle segment, with CT 100 &
Platina losing share in economy segment, single digit share in executive
segment reducing further to sub 5% while in the premium segment the
company has lost its dominance with the likes of Royal Enfield’s market
share now equal to BAL. With no new launches expected in the near
term, we expect domestic volumes to grow at 5% CAGR in FY17-19E.
One positive that could emerge is the possible tie-up with a global
company in the motorcycle segment in the next few weeks.
Export growth on low base and geography diversification
BAL is cautiously optimistic on the export market. The company expects
to offset the expected decline in Nigeria with growth in markets like
Turkey, Iran and South-East Asia. In 3W, BAL has already reduced its
dependence on Sri-Lanka by increasing exports to Bangladesh, Peru etc.
We expect export volumes to grow at 12.8% CAGR in FY17-19E.
Margins to be under pressure
BAL continues to focus on profitability, with ~60% of the business
operating at ~20%+ EBITDA margin. However, margins in domestic
motorcycle segment will be under pressure, due to commodity cost
pressure & customer acquisition costs. We value BAL on an SOTP basis,
valuing the core business at 16x FY19E EPS and investment in KTM to
arrive at a target price of | 2780. We have a HOLD recommendation on
the stock.
Rating matrix
Rating : Hold
Target : | 2780
Target Period : 12 months
Potential Upside : -1%
What’s Changed?
Target changed from | 3000 to | 2780
EPS FY18E Changed from |155.4 to 137.7
EPS FY19E Changed from |181 to |164.7
Rating Unchanged
Quarterly Performance
Q1FY18 Q1FY17 YoY (%) Q4FY17 QoQ (%)
Revenue 5,442.4 5,748.0 -5.3 4,897.3 11.1
EBITDA 938.4 1,176.3 -20.2 906.0 3.6
EBITDA (%) 17.2 20.5 -322 bps 18.5 -126 bps
PAT 923.0 978.4 -5.7 801.8 15.1
Key Financials
| Crore FY16 FY17 FY18E FY19E
Net Sales 22,587 21,767 23,961 27,749
EBITDA 4,782 4,422 4,409 5,333
Net Profit 3,930 3,828 3,951 4,767
EPS (|) 135.8 132.3 136.6 164.7
Valuation summary
FY16 FY17 FY18E FY19E
Core P/E (x) 20.7 21.3 20.4 17.1
Tgt Core P/E (x) 20.5 21.0 20.4 16.9
EV/EBITDA(x) 16.6 17.0 16.5 13.3
P/BV (x) 6.1 4.8 4.3 3.8
RoNW (%) 29.6 22.5 21.1 22.2
RoCE (%) 40.7 30.3 29.0 30.9
Stock data
Particular Amount
Market Capitalization (| crore) 81,457.7
Total Debt (FY17) (| crore) |119.9crore
Cash & Liquid Invests (FY17) (| crore) |6349.7Crore
EV (| crore) |75227.8crore
52 week H/L (|) 3120 / 2510
Equity capital (|) 289.4
Face value (|) | 10
Price performance (%)
1M 3M 6M 12M
Bajaj Auto Ltd -0.1 -0.3 4.2 1.6
Hero MotoCorp Ltd -2.3 14.9 20.7 12.7
TVS Motor Company Ltd 4.8 18.7 50.9 90.5
Bajaj Auto (BAAUTO) | 2815
Research Analyst
Nishit Zota
Vidrum Mehta
ICICI Securities Ltd | Retail Equity Research Page 2
Variance analysis- Standalone
Q1FY18 Q1FY18E Q1FY17 YoY (%) Q4FY17 QoQ (%) Comments
Total Operating Income 5,442 5,378 5,748 -5.3 4,897 11.1 Higher than estimates due to higher-than-expected domestic/export realisations
Raw Material Expenses 3,809 3,679 3,863 -1.4 3,320 14.7 Renewal of contracts with steelmakers led to rise in raw material prices
Employee Expenses 273 236 268 1.6 227 19.9
Other Expenses 427 417 445 -4.1 451 -5.5
EBITDA 938.4 1,050.8 1,176.3 -20.2 906.0 3.6
EBITDA Margin (%) 17.2 19.5 20.5 -322 bps 18.5 -126 bps EBITDA margins came in lower due to lower than estimated gross margins
Other Income 457.3 342.0 267.1 71.2 293.6 55.7 Other income came in higher due to to one-time dividend of | 135 crore from KTM
Depreciation 75.3 82.1 77.5 -2.9 75.7 -0.6
Interest 0 0 0 9.1 0 NA
Total Tax 364 393 387 -6.0 322 13.2
Reported PAT 923.0 916.6 978.4 -5.7 801.8 15.1 Beat on profit attributable to higher than estimated other income
EPS (|) 27.7 27.7 31.9 -13.1 27.7 0.0
Key Metrics
Revneue (| crore)
Domestic 3,261 3,210 3,927 -17.0 3,343 -2.4 Higher than estimates on account of higher ASPs
Exports 2,479 2,377 2,057 20.5 1,778 39.4 Higher than estimates on account of higher ASPs
Blended ASP (|/ unit)
Domestic 68,099 67,036 62,931 8.2 72,103 -5.6
Exports 60,534 58,035 55,497 9.1 54,868 10.3 ASPs higher due to higher share of premium motorcycles
Source: Company, ICICIdirect.com Research
Change in estimates
(| Crore) Old New % Change Old New % Change Comments
Revenue 25,501 23,961 -6.0 29,739 27,749 -6.7 Downward revision as we have revised volume estimates downwards post Q1FY18 volume
performance
EBITDA 5,179 4,409 -14.9 6,176 5,333 -13.6
EBITDA Margin (%) 20.3 18.4 -191 bps 20.8 19.2 -155 bps Margin estimates reduced post management guidance
PAT 4,497 3,951 -12.1 5,237 4,767 -9.0 PAT estimates reduced to reflect reduction in revenue & margin estimates
EPS (|) 155.4 136.6 -12.1 181.0 164.7 -9.0
FY18E FY19E
Source: Company, ICICIdirect.com Research
Assumptions
Current Earlier Comments
Units (mn) FY16 FY17E FY18E FY19E FY18E FY19E
Motorcycle volumes 3.4 3.2 3.4 3.7 3.5 3.9 Downward revision of estimates considering weak Q1FY18 performance
Three-Wheeler volumes 0.5 0.4 0.4 0.5 0.5 0.5
Quadricycle volumes 0.01 0.02 0.02 0.02 0.02
Export volumes 1.7 1.4 1.6 1.8 1.6 1.8
Domestic revenues (| crore) 13,774 14,816 15,617 17,916 17,102 19,787
Export revenues ($ mn) 1,492 1,134 1,417 1,688 1,382 1,618
US$INR Realisation rate 66 67 67 67 67 67
Export ASP ($/unit) 856 830 903 941 870 906 Increased estimates due to better mix
Blended ASP (|/unit) 60,475 61,907 65,287 68,438 65,705 69,171
RM/Vehicle (|/unit) 32,318 38,919 40,821 42,821 40,821 42,821
EBIDTA/Vehicle (|/unit) 12,320 11,260 12,445 10,415 12,028 10,043
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 3
Key conference call takeaways
In Q1FY18, rise in commodity prices had a ~110 bps adverse
impact on gross margins. In May 2017, the company raised prices
by | 500 on motorcycles & | 1000 on 3-W. Going ahead, the
company expects raw material to sales to be in the range of
68.7%-69% in FY18 (~70% in Q1FY18)
Volume of V12 & Avenger family has come off sharply in the past
few quarters (Avenger: Q1FY17-56391 units, Q1FY18-23583 units;
V12/V15: Q1FY17-82387 units, Q1FY18-40937 units). Going ahead
company has guided for a monthly run rate of 12000-15000 units
for Avenger & pickup in V series volumes from festive season
onwards to ~25000 units a month
The company is hopeful of achieving total export volumes of 1.6
million
The exceptional item of | 32 crore related to GST transition: a)
compensation to dealers & b) adjustment to GST price from June
15 onwards
Dealer inventory was reduced by ~50000 units (retail-~155000
units, wholesale- ~105000 units) in anticipation of GST
The company attributes the 30% YoY fall in domestic 3W to high
base of 75204 units in Q1FY17 (Maharashtra permit). Going
ahead, the management expects a monthly run rate of ~20,000+
units in domestic 3W due to removal of restriction on new permits
in Maharashtra, ~10,000 new permits in Delhi & proposed
replacement of 2 stroke 3-W with 4-stroke 3-W in Bangalore
Domestic spare part revenues were at | 460 crore with export at
| 190 crore. Total spare part revenue was at | 650 crore vs. | 637
crore YoY
The company is in talks with a global motorcycle company for a
possible tie-up
The Pulsar brand has witnessed market share erosion as the
competitor brand Apache is doing well in states like Odisha, UP
and Bihar
In FY18, BAL expects total KTM sales from India at 1.1 lakh units,
of which ~50,000 units will be sold in India
The US$:INR realisation in the export market is expected to be
66.7-66.8 for the balance period in FY18
ICICI Securities Ltd | Retail Equity Research Page 4
Company Analysis
Export volumes to recover
BAL’s domestic volumes grew 5.4% in FY17, outpacing industry growth
of ~3.7%. This was mainly on account of new launches like the Dominar,
V series & Avengers. However, volumes from these new models have
come off sharply (Avenger: Q1FY17-56391 units, Q1FY18-23583 units;
V12/V15: Q1FY17-82387 units, Q1FY18-40937 units). The market share
has fallen across segments in the motorcycle segment, with CT 100 &
Platina losing share in economy segment, single digit share in executive
segment reducing further to sub 5%. In the premium segment, the
company has lost its dominance with the likes of Royal Enfield’s market
share now equal to BAL. With no new launches expected in the near
term, we expect domestic volumes to grow at 5% CAGR in FY17-19E.
One positive that may emerge is the possible tie-up with a global
company in the motorcycle segment in the next few weeks. Overall, we
expect revenues to grow at 12.9% CAGR in FY17-19E to | 27,749 crore.
Exhibit 1: Revenue growth at 13.4% CAGR in FY17-19E
19,5
29
21,6
12
22,5
87
21,7
67
23,9
61
27,7
49
16,3
98
19,9
97
20,1
50
39
16
10
19
2
1
7
5
-4
-
5,000
10,000
15,000
20,000
25,000
30,000
FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E
(|
crore)
-10
-5
-
5
10
15
20
25
30
35
40
45
(%
)
Revenue % increase
Source: Company, ICICIdirect.com Research
The company is cautiously optimistic on the export market. BAL expects
to offset the expected decline in Nigeria with growth in markets like
Turkey, Iran and South-East Asia. In 3W, the company has already
reduced its dependence on Sri Lanka by increasing exports to
Bangladesh, Peru, etc. We expect export volumes to grow at 12.8%
CAGR in FY17-19E.
ICICI Securities Ltd | Retail Equity Research Page 5
Exhibit 2: Revenue mix trend
13,2
23
13,9
05
12,5
27
12,2
55
13,7
74
14,8
16
15,6
17
17,9
16
6,6
04
6,7
13
8,2
00
9,7
58
9,7
72
7,8
79
9,6
26
11,3
08
33.332.6
39.6
44.3
41.5
34.7
38.138.7
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E
20
25
30
35
40
45
50
Domestic Exports % share of exports
Source: Company, ICICIdirect.com Research
EBITDA margin to be under pressure in near term!
Looking at BAL’s financial performance, we can clearly see that the
company is almost synonymous with strong consistency. However, BAL
expects EBITDA margins to drop due to commodity price pressure and
customer acquisition cost. We estimate EBITDA margin of 18.4% and
19.2% for FY18E and FY19E, respectively.
Exhibit 3: EBITDA margins to decline!
3,7
20
4,1
17
4,7
82
4,4
22
4,4
09
5,3
33
3,1
71
3,6
35
4,1
06
19.319.0
18.4
19.2
18.2
20.4
19.0
21.2
20.3
-
1,000
2,000
3,000
4,000
5,000
6,000
FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E
(|
crore)
16
17
18
19
20
21
22
(%
)
EBITDA EBITDA margin
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 6
Exhibit 4: Per vehicle metrics and estimates
42,155
39,735
40,498
38,842
65,012
61,796
64,775
60,953
22,000
27,000
32,000
37,000
42,000
47,000
52,000
57,000
62,000
67,000
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
Q4FY15
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
Q1FY18
(|
)
Avg RM Cost Avg realisation
Source: Company press release, ICICIdirect.com Research
Return ratios to remain strong as company continues its profit growth!
BAL remains a cash generating franchise, which has an annual CFO of
~| 4066 crore and CFO/EBITDA ratios of ~76% (five year average). The
company has extremely tight control on working capital and has already
worked towards reducing the system inventory. We believe the cash
accumulated in BAL’s balance sheet could be better utilised via higher
dividend payout as capex requirements are just ~7% of CFO generated
annually.
Exhibit 5: CFO continues to remain strong
3,8
99
2,2
07
4,1
16
2,5
27
3,1
36
4,0
70
3,9
70
5,3
30
104.8
60.7
100.2
61.465.6
92.0 90.1
99.9
-
1,000
2,000
3,000
4,000
5,000
6,000
FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E
| c
rore
-
20.0
40.0
60.0
80.0
100.0
120.0
%
CFO CFO/EBITDA
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 7
Exhibit 6: Trend in profitability
3,0
04
2,8
14 3,9
30
3,8
28
3,9
52
4,7
67
3,3
40
3,0
44
3,2
43
20.4
15.4
16.517.2
15.216.1
13.0
17.417.6
-
1,000
2,000
3,000
4,000
5,000
6,000
FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E
(|
crore)
-
5
10
15
20
25
(%
)
PAT PAT margin
Source: Company press release, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 8
Key takeaways from annual report
The domestic motorcycle market continued to remain sluggish, with
domestic growth of 3.7% in FY17, after de-growth 0.4% in previous
year. Compared to FY15, growth in FY17 was a mere 1.6% per annum
— from 10.7 million units two years earlier to 11.1 million in the
current year. The muted performance is attributable to increasing
share of scooter (~30% of total 2-W sales)
In the last two years, BAL’s domestic motorcycle sales have outpaced
industry growth. In FY17, BAL’s domestic motorcycle volumes grew
by 5.4% vs. market growth of 3.7%. The outperformance is
attributable to launch of V series that sold 234000 units
BAL has captured major market shares in sport segment but lost
share in entry segment. In entry segment, where the company has
presence through CT100 & Platina, its market share has reduced from
35% in FY16 to 32% in FY17. In the sports (Pulsar, Avenger) segment,
market share has increased from 43% last year to 45%. In the super
sports segment (KTM, Pulsar RS 200 & Dominar 400), sales were at
63,575 units. KTM sale of 34,970 units in India was higher 15% YoY
The industry domestic 3-W volumes declined 5% where BAL’s
corresponding volumes declined just 0.7%. In the domestic 3-W
(passenger + goods) market share increased from 47.4% in FY16 to
49.5% in FY17. In the domestic passenger segment, market share
increased from 57.5% to 59.7% in FY17. BAL has recently entered the
goods segment, where its volumes increased from 1325 units in FY16
to 13162 (12% market share) units in FY17.
In export 3-w, BAL saw a drop in volumes from 280,000 units last year
to 191,236 units in FY17. The reason of decline was economic
difficulty and currency constraint in several importing countries.
Motorcycle exports de-grew 16.5%. In export market, of the 18
markets that contribute 85% of the motorcycle exports, BAL gained
market share in 16, reaching a healthy 40%+ in South Asia & Middle-
East & 25% in 25% in Latin America. In FY17, company has entered
four new markets each for motorcycle & 3W, of which three were in
the Asean region
In FY17, Waluj – the export hub of Bajaj Auto, produced 1.64 million
motorcycles of which over 1.03 million were exported; and 445,563
three-wheelers of which 191,000 were shipped abroad. The Chakan
plant has used its core competencies in developing and
manufacturing the high end sports bikes, and manufactured 608,974
units in FY17. The Pantnagar plant manufactured 960,686 motorbikes
As of FY17, BAL’s employee strength was at 9509 employees
Bajaj Auto International Holdings BV is a 100% Netherlands based
subsidiary of Bajaj Auto. Over the years, through this subsidiary, Bajaj
Auto has invested a total of € 198.1 million (H 1,219 crore), and holds
approximately 48% stake in KTM AG of Austria (KTM). In CY16, KTM
sold 203,423 motorcycles, growth of 11% and achieved a turnover of
€1.14 billion, growth of 12%. Profit after tax was at €72.1 million
(| 531 crore), growth of 13%. The proportionate profit to Bajaj Auto is
€34.56 million (| 255 crore)
ICICI Securities Ltd | Retail Equity Research Page 9
Outlook and valuation
On the financials front, ~60% of the business operates at ~20% EBITDA
margin. However, margins will be under pressure due to commodity cost
pressure and customer acquisition costs. We value BAL on an SOTP
basis, valuing the core business at 16x FY19E EPS and investment in KTM
to arrive at a target price of | 2780. We have a HOLD recommendation on
the stock.
Exhibit 7: Valuation
Revenues Growth EPS Growth PE EV/EBITDA RoNW RoCE
(| cr) (%) (|) (%) (x) (x) (%) (%)
FY16 22,586.5 6.3 135.8 30.5 20.7 16.6 29.6 40.7
FY17 21,766.7 (3.6) 132.3 (2.6) 21.3 17.0 22.5 30.3
FY18E 23,960.8 10.1 136.6 3.2 20.6 16.5 21.1 29.0
FY19E 27,749.1 15.8 164.7 20.6 17.1 13.3 22.2 30.9
Exhibit 8: SOTP valuation
SOTP Valuation Estimated value Per share (|) Remark
Core Business
FY19E EPS (|) 164.7
Multiple (x) 16 Long-term average valuation multiple
Value per share (|) 2,640
Stake in KTM (48%)
Total valuation (| crore) 10657
Value towards BAL 5115
47.99% stake via Bajaj Auto International
Holdings
Value per share post 20% holdco disc 140 20% holding company discount
Total Value per Share (|) 2,780
Source: Company, ICICIdirect.com Research
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 10
Recommended history vs. consensus
0.0
10.0
20.0
30.0
40.0
50.0
60.0
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Jul-17May-17Mar-17Jan-17Dec-16Oct-16Aug-16Jun-16Apr-16Feb-16Dec-15Oct-15Aug-15
(%
)(|)
Price Idirect target Consensus Target Mean % Consensus with BUY
Source: Bloomberg, Company, ICICIdirect.com Research
Key events
Date Event
Apr-09 Unveils going global strategy aided by KTM (stake raised to 30% from 14.5% initially in 2007)
May-09 Unveils all new 150/180 cc Pulsar DTS-I to enhance market leadership position in premium segment
Nov-09 Bajaj Auto's export strategy bears strong fruit as volumes rise 46% YoY to ~98,000 odd units (35% of overall share)
Jan-10 Takes historic decision to exit scooter business completely and become a pure play motorcycle manufacturer
Jul-10 Bajaj Auto shuns JV with Nissan for small car venture to continue alone with RE-60
Dec-10 Auto stocks slide as oil firms hike petrol prices steeply by ~| 3/ litre
Feb-11 Bajaj Auto crosses 1 million units in the exports markets
May-11 Rising input cost pressures cause automakers to raise prices; Bajaj hikes prices further as DEPB tax benefits reduced by government
Oct-11 US$INR skids touching 50 causing market preference towards exporters; Bajaj stands out in the same
Mar-12 Bajaj Auto raises stake in KTM to ~48%, first product launch KTM Duke 200 cc receives strong response
Mar-13 Bajaj Auto reports lowest March volumes since FY10 on account of weak domestic motorcycle sales as scooter sales shares rise
Oct-13 Exceptionally strong Q2FY14 margin performance makes it stand head and shoulders above any domestic & global OEM
May-14 Bajaj Auto reports lowest overall market share drop in the 2-W space to below 15%
Mar-15 Bajaj Auto reports a market share of 18% in Q4FY15
Source: Company, ICICIdirect.com Research
Top 10 Shareholders Shareholding Pattern
Rank Name Latest Filing Date % O/S Position (m) Change (m)
1 Bajaj Group of Industries 31-Mar-17 0.47 135.7 44.42
2 Life Insurance Corporation of India 31-Mar-17 0.0539 15.6 1.05
3 Firodia Group of Industries 31-Mar-17 0.0348 10.1 -0.17
4 Norges Bank Investment Management (NBIM) 31-Mar-17 0.0138 4.0 0.00
5 Lazard Asset Management, L.L.C. 30-Jun-17 0.0137 4.0 0.00
6 Bajaj (Niraj) 31-Mar-17 0.0126 3.7 0.00
7 Bajaj (Rahulkumar) 31-Mar-17 0.0103 3.0 0.00
8 BlackRock Institutional Trust Company, N.A. 30-Jun-17 0.0087 2.5 0.02
9 The Vanguard Group, Inc. 30-Jun-17 0.0079 2.3 0.02
10 J.P. Morgan Asset Management (Hong Kong) Ltd. 31-May-17 0.0079 2.3 -0.01
(in %) Jun-16 Sep-16 Dec-16 Mar-17 Jun-17
Promoter 49.3 49.3 49.3 49.3 49.3
FII 17.1 18.1 18.0 17.8 17.8
DII 8.8 8.2 8.4 7.9 7.3
Others 24.8 24.4 24.3 25.0 25.6
Source: Reuters, ICICIdirect.com Research
Recent Activity
Investor name Value Shares Investor name Value Shares
Bajaj Group of Industries +1,921.85M +44.42M PineBridge Investments Asia Limited -41.06M -1.06M
Life Insurance Corporation of India +45.48M +1.05M Lyxor Asset Management -13.11M -0.30M
Bajaj (Sanjivnayan) +26.17M +0.63M Firodia Group of Industries -7.18M -0.17M
Caisse de Depot et Placement du Quebec +6.57M +0.17M Fidelity Management & Research Company -4.32M -0.10M
City of London Investment Management Co. Ltd. +4.90M +0.13M Tata Asset Management Limited -2.72M -0.06M
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 FY17 FY18E FY19E
Total operating Income 22587 21767 23961 27749
Growth (%) 1.8 -3.6 10.1 15.8
Raw Material Expenses 15,056.9 14,624.2 16,575.3 18,964.2
Employee Expenses 917.1 997.1 1,088.7 1,289.4
Other expenses 1,847.6 1,745.4 1,911.5 2,189.7
Total Operating Expenditure 17,804.6 17,344.3 19,551.9 22,415.9
EBITDA 4781.9 4422.4 4408.9 5333.2
Growth (%) 8.1 -7.5 -0.3 21.0
Depreciation 307.2 307.3 311.5 333.0
Interest 1.1 1.4 1.2 1.2
Other Income 1,073.6 1,222.0 1,551.4 1,811.2
PBT 5,547.3 5,335.6 5,647.6 6,810.2
Total Tax 1,617.7 1,508.1 1,663.2 2,043.1
PAT 3929.7 3827.6 3951.4 4767.1
Growth (%) 39.7 -2.6 3.2 20.6
EPS (|) 135.8 132.3 136.6 164.7
Source: Company, ICICIdirect.com Research
Cash flow statement | Crore
(Year-end March) FY16 FY17 FY18E FY19E
Profit after Tax 3,929.7 3,827.6 3,951.4 4,767.1
Add: Depreciation 307.2 307.3 311.5 333.0
(Inc)/dec in Current Assets 593.8 -339.9 -290.9 -214.4
Inc/(dec) in CL and Provisions -1,569.3 91.4 224.9 348.5
CF from operating activities 3135.9 4070.2 3970.2 5329.6
(Inc)/dec in Investments 4,480.6 -4,730.1 -2,000.0 -2,000.0
(Inc)/dec in Fixed Assets -212.9 -251.4 -250.0 -250.0
Others -5,719.6 492.0 616.3 -804.9
CF from investing activities -1451.8 -4489.5 -1633.7 -3054.9
Inc/(dec) in loan funds 6.1 2.0 0.0 0.0
Dividend paid & dividend tax -3,464.6 -174.1 -2,066.1 -2,238.3
Inc/(dec) in Sec. premium 0.0 0.0 0.0 0.0
CF from financing activities -1410.7 -140.6 -2067.3 -2239.5
Net Cash flow 273.4 -559.9 269.2 35.2
Opening Cash 586.2 859.5 299.6 568.8
Closing Cash 859.5 299.6 568.8 604.0
Source: Company, ICICIdirect.com Research
Balance sheet | Crore
(Year-end March) FY16 FY17 FY18E FY19E
Liabilities
Equity Capital 289.4 289.4 289.4 289.4
Reserve and Surplus 12,977.2 16,744.8 18,630.1 21,158.9
Total Shareholders funds 13,266.6 17,034.1 18,919.5 21,448.3
Total Debt 117.9 119.9 119.9 119.9
Deferred Tax Liability 202.8 313.6 313.6 313.6
Other non-current liabilities 29.8 127.2 127.2 127.2
Total Liabilities 13705.5 17722.2 19558.3 22087.0
Assets
Gross Block 4,361.4 4,457.8 4,707.8 4,957.8
Less: Acc Depreciation 2,364.6 2,500.7 2,812.2 3,145.1
Net Block 1,996.8 1,957.1 1,895.6 1,812.7
Capital WIP 26.9 10.6 10.6 10.6
Total Fixed Assets 2,023.7 1,967.8 1,906.3 1,823.3
Investments 10,260.6 14,731.5 16,731.5 19,531.5
Inventory 719.1 689.7 759.2 879.2
Debtors 717.9 902.6 993.6 1,140.4
Loans and Advances 7.1 6.2 6.8 7.9
Other current assets 216.3 295.6 212.3 417.1
Cash 859.5 299.6 568.8 604.0
Total Current Assets 3,399.9 3,185.4 3,745.5 3,995.0
Creditors 2,027.0 2,116.9 2,330.3 2,660.9
Provisions 113.0 114.5 126.0 143.9
Other current liabilities 0 477.1 604.3 546.2
Total Current Liabilities 2,781.0 3,054.9 3,051.9 3,494.5
Net Current Assets -751.1 618.9 130.5 693.6
Deferred Tax asset 0.0 0.0 0.0 0.0
Application of Funds 13705.5 17722.2 19558.3 22087.0
Source: Company, ICICIdirect.com Research
Key ratios
(Year-end March) FY16 FY17 FY18E FY19E
Per share data (|)
EPS 135.8 132.3 136.6 164.7
Cash EPS 146.4 142.9 147.3 176.2
BV 458.5 588.7 653.8 741.2
DPS 119.7 6.0 71.4 77.4
Cash Per Share 29.7 10.4 19.7 20.9
Operating Ratios (%)
EBITDA Margin 21.2 20.3 18.4 19.2
PBT / Net sales 19.8 18.9 17.1 18.0
PAT Margin 14.4 15.2 15.7 16.0
Inventory days 11.6 11.6 11.6 11.6
Debtor days 11.6 15.1 15.1 15.0
Creditor days 32.8 35.5 35.5 35.0
Return Ratios (%)
RoE 40.7 30.3 29.0 30.9
RoCE 29.6 22.5 21.1 22.2
RoIC 40.5 38.3 38.3 44.7
Valuation Ratios (x)
Core P/E 20.7 21.3 20.4 17.1
EV / EBITDA 16.6 17.0 16.5 13.3
EV / Net Sales 3.5 3.5 3.0 2.6
Market Cap / Sales 3.6 3.7 3.4 2.9
Price to Book Value 6.1 4.8 4.3 3.8
Solvency Ratios
Current Ratio 1.0 1.0 1.0 1.0
Quick Ratio 0.7 0.8 0.8 0.7
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) FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E
Amara Raja (AMARAJ) 845 930 Hold 14439 28.0 33.2 40.4 30.2 25.4 20.9 17.3 14.9 12.4 25.8 27.4 28.0 18.5 19.3 19.6
Apollo Tyre (APOTYR) 253 280 Buy 12776 21.7 21.8 19.7 11.7 11.6 12.9 6.5 7.9 8.6 19.9 13.6 11.0 17.1 15.0 12.2
Ashok Leyland (ASHLEY) 104 105 Buy 29239 2.5 4.3 4.7 40.8 24.1 21.9 12.3 11.6 10.8 22.8 21.2 21.6 17.4 21.2 16.5
Bajaj Auto (BAAUTO) 2825 2780 Hold 81748 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) 1620 1670 Buy 15657 58.7 74.0 81.4 25.1 19.9 18.1 13.9 12.8 10.6 20.4 23.0 24.0 20.3 23.0 24.0
Bharat Forge (BHAFOR) 1130 1300 Buy 26324 29.9 40.1 47.6 37.7 28.1 23.7 20.8 13.9 11.7 16.1 22.2 26.9 14.6 17.9 21.2
Bosch (MICO) 24031 26400 Buy 75458 410.2 570.5 564.0 57.7 41.5 42.0 37.7 35.8 30.1 15.1 16.9 16.4 22.5 24.8 24.1
Eicher Motors (EICMOT) 28866 30500 Buy 77966 655.9 833.2 1019.4 44.0 34.6 28.3 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 7.3 8.2 9.4 29.3 26.3 22.8 19.0 17.7 14.4 19.4 18.7 20.4 14.0 14.1 14.8
Hero Mototcorp (HERHON) 3694 3975 Buy 73773 156.9 169.1 199.6 23.6 21.8 18.5 15.2 14.3 11.9 53.6 43.5 49.0 39.4 33.0 36.3
JK Tyre & Ind (JKIND) 161 215 Buy 3640 21.0 16.6 18.1 7.6 9.7 8.8 5.8 8.1 6.5 20.1 11.2 11.8 29.1 15.8 18.2
Mahindra CIE (MAHAUT) 248 280 Buy 8022 4.5 10.3 13.5 55.6 24.0 18.3 16.8 11.5 9.1 5.4 10.8 12.6 6.9 11.1 13.2
Maruti Suzuki (MARUTI) 7546 7200 Buy 228051 151.3 242.9 280.1 49.9 31.1 26.9 21.4 18.6 15.8 23.9 26.3 26.5 16.9 20.3 20.4
Motherson (MOTSUM) 326 450 Hold 45749 11.1 16.7 22.9 29.4 19.5 14.2 15.1 10.5 7.8 16.0 22.2 28.4 19.6 23.1 25.0
Tata Motors (TELCO) 467 560 Buy 141031 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) 5390 6610 Buy 10241 107.7 112.5 144.7 50.0 47.9 37.2 35.9 31.8 25.5 19.4 16.9 18.2 25.5 23.6 25.2
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
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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,
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ICICI Securities Ltd | Retail Equity Research Page 14
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