bajaj auto ltd. absolute : long relative : overweight ), pt · 2018. 10. 31. · bajaj auto ltd....

October 26, 2018 Analyst: Ashutosh Tiwari [email protected] (+91-8128694112 +91 79-40504017) Page 1 of 12

Before reading this report, you must refer to the disclaimer on the last page.

Bajaj Auto Ltd. Absolute : LONG

Relative : OVERWEIGHT

2QFY19 Result: Estimate (), PT (), Rating () Regular Coverage 31% ATR in 11 Months

Volumes to remain healthy, margins to revive in FY20, retain LONG Auto

© 2018 Equirus All rights reserved

Rating Information

Price (Rs) 2,478

Target Price (Rs) 3,130

Target Date 30th Sep'19

Target Set On 25th oct'18

Implied yrs of growth (DCF) 15

Fair Value (DCF) 2,632

Fair Value (DDM) 1,057

Ind Benchmark BSEAUTO

Model Portfolio Position NA

Stock Information

Market Cap (Rs Mn) 716,907

Free Float (%) 50.70 %

52 Wk H/L (Rs) 3472.6/2421.45

Avg Daily Volume (1yr) 489,851

Avg Daily Value (Rs Mn) 1,424

Equity Cap (Rs Mn) 2,894

Face Value (Rs) 10

Bloomberg Code BJAUT IN

Ownership Recent 3M 12M

Promoters 49.3 % 0.0 % 0.0 %

DII 7.7 % -0.7 % -0.3 %

FII 17.4 % -0.2 % 0.7 %

Public 25.6 % 0.9 % -0.5 %

Price % 1M 3M 12M

Absolute -11.2 % -6.1 % -23.4 %

Vs Industry 3.6 % 14.1 % -0.7 %

Bajaj Auto -13.4 % -13.3 % -28.5 %

TVS Motors -12.4 % -3.9 % -25.1 %

Standalone Quarterly EPS forecast

Rs/Share 1Q 2Q 3Q 4Q

EPS (18A) 33.0 38.4 32.9 37.3

EPS (19E) 38.5 39.8 35.5 37.0

BJAUT’s delivered an in-line 2QFY19 with 3% yoy growth in EBITDA (Rs 13.4bn), despite

25% yoy growth in volumes as discounts offered to gain market share in domestic 2Ws

hurt margins. As we had stated earlier, discounting or some other form of promotion

was critical for BJAUT to revive footfalls, dealer profitability and market share, given

that market share is relatively difficult to revive (vis-à-vis margins) in the long term.

Increase in Platina sales and market share stemmed from higher footfalls in

dealerships. We expect EBITDA margins to improve gradually from 4Q with 18% margins

in FY20 as USD-INR realizations touch 73. We raise FY19E/FY20E volumes by ~3% but

revise EPS estimates by -1%/1. Retain LONG with a Sep’19 TP of Rs 3,130 set at 18x

Sep’19 EPS (Jun’19 TP: Rs 3,038).

Levers in place for further market share gains in motorcycles: Management is now

comfortable with its CT100 market share in the entry segment, as reflected in a price

hike of Rs 1,800 taken over Jul-Oct’18 after a cut of ~Rs 4,000 in April. While CT100

remains a loss-making model for BJAUT, higher footfalls due to these offers helped revive

sales of Platina, whose market share in the

Bajaj Auto Ltd. Absolute –LONG Relative – OVERWEIGHT 31% ATR in 11 Months

October 26, 2018 Analyst: Ashutosh Tiwari [email protected] (+91-8128694112, +91-79-40504017) Page 2 of 12

Quarterly performance, standalone

Rs Mn 2QFY19 2QFY19E 1QFY19 2QFY18 % Change

Comments 2QFY19E 1QFY19 2QFY18

Net Sales 79,868 80,249 74,193 65,799 0% 8% 21%

Raw Material 57,829 57,618 52,993 45,492 0% 9% 27%

Employee Cost 3,119 3,290 3,140 2,644 -5% -1% 18%

Other Expenses 5,490 5,707 5,246 4,679 -4% 5% 17%

Total Expenditures 66,438 66,615 61,379 52,815 0% 8% 26%

EBITDA 13,430 13,633 12,814 12,984 -1% 5% 3%

Depreciation 715 766 700 770 -7% 2% -7%

EBIT 12,714 12,867 12,115 12,214 -1% 5% 4%

Interest 3 0 3 5 0% -34%

Other Income 3,815 3,571 4,044 2,964 7% -6% 29%

PBT 16,527 16,438 16,156 15,174 1% 2% 9%

Tax 5,002 4,931 5,003 4,055 1% 0% 23%

Recurring PAT 11,525 11,506 11,152 11,119 0% 3% 4%

Extraordinaries 1,753 0 1,820 819

Reported PAT 9,772 11,506 9,332 10,300 -15% 5% -5%

EPS (Rs) 39.8 39.8 38.5 38.4 0% 3% 4%

Gross Margin 27.6% 28.2% 28.6% 30.9% -61 bps -98 bps -327 bps

EBITDA Margin 16.8% 17.0% 17.3% 19.7% -17 bps -46 bps -292 bps

EBIT Margin 15.9% 16.0% 16.3% 18.6% -11 bps -41 bps -264 bps

PBT Margin 20.7% 20.5% 21.8% 23.1% 21 bps -108 bps -237 bps

PAT Margin 12.2% 14.3% 12.6% 15.7% -210 bps -34 bps -342 bps

Tax Rate 30.3% 30.0% 31.0% 26.7% 26 bps -70 bps 354 bps



Rs Mn 2QFY19 2QFY19E 1QFY19 2QFY18 % Change

Comments 2QFY19E 1QFY19 2QFY18

2W Volumes 1,126,542 1,126,542 1,029,964 918,721 0.0% 9.4% 22.6%

Domestic 2W 692,899 692,899 594,234 583,997 0.0% 16.6% 18.6%

Export 2W 433,643 433,643 435,730 334,724 0.0% -0.5% 29.6%

3W Volumes 212,902 212,902 196,677 152,789 0.0% 8.2% 39.3%

Domestic 3W 111,746 111,746 94,431 84,938 0.0% 18.3% 31.6%

Export 3W 101,156 101,156 102,246 67,851 0.0% -1.1% 49.1%

Domestic Volumes 804,645 804,645 688,665 668,935 0.0% 16.8% 20.3%

Export Volumes 534,799 534,799 537,976 402,575 0.0% -0.6% 32.8%

Domestic Sales (Rs mn) 50,789 48,567 42,683 41,599 4.6% 19.0% 22.1%

Export Sales (Rs mn) 29,079 31,682 31,510 24,200 -8.2% -7.7% 20.2%

ASP (Rs/unit) 59,628 59,912 60,485 61,408 -0.5% -1.4% -2.9%

Domestic ASP (Rs/unit) 59,314 60,358 61,979 62,187 -1.7% -4.3% -4.6%

Export ASP (Rs/unit) 58,061 59,240 58,571 60,113 -2.0% -0.9% -3.4%

EBITDA/Vehicle (Rs/unit) 10,026 10,178 10,447 12,117 -1.5% -4.0% -17.3%

Cost items as % of Sales

RM 72.4% 71.8% 71.4% 69.1% 61 bps 98 bps 327 bps

Employee Cost 3.9% 4.1% 4.2% 4.0% -19 bps -33 bps -11 bps

Other Expenses 6.9% 7.1% 7.1% 7.1% -24 bps -20 bps -24 bps

Adj Other Expenses 6.9% 7.1% 7.1% 7.1% -24 bps -20 bps -24 bps



Exhibit 1: Domestic quarterly 2W volume mix (in ‘000 units)

Source: Company, Equirus Securities

Exhibit 2: Quarterly 2W export volume mix (In ‘000 units)

Source: SIAM, Equirus Securities

Exhibit 3:3W domestic & export sales volumes (in ‘000 units)

Source: Company, Equirus Securities

Exhibit 4:Export & domestic sales (Rs bn); exports as % of sales vs. EBITDA margins

Source: SIAM, Equirus Securities

258

200

195

181 2

90

230

217

184

231

251

204

149

186 282

244

240 323 421

57

26 18 13

1345 54

3529 25

3145

36

3224 25

19

13124

172 164127

126119 128

169

223 218

165137

134

151

119 113

162

166491

462439

379

486 469 475 469

549580

459414 427

584

466498

594

688

0

100

200

300

400

500

600

700

1Q

FY15

2Q

FY15

3Q

FY15

4Q

FY15

1Q

FY16

2Q

FY16

3Q

FY16

4Q

FY16

1Q

FY17

2Q

FY17

3Q

FY17

4Q

FY17

1Q

FY18

2Q

FY18

3Q

FY18

4Q

FY18

1Q

FY19

2Q

FY19

>75cc & 110cc 125cc but 150 =200cc

241

248

251

137

244

258

214

137

172

155

158

158

168

183

207

211

239

254

3880 45

39

24 26

20

2227

26 22 2435 30

38 41

55 5456

6062

74

7297

70

79

90 99 75 7385 64

61 56

79 7536

3838

34

38

46

42

35

26 2928 22

41 3634 36

44 39384

438406

294

389

434

352

284

324 318290 287

349 335352 359

436 434

0

50

100

150

200

250

300

350

400

450

1Q

FY15

2Q

FY15

3Q

FY15

4Q

FY15

1Q

FY16

2Q

FY16

3Q

FY16

4Q

FY16

1Q

FY17

2Q

FY17

3Q

FY17

4Q

FY17

1Q

FY18

2Q

FY18

3Q

FY18

4Q

FY18

1Q

FY19

2Q

FY19

>75cc & 110cc 125cc but 150 =200cc

5675

55 49 5167 66 71 75 74 54 50 52

85110 122

94112

58

8284

6187

8658 49 47

60

4937

60

68

7367

102101

114

156139

110

138153

124 120 122135

10387

113

153

183 189197

213

0

40

80

120

160

200

240

1Q

FY15

2Q

FY15

3Q

FY15

4Q

FY15

1Q

FY16

2Q

FY16

3Q

FY16

4Q

FY16

1Q

FY17

2Q

FY17

3Q

FY17

4Q

FY17

1Q

FY18

2Q

FY18

3Q

FY18

4Q

FY18

1Q

FY19

2Q

FY19

Domestic Export

43%46% 47%

44%47% 47%

41%38%

36% 35%38%

36%

46%

37% 38% 35%

42%39%

17.6%18.9%21.7%

17.7%20.4%21.7%21.1%21.5%20.5%21.4%20.6%

18.5%17.2%19.7%19.3%19.4%

17.3%16.8%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0

10

20

30

40

50

60

70

80

1Q

FY15

2Q

FY15

3Q

FY15

4Q

FY15

1Q

FY16

2Q

FY16

3Q

FY16

4Q

FY16

1Q

FY17

2Q

FY17

3Q

FY17

4Q

FY17

1Q

FY18

2Q

FY18

3Q

FY18

4Q

FY18

1Q

FY19

2Q

FY19

Domestic Exports Exports as % of Sales EBITDA Margin (%)



Earnings call takeaways

Industry & business update

• Till date, the festive season has been softer in western states like Gujarat and

Maharashtra than North India. However, management expects demand to bounce back

during the remaining part of the season.

• Cost pressures of insurance would get absorbed over 3-4 months, with growth likely

to recover from January.

• To combat commodity price inflation, BJAUT took price hikes in the month of Oct’18.

2W prices of most models for the end customer were raised by

Rs 1,000/unit, and for 3Ws by Rs 1,500/unit.

• 3Ws, spares and exports are high-margin propositions with margins of >20%. Pulsar

fetches close to ~20% margins and Platina single-digit margins.

• BJAUT expects commodity prices to go up in 3QFY19.

• The company expects pre-buying to kick in before the BS-VI roll out, which would

drive growth in 2HFY20.

• Bajaj Finance financed ~48% of sales; total financing is ~50% plus.

Domestic 2W volumes, product pipeline

• No new product launches are planned for 3Q.

• New products in the M3 category are expected to be launched in 4QFY19.

• BJAUT is focused on gaining market share even if it is margin-dilutive.

• Market for the M1 segment is expanding.

• With Platina picking up traction, BJAUT expects its contribution to increase going

ahead.

• CT is a loss-making proposition, while Platina is a profitable model and incremental

contribution would be margin accretive.

• Pulsar twin disk is gaining ground and contributes ~40% to the Pulsar portfolio. Twin

Disk has been the fastest growing model and, being a value-added product, should lead

to margin improvement.

• The company plans to come up with a newer version of classic Pulsar, which would

grow at a higher rate than the Pulsar portfolio.

• CT contributes only 14% of revenues.

Domestic 3W volumes

• BJAUT expects to maintain a monthly run-rate of 30,000+ units for 3Ws in the domestic

market.

• Demand is driven by consistent reduction in requirement of permits.

• The cargo segment is also doing well and expected to drive the topline.

• In 3Q, growth would be muted off a high base.

• CNG penetration is rising dramatically in the country. BJAUT has a ~90% market share

in alternate fuel technology.

• BJAUT expects to clock 3W volumes of 800,000 in the domestic and export markets in

FY19.

• Capacity for 3Ws is ~850,000 vehicles per year, and the company expects it to increase

to 1mn to meet increasing demand.

Exports, spare parts, taxes & capex

• Share of Africa has been rising in the last one year, and should reach 50% from 45%

currently.

• The African market is largely driven by Boxer. However, the mix is improving gradually

and moving towards the 150cc segment.

• BJAUT’s market share in Uganda is ~90%, Ethiopia ~65% and Kenya ~45%. The company

has strong ground in East Africa but is facing challenges in West Africa.

• The total export market in which BJAUT operates is 6.5mn-6.6mn units.

• Realization per US$ is expected to reach ~Rs 70 in 3Q and 4Q, and ~Rs 73 in FY20. In

2QFY19, it stood at Rs 69.4.

• FY19E capex guidance is at ~Rs 3bn, largely for new models, R&D and debottlenecking.

• Tax rate for FY19 is expected at ~31%.

• Spares exports stood at ~2.43bn and domestic sales at Rs 5.67bn.



Company Snapshot

How we differ from Consensus

- Equirus Consensus % Diff Comment

EPS FY19E 161.4 151.4 7 % In line with consensus

FY20E 186.6 170.6 9 %

Sales FY19E 294,641 293,326 0 %

FY20E 326,388 328,971 -1 %

PAT FY19E 43,123 43,765 -1 %

FY20E 54,002 49,435 9 %

Key Assumptions: FY18A FY19E FY20E FY21E

2W Domestic Sales 1,974,577 2,391,089 2,609,411 2,687,694

yoy change -1.3% 21.1% 9.1% 3.0%

2W Export Sales 1,394,757 1,665,425 1,831,968 2,015,165

yoy change 14.5% 19.4% 10.0% 10.0%

Total 2W Sales 3,369,334 4,056,515 4,441,379 4,702,858

yoy change 4.6% 20.4% 9.5% 5.9%

3W Domestic Sales 369,637 400,868 406,128 426,434

yoy change 46.0% 8.4% 1.3% 5.0%

3W Export Sales 267,820 395,801 417,452 450,848

yoy change 38.9% 47.8% 5.5% 8.0%

Total 3W Sales 637,457 796,670 823,580 877,282

yoy change 42.9% 25.0% 3.4% 6.5%

ASP 62,806 60,711 61,992 63,843

yoy change 5.8% -3.3% 2.1% 3.0%

EBITDA Margin 19.0% 17.0% 18.0% 18.0%

Tax Rate 29.5% 30.3% 30.0% 30.0%

NCW Days -21 -19 -20 -20 Risk to our view: A sharp recovery in domestic volumes would be an upside risk to our

volume estimates.

Key triggers

• Margin decline & volume pressure

Sensitivity to Key Variables % Change % Impact on EPS

EBITDA Margin 1 % 5 %

Volume 1 % 1 %

- - -

DCF Valuations & Assumptions

Rf Beta Ke Term. Growth Debt/IC in Term. Yr

7.7 % 0.9 12.8 % 3.0 % 0.0 %

- FY19E FY20E FY21-23E FY24-28E FY29-33E

Sales Growth 17 % 11 % 6 % 7 % 6 %

NOPAT Margin 11 % 12 % 12 % 12 % 12 %

IC Turnover 8.35 8.69 9.32 9.32 9.32

RoIC 86.6 % 106.7 % 114.8 % 115.8 % 115.5 %

Years of strong growth 1 2 5 10 15

Valuation as on date (Rs) 1,618 1,771 1,955 2,185 2,352

Valuation as of 30thSep'18 1,810 1,981 2,187 2,445 2,632

On P/E basis, our Sep’19 TP stands at Rs 3,130 set at 18x EPS. Our DCF-based Jun’19 fair

value is Rs 2,631.

Company Description:

Bajaj Auto is the flagship company of Bajaj group, one among the Top 10 business houses

in India. Company is also India’s largest 2W & 3W exporter, accounting for 2/3rd of India’s

2W export. Company came into existence as M/s Bachraj Trading Corporation Private

Limited in 1945. In 1972 company launched their 1st scooter by the name ‘Chetak’. The

Rear Engine Auto rickshaw was introduced in 1977 &Bajaj achieved production and sales of

100,000 vehicles in a single financial year. Company entered into the motorcycle segment

in 1986 with launch of Bajaj M-80 and the Kawasaki Bajaj KB100.

Comparable valuation Mkt Cap

Rs. Mn.

Price

Target

Target

Date

EPS P/E BPS P/B RoE Div Yield

Company Reco. CMP FY18A FY19E FY20E FY18A FY19E FY20E FY18A FY19E FY18A FY19E FY20E FY18A FY19E

Bajaj Auto LONG 2,478 716,907 3,130 30th Sep'19 146.9 161.4 186.6 16.9 15.4 13.3 705.9 3.2 22 % 22 % 23 % 2.4 % 2.6 %

Hero Motocorp ADD 2,695 538,242 3,100 30th Sept'19 185.1 176.2 190.6 15.6 16.4 15.2 579.0 4.6 34 % 29 % 29 % 3.0 % 3.0 %

TVSMOTOR NA 519 246,641 NA NA 17.2 16.3 21.4 30.2 31.8 24.3 17.9 25.1 12 % 22 % 23 % 0.4 % 0.2 %



Standalone Quarterly Earnings Forecast and Key Drivers Rs in Mn 1Q18A 2Q18A 3Q18A 4Q18A 1Q19E 2Q19E 3Q19E 4Q19E 1Q20E 2Q20E 3Q20E 4Q20E FY18A FY19E FY20E FY21E

Revenue 54,424 65,799 63,693 67,733 74,193 79,868 69,418 71,161 80,204 87,719 78,032 80,432 251,649 294,640 326,387 356,256

EBITDA 9,384 12,984 12,315 13,152 12,814 13,430 11,662 12,240 14,434 16,246 13,734 14,236 47,834 50,146 58,650 64,196

Depreciation 753 770 747 879 700 715 717 836 738 757 775 857 3,148 2,967 3,126 3,423

EBIT 8,631 12,214 11,568 12,274 12,115 12,714 10,946 11,404 13,696 15,489 12,959 13,380 44,686 47,178 55,524 60,773

Interest 2 5 3 3 3 3 0 0 0 0 0 0 13 6 0 0

Other Income 4,573 2,964 2,269 3,667 4,044 3,815 3,726 3,880 4,167 4,092 4,257 4,444 13,473 15,466 16,959 19,275

PBT 13,201 15,174 13,833 15,937 16,156 16,527 14,672 15,284 17,862 19,581 17,216 17,824 58,146 62,638 72,483 80,048

Tax 3,642 4,055 4,309 5,138 5,003 5,002 4,401 4,585 5,359 5,874 5,165 5,347 17,145 18,992 21,745 24,014

Recurring PAT 9,559 11,119 9,524 10,799 11,152 11,525 10,270 10,699 12,504 13,707 12,051 12,477 41,001 43,646 50,738 56,034

Extraordinary 324 819 -923 1,204 1,820 1,753 0 0 0 0 0 0 1,424 3,573 0 0

Reported PAT 9,235 10,300 10,448 9,595 9,332 9,772 10,270 10,699 12,504 13,707 12,051 12,477 39,578 40,073 50,738 56,034

EPS (Rs) 33.03 38.42 32.91 37.32 38.54 39.83 35.49 36.97 43.21 47.37 41.65 43.12 141.69 150.83 175.34 193.64

Key Drivers

2W Domestic Volumes 426,562 583,997 466,431 497,587 594,234 692,899 531,731 572,225 653,657 741,402 584,904 629,448 1,974,577 2,391,089 2,609,411 2,687,694

2W Export Volumes 349,152 334,724 352,079 358,802 435,730 433,643 401,370 394,682 479,303 477,007 441,507 434,150 1,394,757 1,665,425 1,831,968 2,015,165

3W Domestic Volumes 52,347 84,938 110,123 122,229 94,431 111,746 96,908 97,783 90,654 106,159 101,754 107,562 369,637 400,868 406,128 426,434 3W Export Volumes 60,373 67,851 72,836 66,760 102,246 101,156 97,600 94,799 100,412 109,248 105,408 102,383 267,820 395,801 417,452 450,848

- - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - -

Sequential Growth (%)

Revenue 11 % 21 % -3 % 6 % 10 % 8 % -13 % 3 % 13 % 9 % -11 % 3 % - - - -

EBITDA 4 % 38 % -5 % 7 % -3 % 5 % -13 % 5 % 18 % 13 % -15 % 4 % - - - -

EBIT 4 % 42 % -5 % 6 % -1 % 5 % -14 % 4 % 20 % 13 % -16 % 3 % - - - -

Recurring PAT 19 % 16 % -14 % 13 % 3 % 3 % -11 % 4 % 17 % 10 % -12 % 4 % - - - -

EPS 19 % 16 % -14 % 13 % 3 % 3 % -11 % 4 % 17 % 10 % -12 % 4 % - - - -

Yearly Growth (%)

Revenue -5 % 9 % 26 % 38 % 36 % 21 % 9 % 5 % 8 % 10 % 12 % 13 % 11 % 17 % 11 % 9 %

EBITDA -20 % 0 % 18 % 45 % 37 % 3 % -5 % -7 % 13 % 21 % 18 % 16 % 0 % 5 % 17 % 9 %

EBIT -21 % 0 % 20 % 48 % 40 % 4 % -5 % -7 % 13 % 22 % 18 % 17 % 0 % 6 % 18 % 9 %

Recurring PAT -2 % -1 % 3 % 35 % 17 % 4 % 8 % -1 % 12 % 19 % 17 % 17 % 4 % 6 % 16 % 10 %

EPS -2 % -1 % 3 % 35 % 17 % 4 % 8 % -1 % 12 % 19 % 17 % 17 % 4 % 6 % 16 % 10 %

Margin (%)

EBITDA 17 % 20 % 19 % 19 % 17 % 17 % 17 % 17 % 18 % 19 % 18 % 18 % 19 % 17 % 18 % 18 %

EBIT 16 % 19 % 18 % 18 % 16 % 16 % 16 % 16 % 17 % 18 % 17 % 17 % 18 % 16 % 17 % 17 %

PBT 24 % 23 % 22 % 24 % 22 % 21 % 21 % 21 % 22 % 22 % 22 % 22 % 23 % 21 % 22 % 22 %

PAT 18 % 17 % 15 % 16 % 15 % 14 % 15 % 15 % 16 % 16 % 15 % 16 % 16 % 15 % 16 % 16 %



Consolidated Financials P&L (Rs Mn) FY18A FY19E FY20E FY21E Balance Sheet (Rs Mn) FY18A FY19E FY20E FY21E Cash Flow (Rs Mn) FY18A FY19E FY20E FY21E

Revenue 251,649 294,641 326,388 356,257 Equity Capital 2,894 2,894 2,894 2,894 PBT 56,778 62,610 72,454 80,019

Op. Expenditure 203,833 244,526 267,769 292,093 Reserve 201,359 221,843 251,465 286,613 Depreciation 3,148 2,967 3,126 3,423

EBITDA 47,816 50,115 58,619 64,164 Networth 204,252 224,737 254,359 289,507 Others 320 -3,573 0 0

Depreciation 3,148 2,967 3,126 3,423 Long Term Debt 0 0 0 0 Taxes Paid 17,145 18,992 21,745 24,014

EBIT 44,668 47,148 55,492 60,741 Def Tax Liability 6,043 4,270 4,270 4,270 Change in WC 13,229 1,495 2,114 1,668

Interest Expense 13 6 0 0 Minority Interest 0 0 0 0 Operating C/F 56,330 44,508 55,950 61,095

Other Income 12,123 15,468 16,962 19,278 Account Payables 32,444 17,445 22,266 26,081 Capex 11,008 3,699 -5,000 -5,000

PBT 56,778 62,610 72,454 80,019 Other Curr Liabi 8,670 33,851 35,713 37,186 Change in Invest -5,607 -3,077 -3,293 -3,523

Tax 17,145 18,992 21,745 24,014 Total Liabilities & Equity 251,410 280,303 316,608 357,044 Others 0 0 0 0

PAT bef. MI &

Assoc. 39,633 43,619 50,709 56,004 Net Fixed Assets 18,783 18,688 20,561 22,139 Investing C/F 5,400 622 -8,293 -8,523

Minority Interest 0 0 0 0 Capital WIP 565 307 307 307 Change in Debt -1,692 0 0 0

Profit from Assoc. 2,876 3,077 3,293 3,523 Others 33,552 30,317 33,610 37,133 Change in Equity 3,754 0 0 0

Recurring PAT 42,509 46,696 54,002 59,528 Inventory 7,426 6,041 6,828 7,450 Others -15,968 -21,335 -21,087 -20,857

Extraordinaires -320 3,573 0 0 Account Receivables 14,919 20,334 22,983 25,079 Financing C/F -13,905 -21,335 -21,087 -20,857

Reported PAT 42,829 43,123 54,002 59,528 Other Current Assets 4,583 9,240 10,372 11,274 Net change in cash 47,826 23,795 26,570 31,715

FDEPS (Rs) 146.9 161.4 186.6 205.7 Cash 171,582 195,377 221,947 253,663 RoE (%) 22 % 22 % 23 % 22 %

DPS (Rs) 60.0 65.0 70.0 70.0 Total Assets 251,410 280,303 316,608 357,044 RoIC (%) 22 % 21 % 22 % 22 %

CEPS (Rs) 157.8 171.6 197.4 217.5 Non-cash Working Capital -14,186 -15,682 -17,796 -19,464 Core RoIC (%) 59 % 87 % 107 % 112 %

FCFPS (Rs) 213.4 156.0 164.7 181.7 Cash Conv Cycle -20.6 -19.4 -19.9 -19.9 Div Payout (%) 49 % 52 % 45 % 41 %

BVPS (Rs) 705.9 776.6 879.0 1,000.5 WC Turnover -17.7 -18.8 -18.3 -18.3 P/E 16.9 15.4 13.3 12.0

EBITDAM (%) 19 % 17 % 18 % 18 % FA Turnover 13.0 15.5 15.6 15.9 P/B 3.5 3.2 2.8 2.5

PATM (%) 17 % 16 % 17 % 17 % Net D/E -0.8 -0.9 -0.9 -0.9 P/FCFF 11.6 15.9 15.0 13.6

Tax Rate (%) 30 % 30 % 30 % 30 % Revenue/Capital

Employed 1.6 1.5 1.5 1.5 EV/EBITDA 11.5 10.5 8.5 7.3

Sales Growth (%) 16 % 17 % 11 % 9 % Capital Employed/Equity 1.0 1.0 1.0 1.0 EV/Sales 2.2 1.8 1.5 1.3

FDEPS Growth (%) 4 % 10 % 16 % 10 % Dividend Yield (%) 2.4 % 2.6 % 2.8 % 2.8 %

TTM P/E vs. 2 yr forward EPS growth TTM EV/EBITDA vs. 2 yr forward EBITDA growth TTM P/B vs. 2 yr forward RoE

4x

8x

12x

16x

20x

-40%

-20%

0%

20%

40%

60%

0

1000

2000

3000

4000

Ma

y-0

8

Jan

-09

Se

p-0

9

Ma

y-1

0

Jan

-11

Se

p-1

1

Ma

y-1

2

Jan

-13

Se

p-1

3

Ma

y-1

4

Jan

-15

Se

p-1

5

Ma

y-1

6

Jan

-17

Se

p-1

7

Ma

y-1

8

Jan

-19

Se

p-1

9

EPS Growth

-40%

-20%

0%

20%

40%

60%

80%

0100000200000300000400000500000600000700000800000

May

-08

Nov

-08

May

-09

Nov

-09

May

-10

Nov

-10

May

-11

Nov

-11

May

-12

Nov

-12

May

-13

Nov

-13

May

-14

Nov

-14

May

-15

Nov

-15

May

-16

Nov

-16

May

-17

Nov

-17

May

-18

Nov

-18

May

-19

Nov

-19

8x

10x

12x

14x

16x

EBITDA Growth

0%

20%

40%

60%

80%

100%

0

1000

2000

3000

4000

5000

Ma

y-0

8

Jan

-09

Se

p-0

9

Ma

y-1

0

Jan

-11

Se

p-1

1

Ma

y-1

2

Jan

-13

Se

p-1

3

Ma

y-1

4

Jan

-15

Se

p-1

5

Ma

y-1

6

Jan

-17

Se

p-1

7

Ma

y-1

8

Jan

-19

Se

p-1

9

RoE

3x

4x

5x

6x

7x



Historical Consolidated Financials P&L (Rs Mn) FY15A FY16A FY17A FY18A Balance Sheet (Rs Mn) FY15A FY16A FY17A FY18A Cash Flow (Rs Mn) FY15A FY16A FY17A FY18A

Revenue 216,143 225,865 217,667 251,649 Equity Capital 2,894 2,894 2,894 2,894 PBT 44,232 54,575 53,329 56,778

Op. Expenditure 175,010 178,054 173,473 203,833 Reserve 108,060 127,561 175,672 201,359 Depreciation 2,675 3,072 3,073 3,148

EBITDA 41,132 47,811 44,194 47,816 Networth 110,953 130,454 178,566 204,252 Others -6,460 0 0 320

Depreciation 2,675 3,072 3,073 3,148 Long Term Debt 1,118 1,625 1,692 0 Taxes Paid 12,853 16,177 15,081 17,145

EBIT 38,458 44,739 41,121 44,668 Def Tax Liability 2,816 2,656 3,990 6,043 Change in WC -6,457 -8,908 -3,168 13,229

Interest Expense 65 11 14 13 Minority Interest 0 0 0 0 Operating C/F 21,138 32,562 38,154 56,330

Other Income 5,840 9,846 12,222 12,123 Account Payables 17,998 20,271 2,799 32,444 Capex -2,949 -4,489 -11,281 11,008

PBT 44,232 54,575 53,329 56,778 Other Curr Liabi 26,770 9,260 29,329 8,670 Change in Invest -4,185 20,685 -8,521 -5,607

Tax 13,492 16,177 15,081 17,145 Total Liabilities & Equity 159,656 164,266 216,376 251,410 Others 2,994 0 0 0

PAT bef. MI & Assoc. 30,740 38,398 38,249 39,633 Net Fixed Assets 19,172 20,257 20,018 18,783 Investing C/F -4,140 16,197 -19,802 5,400

Minority Interest 0 0 0 0 Capital WIP 2,549 522 422 565 Change in Debt 0 507 67 -1,692

Profit from Assoc. 2,137 2,214 2,546 2,876 Others 42,266 23,941 41,009 33,552 Change in Equity 467 -1,956 26,472 3,754

Recurring PAT 32,877 40,613 40,795 42,509 Inventory 8,142 7,191 7,284 7,426 Others -16,909 -17,101 -15,275 -15,968

Extraordinaires 0 0 0 -320 Account Receivables 7,170 7,179 9,533 14,919 Financing C/F -16,442 -18,550 11,264 -13,905

Reported PAT 32,877 40,613 40,795 42,829 Other Current Assets 16,424 11,036 14,354 4,583 Net change in cash 556 30,208 29,616 47,826

EPS (Rs) 113.6 140.3 141.0 146.9 Cash 63,933 94,141 123,757 171,582 RoE (%) 31 % 34 % 26 % 22 %

DPS (Rs) 50.0 55.0 55.0 60.0 Total Assets 159,656 164,266 216,376 251,410 RoIC (%) 30 % 33 % 26 % 22 %

CEPS (Rs) 122.9 151.0 151.6 157.8 Non-cash Working Capital -13,033 -4,125 -958 -14,186 Core RoIC (%) 67 % 66 % 49 % 59 %

FCFPS (Rs) 58.9 168.5 63.5 213.4 Cash Conv Cycle -22.0 -6.7 -1.6 -20.6 Div Payout (%) 52 % 47 % 47 % 49 %

BVPS (Rs) 383.4 450.8 617.1 705.9 WC Turnover -16.6 -54.8 -227.3 -17.7 P/E 21.8 17.7 17.6 0.0

EBITDAM (%) 19 % 21 % 20 % 19 % FA Turnover 10.0 10.9 10.6 13.0 P/B 6.5 5.5 4.0 0.0

PATM (%) 15 % 18 % 19 % 17 % Net D/E -0.6 -0.7 -0.7 -0.8 P/FCFF 42.1 14.7 39.0 11.6

Tax Rate (%) 31 % 30 % 28 % 30 % Revenue/Capital

Employed 2.3 2.0 1.7 1.6 EV/EBITDA 16.0 13.2 13.6 0.0

Sales growth (%) 7 % 4 % -4 % 16 % Capital Employed/Equity 1.0 1.0 1.0 1.0 EV/Sales 3.1 2.8 2.8 0.0

FDEPS growth (%) -4 % 24 % 0 % 4 % Dividend Yield (%) 2.0 % 2.2 % 2.2 % 2.4 %



Equirus Securities

Research Analysts Sector/Industry Email Equity Sales E-mail

Abhishek Shindadkar IT Services [email protected] 91-22-43320643 Vishad Turakhia [email protected] 91-22-43320633

Ashutosh Tiwari Auto, Metals & Mining [email protected] 91-79-61909517 Subham Sinha [email protected] 91-22-43320631

Bharat Celly Healthcare [email protected] 91-79-61909524 Viral Desai [email protected] 91-22-43320635 Depesh Kashyap Mid-Caps [email protected] 91-22-43320671 Viraj Mehta [email protected] 91-22-43320634

Dhaval Dama FMCG, Mid-Caps [email protected] 91-79-61909518 Ruchi Bhadra [email protected] 91-22-43320601 Manoj Gori Consumer Durables [email protected] 91-79-61909523 Cash Dealing Room E-mail Maulik Patel Oil and Gas [email protected] 91-79-61909519 Ashish Shah [email protected] 91-22-43320662 Pranav Mehta Building Materials [email protected] 91-79-61909514 Ilesh Savla [email protected] 91-22-43320666

Praful Bohra Healthcare [email protected] 91-22-43320611 Manoj Kejriwal [email protected] 91-22-43320663

Rohan Mandora Banking & Financial Services [email protected] 91-79-61909529 Dharmesh Mehta [email protected] 91-22-43320661

Associates E-mail Sarit Sanyal [email protected] 91-22-43320666 Ankit Choudhary [email protected] 91-79-61909533 Vikram Patil [email protected] 91-22-43320677 Dhairya Dhruv [email protected] 91-79-61909528 Gaurav Mehta [email protected] 91-22-43320680 Harshit Patel [email protected] 91-79-61909522 Compliance Officer E-mail Meet Chande [email protected] 91-79-61909513 Jay Soni [email protected] 91-79-61909561 Nishant Bagrecha [email protected] 91-79-61909526 Corporate Communications E-mail

Prateeksha Malpani [email protected] 91-79-61909532 Mahdokht Bharda [email protected] 91-22-43320647

Ronak Soni [email protected] 91-79-61909525 Quant Analyst

Rushabh Shah [email protected] 91-79-61909520 Kruti Shah [email protected] 91-22-43320632

Shreepal Doshi [email protected] 91-79-61909541 F&O Dealing Room

Varun Baxi [email protected] 91-79-61909527 Kunal Dand [email protected] 91-22-43320678

Vikas Jain [email protected] 91-79-61909531 Dhananjay Tiwari [email protected] 91-22-43320668

Mukesh Jain [email protected] 91-22-43320667

Rating & Coverage Definitions: Absolute Rating • LONG : Over the investment horizon, ATR >= Ke for companies with Free Float market cap >Rs 5 billion and ATR >= 20% for rest of the companies • ADD: ATR >= 5% but less than Ke over investment horizon • REDUCE: ATR >= negative 10% but



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