93

110

18%

-

500477

ASHOKLEY

26,452

1201241

8,794

1Month 3Month 1Year

Absolute 9.9 6.4 14.6

Rel.to Nifty 5.2 0.4 -11.4

3QFY17 2QFY17 1QFY17

Promoter 50.4 50.4 50.4

Public 49.6 49.6 49.6

Others -- -- --

Total 100.0 100.0 100.0

Rs. In crore

Financials 3QFY17 2QFY17 3QFY16 QoQ YoY

Sales 4431 4622 4114 -4% 8%

EBITDA 454 536 449 -15% 1%

Net Profit 180 294 217 -39% -17%

EBIDTA% 10.3% 11.6% 10.9%

PAT % 4.1% 6.4% 5.3%

2

113/74

naveen.dubey@narnolia.com

52wk Range H/L

Naveen Kumar Dubey

Mkt Capital (Rs Cr)

Av. Volume

Please refer to the Disclaimers at the end of this Report

BUY

ASHOK LEYLAND LTD. 13-Feb-17

CMP

Going forward, We assume that the upcoming emission norms BS-IV to BS-

VI, improvement in demand from infrastructure segment and government's

initiative to develop defense products in the country can be volume boosters

for the company in FY17. Ashok Leyland is also working towards a renewed

thrust in the international markets, with network expansion and dedicated

products. We expect that the company will maintain a healthy ROE of over

20% going ahead. We maintain 'BUY' on Ashok Leyland considering the

huge growth potential going ahead for a target price of Rs.110.

Revenue stood Rs.4431 crore with a groowth of 8%YoY on account of

6%YoY growth in Volumes and 2%YoY growth in realization in 3QFY17.

EBITDA margin contracted by 60 bps YoY due to 80bps rise in commodity

prices during the quarter.

PAT margin declined by 120 bps to 4.1% due to forex loss of Rs.64 crore

during the quarter.

The commercial vehicle giant has posted Rs.4431 crore of net revenue with

a growth of 7.7% YoY in the 3QFY17. M&HCV volumes grew by 9%YoY on

account of increased infra activity in the country. LCV volumes declined by

3% due to the vast presence in rural areas, which were affected most by

demonetization. Realization also declined by 2%QoQ to Rs.1349300

because of higher discounts in the industry. Discounts have gone up to

Rs.300000 per unit from Rs.225000-250000 per unit but further price

increases will net off this effect. M&HCV segment market share stood at

33.7% (+370bps YoY) during the quarter despite the demonetization issue.

Exports revenue grew by 11%QoQ to Rs.388 crore for the quarter. The

company has a healthy order book of export orders. Hinduja Foundries

Limited (HFL), which fulfills casting requirements of Ashok Leyland, has also

shown EBITDA positive for consecutive second quarters. Management

anticipates that in two years time the HFL will be accretive to Ashok Leyland.

Recently, Ashok Leyland opened a new assembly plant in Bangladesh as it

aims to make further inroads into the neighboring countries.

Previous Target Price

Upside

Change from Previous

Target Price

BSE Code

NSE Symbol

Nifty

Narnolia Securities Ltd

AAASSSHHOOKK LLEYLAND LTD.

Result Update

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Target Price

Result Update

Market Data

ASHOKLEYEY

2626,4,45252

12120101242411

8,79794

113/3/74745252wk Range H/L

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Stock Performance

1Month 3Month 1Year

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Rel.to Nifty 5.2 0.4 -11.4

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6%6%6%6%YoY growth

EBEBEBITDA margin

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PrPromoter 50.4 50.4 5050.4.4

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d Rs.4431 crore with a groowth of 8%YoY on account ofReReReRevenue stood

3QFY17 Result Highlights

BUY

13-Feb-1

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Outlook

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95

100

105

110

115

120

125

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7

ASHOKLEY NIFTY

♦ Management expects Q4 to be promising due to the implementation of BS-IV norms.

♦ Capex for FY17 is Rs.500 crore and for FY18 in the range of Rs.500-750 crore.

♦ 33.7% market share in M&HCV space and in south region overall market share is 51%.

♦ Domestic truck business contributes 50-55 percent of total revenue.

♦ Some cost pressure would be in 4QFY17 becasue of rising commodity prices.

♦ Net debt stood at Rs.1520 crore.

♦ Price increase of 4% in truck and bus segment in 4QFY17..

♦ The management is focusing on to improve profitability and ROCE of the company going ahead.

♦ Defence Revenue to be close to around Rs 1,500 crore by FY18.

3

♦ Export is only 12% of total volumes, therefore the company is targeting the African and Middle East countries to expand its

export contribution by setting up own assembly plants in these countries under the company's global expansion project. The

exports is an important part of Ashok Leyland's strategic intent to globalise its product portfolio and derisk itself from supplying

only into India.

♦ The management expects its defence business to log four-fold jump in revenues at over Rs 2,000 crore in next five years as it

gears up to provide an entire range of mobility solutions, including missile carrying vehicles to the armed forces. Ashok Leyland is

the largest supplier of logistics vehicles to the Indian Army.

♦ The management has focused approach towards its core commercial vehicle business. We expect that the company will be

benefitting from recovery in the M&HCV demand and its EBITDA margin will expand on account of operating leverage. The

company is also working on to reduce its debt and generate more cash to fulfill its future expansion requirements.

ASHOKLEY

Please refer to the Disclaimers at the end of this Report

♦ If there is economic growth in the country CV industry will move ahead. Going ahead we see CV industry to grow about 12-15%

annually.

♦ Ashok Leyland have acquired 100% ownership of the JVs, we will continue to be associated with Nissan for the technology of

the existing Dost, Partner, and Mitr models.

♦ The country would be moving to BS-IV norms in April, 2017 and a significant amount of pre-buying expected, especially in the

fourth quarter of FY17. Ashok Leyland's subsidiary, Albonair, holds a significant potential moving forward because Albonair does

exhaust emission systems, selective catalytic reduction emission systems which are necessary for being BS-IV compliant.

Narnolia Securities Ltd

♦ The country would be moving to BS-IV in April, 2017 and significant amount

Investment Arguments

Concall Highlights

M&HCV volume and growth trend

14908

18207 18279

26262

21489

29840

23232

35246

2402525346 25,284

0%

14%

71%

40%

44%

64%

27%34%

12%

-15%

9%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

0

5000

10000

15000

20000

25000

30000

35000

40000

1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17

M&HCV Growth YoY

FY14 FY15 FY16 FY17E FY14 FY15 FY16 FY17E

Net Revenue 11,487 15,341 20,659 21,850 EPS (1) 0 4 4

Other Income 92 189 152 171 Book Value 15 16 18 20

Total Revenue 11,579 15,530 20,811 22,021 DPS - 0.5 1.1 1.1

COGS 8,138 10,443 13,558 14,312 Payout (incl. Div. Tax.) 0% 112% 30% 30%

GPM 71% 68% 66% 66% Valuation(x)

Other Expenses 1,581 1,845 2,396 2,513 P/E -38.4 73.2 9.2 9.1

EBITDA 422 1,517 2,932 3,151 Price / Book Value 1.6 2.2 2.0 1.7

EBITDA Margin (%) 4% 10% 14% 14% Dividend Yield (%) 0.00% 1.53% 3.23% 3.24%

Depreciation 530 580 524 519 Profitability Ratios

EBIT (108) 937 2,408 2,633 RoE -4% 3% 21% 19%

Interest 805 872 968 1,194 RoCE -1% 9% 19% 20%

PBT (821) 254 1,592 1,610 Turnover Ratios

Tax (68) 172 528 534 Asset Turnover (x) 0.7 0.8 0.9 0.9

Tax Rate (%) 8% 68% 33% 33% Debtors (No. of Days) 43.9 32.2 26.8 26.8

Reported PAT (164) 134 1,071 1,077 Inventory (No. of Days) 69.2 54.8 55.5 55.5

Dividend Paid - 150 316 318 Creditors (No. of Days) 82.4 73.3 52.4 50.0

No. of Shares 266 285 285 285 Net Debt/Equity (x) 1.4 1.4 1.5 1.3

FY14 FY15 FY16 FY17E FY14 FY15 FY16 FY17E

Share Capital 266 285 285 285 OP/(Loss) before Tax (300) (42) 1,627 1,610

Reserves 3,723 4,227 4,708 5,466 Depreciation 530 580 524 519

Net Worth 3,989 4,511 4,992 5,751 Direct Taxes Paid (97) (112) (545) (534)

Long term Debt 5,491 6,219 7,597 7,217 OP before WC changes 195 1,725 2,431 3,322

Short term Debt 1,264 827 1,093 874 CF from Op. Activity (104) 496 (952) 2,605

Deferred Tax 411 510 536 536 - - - -

Total Capital Employed 9,480 10,731 12,589 12,968 Capex (408) (251) (212) -

Net Fixed Assets 7,087 6,060 5,894 5,871 CF from Inv. Activity (377) (126) 552 (652)

Capital WIP 270 166 162 162 Repayment of Long Term Borrowings(1,586) (1,996) (2,362) (380)

Debtors 1,381 1,354 1,515 1,603 Interest Paid (499) (803) (316) (1,194)

Cash & Bank Balances 113 905 1,758 1,600 Divd Paid (incl Tax) (187) - (154) (318)

Trade payables 2,592 3,082 2,966 2,993 CF from Fin. Activity 461 381 1,246 (2,111)

Total Provisions 256 599 1,081 1,069 Inc/(Dec) in Cash (20) 751 846 (158)

Net Current Assets 400 522 1,016 1,035 Add: Opening Balance 127 106 858 1,758

Total Assets 17,534 19,525 22,963 23,157 Closing Balance 106 858 1,718 1,600

4

Please refer to the Disclaimers at the end of this Report

Financials Snap Shot

INCOME STATEMENT

BALANCE SHEET

RATIOS

CASH FLOW STATEMENT

ASHOKLEY

Narnolia Securities Ltd