november 6, 2015 ashok leyland (ashley) target : | … motors ltd -5.8 -14.0 13.6 37.3 research...

November 6, 2015

ICICI Securities Ltd | Retail Equity Research

Result Update

Less margin of safety! • Ashok Leyland’s Q2FY16 results were below our estimates.

Revenues were at | 4,940 crore (up 53.5% YoY, 28.6% QoQ) below our estimates of | 5,246 crore. Revenue growth was driven by 49% YoY, 32.4% QoQ growth in total volumes, which were at 37279 units. MHCV volumes grew 64% YoY while LCV volumes grew 9% YoY

• EBITDA margins were at 12% (expanded 475 bps YoY, 191 bps QoQ) vs. our estimate of 11.9%. Margin expansion was mainly because of lower raw material cost, as gross margins expanded 390 bps YoY

• Reported PAT grew 137.6% YoY, 80% QoQ to | 286.8 crore (adjusted PAT: | 290.2 crore) vs. our expectation of | 309 crore. While the interest & depreciation cost was below our estimate, tax outgo was above our estimates, as the tax rate was at 33.7% vs. 32.2% QoQ

• Exceptional gain of | 151.8 crore related to profit on sale of long term investment (IndusInd Bank shares) was offset by diminution of long term investments of JV

Continuous gain in market share FY11-14 has been one of the worst periods for the industry with growth declining for four straight years (de-growth in FY13, FY14). That period was marred by a mining ban in various states and stalled/shelved infra projects leading to excess capacity with fleet owners. Infrastructure spending has a major impact on demand for MHCVs. However, with the new central government and expectations of core infra driven economic growth, demand for MHCVs recovered with domestic industry growing 16% in FY15. Policy actions like reversal of mining bans and resumption of stalled infra projects led to a visible rebound in the HCV segment. In H1FY16, ALL’s MHCV volumes grew 55% YoY, with its market share improving from ~28.6% in FY15 end to ~33.1% in H1FY16. In the first half of FY16, ALL witnessed strong growth in haulage, tractor & tipper segment. Steepest growth (~ 4.5x YoY in H1FY16) has been in the 35-40 tonne category, in which industry leader Tata Motors has no presence. Strong product portfolio to help ALL to capitalise on up-cycle The MHCV down cycle had been the longest/severest in terms of duration, which suggests the up cycle could be sharper than usual. ALL has used the downturn to revamp its product portfolio and filled the gaps with timely new product launches like Captain, Boss, Dost, etc. All these efforts helped ALL to withstand heavy competition and increase its market share from ~26% in FY11 to ~33% in H1FY16. Based on a buoyant volume outlook (22% CAGR for FY15-17E) and robust growth in ASPs (tapering discounts & improving product mix), we expect revenues to witness ~28.5% CAGR for FY15-17E. Rich valuations Although we subscribe to the view that ALL’s performance is likely to improve after the underperformance in the past two years, current valuation multiples (~10x EV/EBITDA FY17E) compel us to be cautious on a bigger upgrade on the multiple front. Thus, we maintain our HOLD rating on the stock. We value the stock on an SOTP basis, to arrive at a target price of | 90. We recommend that investors wait for better risk-reward opportunities to enter the stock.

Ashok Leyland (ASHLEY) | 87 Rating matrix

Rating : HoldTarget : | 90

Target Period : 12 monthsPotential Upside : 3%

What’s changed?

Target Unchanged EPS FY16E Changed from | 3.2 to | 3.5 EPS FY17E Changed from | 5.1 to | 5.0 Rating Unchanged

Quarterly performance (| Crore) Q2FY16 Q2FY15 YoY (%) Q1FY16 QoQ (%)Revenues 4,939.7 3,217.7 53.5 3,841.2 28.6EBITDA 594.5 234.4 153.6 388.7 52.9EBITDAM (%) 12.0 7.3 475 bps 10.1 191 bpsReported PAT 286.8 120.7 137.6 159.4 80.0

Key financials

| Crore FY14 FY15 FY16E FY17ENet Sales 9,943 13,562 18,131 21,945 EBITDA 166.6 1,026.7 2,059.1 2,597.7 Net Profit 29.4 334.8 992.4 1,427.7 EPS (|) 0.1 1.2 3.5 5.0

Valuation summary

FY14 FY15 FY16E FY17EP/E (x) 772.3 72.6 24.5 17.0 CoreEV/EBITDA(x) 176.7 26.6 12.9 10.3 Tar.EV/EBITDA(x) 172.4 26.0 12.5 10.0 P/BV (x) 5.2 4.8 4.3 3.6 RoNW (%) 0.7 6.5 17.2 21.0 RoCE (%) (2.3) 7.2 18.3 23.0

Stock data Particular AmountMarket Capitalization (| Crore) 24,760.2Total Debt (FY15)(| crore) 3,349.7Cash (FY15)(| crore) 751.2EV (| Crore) 27,358.852 week H/L (|) 99/43Equity capital (| crore) 284.6Face value (|) | 1

Price performance

1M 3M 6M 12MAshok Leyland Ltd -8.3 -0.7 23.0 85.7Tata Motors Ltd 28.2 7.3 -20.9 -23.8Eicher Motors Ltd -5.8 -14.0 13.6 37.3

Research Analyst

Nishit Zota

[email protected] Vidrum Mehta [email protected]


Variance analysis ` Q2FY16 Q2FY16E Q2FY15 YoY (%) Q1FY16 QoQ (%) CommentsTotal Operating Income 4,939.7 5,245.5 3,217.7 53.5 3,841.2 28.6 Revenues came lower on account of lower than estimated ASPsRaw Material Expenses 3,477.4 3,550.5 2,368.2 46.8 2,667.2 30.4Employee Expenses 378.4 454.8 291.5 29.8 330.4 14.5 QoQ growth in employee cost on account of some provisioning

Other expenses 489.5 615.0 323.6 51.3 454.9 7.6EBITDA 594.5 625.2 234.4 153.6 388.7 52.9EBITDA Margin (%) 12.0 11.9 7.3 475 bps 10.1 191 bps Better performance due to better gross margins & operating leverage

benefitOther Income 26.5 18.7 25.7 3.0 27.1 -2.3Depreciation 112.9 125.6 103.1 9.6 104.3 8.3Interest 70.2 76.2 100.7 -30.3 76.6 -8.3Tax 145.8 132.6 44.5 227.3 76 92.9Reported PAT 286.8 309.5 120.7 137.6 159.4 80.0 Lower revenues,higher tax outgo & an exceptional item resulted in lower

than estimated PATEPS 1.0 1.1 0.4 137.6 0.6 80.0Key MetricsASPs (| '000s) 1,327 1384 1,258 5.5 1,341 -1.0 YoY increase in ASP because of richer product mix & price hikeAverage discount M&HCV (|) 225,000 160,000 175,000 28.6 200,000 12.5 Discounts remain in the | 2,00,000-2,25,000 range

Source: Company, ICICIdirect.com Research Change in estimates

(| Crore) Old New % Change Old New % Change CommentsRevenue 18,690 18,454 -1.3 22,866 22,393 -2.1 Marginally reduced estimates on account of higher discount levels & marginal decline in

ASPsEBITDA 1,955 2,059 5.3 2,629 2,598 -1.2EBITDA Margin (%) 10.7 11.4 66 bps 11.7 11.8 14 bps Improving operating leverage, tight cost control & higher utilisation to aid in higher margins

PAT 920 992 8 1,450 1,428 -2 FY16E estimates increased on the back of H1FY16 trend & inrease in FY16E margin estimates

EPS (|) 3.2 3.5 9 5.1 5.0 -2

FY16E FY17E

Source: Company, ICICIdirect.com Research Assumptions

Current Earlier CommentsFY14 FY15 FY16E FY17E FY16E FY17E

M&HCV Passenger volumes 19,328 20,722 25,592 30,343 25,757 30,587M&HCV Goods volumes 40,976 56,938 77,603 89,788 73,846 85,518 Higher volumes in the truck segment expected on the back of a recovery in

economic activity, pick-up in activityLCV volumes 28,205 26,794 30,359 35,644 31,672 37,226ASPs (| '000s) 1,100.0 1,279.2 1,357.6 1,408.7 1,395.9 1,461.4RMC/Unit (| '000s) 811.1 959.1 957.7 997.5 995.2 1,037.4M&HCV discount (|) 160,500 166,250 206,250 162,500 177,500 150,000 Tapering of discounts will take more time than expected

Source: Company, ICICIdirect.com Research


Key conference call takeaways

• In Q2FY16, MHCV volumes of the industry grew 35% whereas

ALL’s volumes grew ~64%. Exports were down 4% while LCV volumes were up ~9%. The management attributes the industry growth to pent up demand, improving economics of transporters, green-shoots of growth in economy. The management expects the MHCV industry to grow ~20-22% in FY16E

• Discounts continue to remain at elevated levels of ~| 200,000-

225,000

• The revenue mix for the quarter was: trucks-64%, buses-13%, LCV-6.5%, exports- 8.5% & the balance from spares & engines

• ALL has gained market share across geographies, with its market

share in the range of 20-23% in all geographies

• Channel inventory was at ~7600 units at the end of September

• ALL has made sure that although discounts are at elevated levels, it has taken a price hike of 1-1.5% to ensure ASP increase on a QoQ basis

• The working capital has increased from FY15 end to September.

As per the management, March witnessed negative working capital on account of significant customer advances. The working capital cycle is currently at five days

• Excise benefits at the Pantnagar facility are expected to continue

till March 2020. Pantnagar’s capacity is at ~50,000 units and it clocked 5000 units per month in September

• The tax rate is expected to be in the range of 32-33% The total

capex + investment guidance for FY16E remains at ~| 500 crore

• The management expects net D/E to be in the range of 0.5x-1x

• ABS implementation is expected to increase prices by | 30,000, while change in emission norms from BSIII to BSIV is expected to increase prices by | 70,000 per vehicle

• The company expects the domestic bus segment to grow ~15-

20% YoY in FY16E. The management is targeting an export contribution of one-third in the next three to five years


Company Analysis Economic recovery, defence orders, export strategy hold key to volumes

Ashok Leyland (ALL) is one of the few pure play major commercial vehicle manufacturers in India. ALL is the second largest player across various segments with an overall market share of ~33% in the M&HCV segment. The company has remained highly cyclical in terms of revenues/earnings (MHCV led) as it remains highly dependent on macros like GDP growth, interest rates. ALL also entered the LCV segment in FY12 with the launch of Dost, which saw an encouraging start and saw a good pick-up. Even in the current fiscal, when domestic LCV volumes declined ~7%, domestic LCV volumes of ALL increased ~16%. On exports, the company has initiated new strategies of penetrating newer African markets as well as consolidating markets like Middle East. They have set a five year target of achieving ~33% of volumes from exports. We expect export volumes to grow at a CAGR of 19% in FY15-17E to ~17,750 units. In defence also, ALL remains confident that segments like armoured vehicles would be able to win orders competing with other domestic majors like Tata Motors, M&M, etc. The management has highlighted that a lot of product initiatives are in place in the segment and could throw up a good opportunity in the coming years. Going ahead, we build-in ~22% CAGR in FY15-17E in overall volumes as an economic recovery and pent up demand seem to be panning out. With improving realisations, we expect revenues to grow at ~28.5% CAGR in FY15-17E to ~| 22393 crore in FY17E. Exhibit 1: Revenue growth trends

11,1

77

12,9

04

12,4

81

9,94

3

13,5

62 18,4

54 22,3

93

54.4

15.5

(3.3)

(20.3)

36.4 36.1

21.3

0

3500

7000

10500

14000

17500

21000

24500

FY11 FY12 FY13 FY14 FY15 FY16E FY17E

(| c

rore

)

(30)

(20)

(10)

-

10

20

30

40

50

60

(%)

Total Operating Income Growth



Exhibit 2: Segmental volumes

2584

5

2349

2

1932

8

2072

2

2559

2

3034

3

6740

8

5543

3

4097

6

5693

8 7760

3

8978

88555

3570

4

2820

5 2679

4

3035

9 3564

4

-

30,000

60,000

90,000

120,000

150,000

FY12 FY13 FY14 FY15 FY16E FY17E(u

nits

)

M&HCV Passenger M&HCV Goods LCV


Exhibit 3: Market share movement across years

37.6

43.4 44.0 43.1 42.2

20.523.2

21.223.7 22.9

42.4

26.5

15

20

25

30

35

40

45

FY10 FY11 FY12 FY13 FY14 FY15

(%)

% Share in M&HCV Passenger % Share in M&HCV Goods

Source: Siam, Company, ICICIdirect.com Research

EBITDA margins to improve as utilisation levels improve In the past, with a drop in volumes, the impact of operating leverage has hurt margins significantly. Margins dropped from ~11% in FY11 to ~2% in FY14, with Q3FY14 witnessing negative operating margin of ~6%. Going ahead, we expect a ramp-up of volumes to aid utilisation levels and, thus, boost margins. The cost rationalisation measures taken by the management have also provided a strong fillip to margins. We expect the operating profit to increase at ~59% CAGR in FY15-17E to ~| 2598 crore as margins are likely to scale back to above 10% by FY16E.


Exhibit 4: Margins, costs annual trends and forecasts

1,21

4

1,25

6

876

1,02

7

2,05

9 2,59

8

167

10.99.7

7.0

1.7

7.6

11.2 11.6

0

500

1000

1500

2000

2500

3000

FY11 FY12 FY13 FY14 FY15 FY16E FY17E(|

cro

re)

-

2

4

6

8

10

12

14

(%)

EBITDA EBITDA Margin (%)


Exhibit 5: Trend in ASPs & LCV/MHCV

9.2

45.2 46.8

34.5

29.4 29.712.5

10.6 11.0

12.813.6 14.1

0

10

20

30

40

50

FY12 FY13 FY14 FY15 FY16E FY17E

(%)

0

2

4

6

8

10

12

14

16

(| in

lakh

s)

LCV/MHCV (%) Blended ASP (|)


Profitability to remain at elevated levels Adjusting for exceptional items, the last two years have seen a sharp drop in profitability as volumes and realisations (ex-discounts) have moved sharply lower. However, with the sale of non-core assets, ALL managed to report positive numbers for both years. With an increase in revenues and operating margins, we expect profits to increase to ~| 1428 crore in FY17E.


Exhibit 6: Increase in profitability continues as subsidiaries scale up margins

820

566

434

992

1,42

8

820

565

167

193

996

1,42

8

29 335

258

7.3

4.4

5.4

6.4

1.31.9 1.9

0

200

400

600

800

1000

1200

1400

1600


(| c

rore

)

0

1

2

3

4

5

6

7

8

(%)

PAT Adjusted PAT Adjusted PAT Margin (%)


Debt levels set to decline as majority capex already complete With a majority of the capex already completed, we believe debt levels are likely to decline as CFO generation would most likely be used to de-lever the balance sheet. We estimate net debt will reduce from ~| 2599 crore in FY15 to ~| 1932 crore in FY17E. Exhibit 7: Major capex behind as QIP, working capital lead to decline in debt

823

890

248

-50

530

1258

335

-600

400

350

-134

1

-300

4,679

2,599

1,769

3,065

4,341

1,932

(1,500)

(1,000)

(500)

-

500

1,000

1,500

FY12 FY13 FY14 FY15 FY16E FY17E

(| c

rore

)

-

1,000

2,000

3,000

4,000

5,000

(| c

rore

)Capex Incremental debt Net Debt

| 660 crore QIP to aids debt reduction



Return ratio improvement reflects overall improvement in financials With a decline in volumes and negative impact of operating leverage coupled with ill-timed capex, the asset turnover had dropped to 1.0x in FY14 from ~1.7x in FY11. Going ahead, with higher capacity utilisation & no major capex planned for FY16E, FY17E, a volume pick-up will aid return ratios. With improved sweating of assets and low capex in the next two years, we believe return ratios are likely to improve. We expect RoE, RoCE at the ~21%, 23% mark, respectively by FY17E. Exhibit 8: Return ratios to improve as asset turn improves on better utilisation

13.612.4

5.6

(2.3)

7.2

18.3

23.0

18.6

13.4

9.7

0.7

6.5

17.221.0

1.7

1.5

1.1

1.5

2.0

1.6

2.3

-5

0

5

10

15

20

25


(%)

-

0.3

0.6

0.9

1.2

1.5

1.8

2.1

2.4

2.7

(x)

RoCE RoE Asset turnover(RHS)



Valuation Although we subscribe to the view that ALL’s performance is likely to improve after the underperformance in the past two years, the current valuation multiple (~10x EV/EBITDA FY17E) compels us to be cautious on a bigger upgrade on the multiple front. We value the core business at an upgraded up-cycle multiple of 10x FY17E EV/EBITDA and investments in JV/associates at ~| 5 /share, to arrive at a target price of | 90. We have a HOLD recommendation on the stock.

Exhibit 9: SOTP valuation SOTP

Target EV/EBITDA (x) 10.0

EBITDA (FY17E) 2,597.7

Net Debt 1,931.9

Enterprise Value (| Crore) 25,977.4

Target Market cap Core business (| crore) 24,045.5

Value/Share 84.5

Strategic Investments FY17E (| crore) 1,990.4

P/BV(x) 0.6

Total Value/Share 4.2

Value for stake in Indus Ind bank 0.9

Price target (|) 90


Exhibit 10: Valuations

Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE (| cr) (%) (|) (%) (x) (x) (%) (%)

FY14 9,943.4 (20.3) 0.1 (93.8) 787.1 176.7 0.7 (2.3)FY15 13562.2 36.4 1.2 964.5 73.9 26.6 6.5 7.2FY16E 18,130.8 33.7 3.5 196.4 25.0 12.9 17.2 18.3 FY17E 21,944.9 21.0 5.0 43.9 17.3 10.3 21.0 23.0



Company snapshot

Target Price: 90

0

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120

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(|)

Source: Bloomberg, Company, ICICIdirect.com Research Key events Date EventJan-08 Industry wide slowdown affects CV business resulting in weak financial performance in Q3FY08Mar-08 Government cuts excise duty in the CV business leading to positive buzz in the stockJun-08 Signs JV agreement with Nissan MotorsJan-09 Bags large contract of |1,200 crore from Delhi transport corporation Feb-09 Ashok Leyland and overall CV space gets a boost as government cuts excise duty by 2% to 8% Jul-09 Ashok Leyland completes JV with John Deere for a foray in the construction equipment segmentJan-10 Launches the new "U-truck" platform designed to meet latest emissions normsApr-10 Lines up | 3,000 crore for expansion and to make a new facility in tax-saving zone PantnagarJun-10 Steep increase in input costs ranging from steel to tyres lead to pressure on margins. Thus, company forced to undertake price hikes of ~3%Jan-11 Top management rejig, long time MD R Seshasayee moved to executive vice chairman position. Vinod Dasari replaces himMar-11 Unveils the new LCV "Dost" to be launched in September; Stock gets boosted as Q4FY12 profits rise on strong operating performanceJan-12 Stock receives support as December sales turn around and grow ~20% to 9,088 units aided by "Dost" performanceSep-12 Witnesses huge margin drop on a QoQ basis by ~600 bps on an EBITDA levelFeb-13 Management starts to increasingly focus on cost cutting initiatives ranging from salary cuts, VRS, etc.Sep-13 Management reiterates focus on divesting non-core investments and reducing fixed cost structure in the company. Market expectations riseJul-14 QIP of | 660 crore. Management iterates using proceeds for debt reduction

Source: Company, ICICIdirect.com Research Top 10 Shareholders Shareholding Pattern Rank Name Latest Filing Date % O/S Position (m) Change (m)1 Hinduja Group 31-Mar-15 38.8 1,104.7 0.02 Life Insurance Corporation of India 31-Mar-15 6.6 187.6 -19.83 J.P. Morgan Asset Management (Hong Kong) Ltd. 31-Mar-15 3.8 108.5 30.74 Morgan Stanley Investment Management Inc. (US) 30-Sep-15 2.1 60.0 0.95 Amansa Capital Pte Ltd. 31-Mar-15 1.8 52.0 -1.06 Norges Bank Investment Management (NBIM) 31-Mar-15 1.7 47.3 27.97 IDFC Asset Management Company Private Limited 31-Aug-15 1.3 37.8 0.18 Kuwait Investment Authority 31-Mar-15 1.2 34.9 3.99 Invest AD 31-Mar-15 1.1 31.3 1.610 Dimensional Fund Advisors, L.P. 31-Aug-15 0.8 22.3 0.0

(in %) Sep-14 Dec-14 Mar-15 Jun-15 Sep-15Promoter 38.8 38.8 38.8 38.8 38.8FII 21.5 19.6 20.4 20.2 20.4DII 13.3 13.2 12.1 12.4 12.1Others 26.5 28.4 28.7 28.6 28.7

Source: Reuters, ICICIdirect.com Research Recent Activity

Investor name Value Shares Investor name Value SharesJ.P. Morgan Asset Management (Hong Kong) Ltd. 36.07m 30.65m Life Insurance Corporation of India -23.30m -19.80m Norges Bank Investment Management (NBIM) 32.79m 27.86m Van Eck Associates Corporation -7.62m -7.63m British Columbia Investment Management Corp. 8.13m 6.91m Handelsbanken Asset Management -6.30m -6.90m Kuwait Investment Authority 4.55m 3.87m DSP BlackRock Investment Managers Pvt. Ltd. -5.63m -5.41m William Blair & Company, L.L.C. 3.57m 3.13m Tata Asset Management Limited -4.64m -4.63m

Buys Sells

Source: Reuters, ICICIdirect.com Research


.

Financial summary Profit and loss statement | Crore(Year-end March) FY14 FY15 FY16E FY17E

Total operating Income 9,943.4 13,562.2 18,453.9 22,393.1

Growth (%) -20.3 36.4 36.1 21.3

Raw Material Expenses 7,602.6 9,965.2 12,931.9 15,620.9

Employee Expenses 999.7 1,184.0 1,509.7 1,867.8

Other Expenses 1,174.6 1,386.3 1,953.2 2,306.7

Total Operating Expenditure 9,776.8 12,535.5 16,394.8 19,795.3

EBITDA 166.6 1,026.7 2,059.1 2,597.7

Growth (%) -81.0 516.3 100.6 26.2

Depreciation 377.0 416.3 446.8 465.9

Interest 452.9 393.5 291.6 220.5

Other Income 66.5 124.5 89.5 71.7

PBT -91.2 442.2 1,405.0 1,983.0

Others 0.0 0.0 0.0 0.0

Total Tax -120.6 107.4 412.6 555.2

PAT 29.4 334.8 992.4 1,427.7

Growth (%) -93.2 1,038.4 196.4 43.9EPS (|) 0.1 1.2 3.5 5.0


Cash flow statement | Crore(Year-end March) FY14 FY15 FY16E FY17E

Profit after Tax 29.4 334.8 992.4 1,427.7

Add: Depreciation 377.0 416.3 446.8 465.9

(Inc)/dec in Current Assets 803.6 -73.9 -1,271.0 -698.2

Inc/(dec) in CL and Provisions -496.4 1,070.1 1,389.7 -518.7

CF from operating activities 713.7 1,747.4 1,557.9 676.7

(Inc)/dec in Investments -67.7 164.9 150.0 100.0

(Inc)/dec in Fixed Assets -248.0 49.5 -400.0 -350.0

Others -698.9 -217.5 -145.8 -189.6

CF from investing activities -1,014.6 -3.0 -395.8 -439.6

Issue/(Buy back) of Equity 0.0 0.0 0.0 0.0

Inc/(dec) in loan funds 334.9 -1,340.6 -300.0 -600.0

Dividend paid & dividend tax 0.0 -154.1 -333.0 -399.6

Others -36.6 490.1 0.0 0.0

CF from financing activities 298.3 -1,004.6 -633.0 -999.6

Net Cash flow -2.6 739.8 529.1 -762.4

Opening Cash 14.0 11.4 751.2 1,280.3Closing Cash 11.4 751.2 1,280.3 517.8


Balance sheet | Crore(Year-end March) FY14 FY15 FY16E FY17E

Liabilities

Equity Capital 266.1 284.6 284.6 284.6

Reserve and Surplus 4,181.9 4,834.2 5,493.6 6,521.8

Total Shareholders funds 4,447.9 5,118.8 5,778.2 6,806.4

Total Debt 4,690.3 3,349.7 3,049.7 2,449.7

Deferred Tax Liability 406.8 510.3 510.3 510.3

Other non-current liabilities 2.4 2.1 2.1 2.1

Total Liabilities 9,547.4 8,980.8 9,340.2 9,768.4

Assets

Gross Block 8,672.3 8,555.3 8,955.3 9,305.3

Less: Acc Depreciation 3,012.0 3,299.5 3,746.3 4,212.3

Net Block 5,660.3 5,255.8 5,209.0 5,093.1

Capital WIP 155.1 69.8 69.8 69.8

Total Fixed Assets 5,815.4 5,325.6 5,278.8 5,162.9

Investments 2,405.3 2,240.4 2,090.4 1,990.4

Inventory 1,188.7 1,398.5 1,879.9 2,328.7

Debtors 1,299.0 1,257.7 1,688.9 1,984.1

Loans and Advances 800.7 568.8 935.7 885.3

Other current assets 170.9 308.2 299.7 304.4

Cash 11.4 751.2 1,280.3 517.8

Total Current Assets 3,470.7 4,284.4 6,084.5 6,020.3

Creditors 2,214.2 2,828.3 3,725.5 4,328.9

Provisions 156.0 334.7 411.0 442.9

Other current Liabilties 890.5 1,167.8 1,583.9 429.9

Total Current Liabilities 2,370.1 3,163.0 4,136.5 4,771.8

Net Current Assets 1,100.6 1,121.4 1,948.0 1,248.5Application of Funds 9,547.4 8,980.9 9,340.2 9,768.4


Key ratios (Year-end March) FY14 FY15 FY16E FY17E

Per share data (|)

EPS 0.1 1.2 3.5 5.0

Cash EPS 1.5 2.6 5.1 6.7

BV 16.7 18.0 20.3 23.9

DPS 0.0 0.4 1.0 1.2

Cash Per Share 0.0 2.6 4.5 1.8

Operating Ratios (%)

EBITDA Margin 1.7 7.6 11.4 11.8

PBT / Net sales -0.9 3.3 7.7 9.0

PAT Margin 7.0 7.3 4.4 3.5

Inventory days 56.6 34.8 33.0 35.0

Debtor days 47.7 33.8 34.0 33.0

Creditor days 81.3 76.1 75.0 72.0

Return Ratios (%)

RoE 0.7 6.5 17.2 21.0

RoCE -2.3 7.2 18.3 23.0

RoIC -2.2 7.5 20.0 23.0

Valuation Ratios (x)

P/E 787.1 73.9 25.0 17.3

EV / EBITDA 176.7 26.6 12.9 10.3

EV / Net Sales 3.0 2.0 1.5 1.2

Market Cap / Sales 2.5 1.8 1.4 1.1

Price to Book Value 5.2 4.8 4.3 3.6

Solvency Ratios

Debt/Equity 1.1 0.7 0.5 0.4

Current Ratio 1.1 1.0 1.1 1.2Quick Ratio 1.1 0.8 0.8 1.1



ICICIdirect.com coverage universe (Auto & Auto Ancillary) CMP M Cap(|) TP(|) Rating (| Cr) FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E

Amara Raja (AMARAJ) 885 1000 Buy 15118 24.1 29.8 39.5 36.8 29.7 22.4 21.6 18.1 13.7 34.3 32.2 34.0 25.6 24.1 25.4Apollo Tyre (APOTYR) 161 200 Buy 8136 19.0 20.6 20.5 8.5 7.8 7.9 4.5 4.7 4.9 26.0 23.1 18.9 18.9 17.9 15.5Ashok Leyland (ASHLEY) 87 90 Hold 24676 1.2 3.5 5.0 74.2 25.1 17.4 26.4 12.7 10.2 7.2 18.3 23.0 6.5 17.2 21.0Bajaj Auto (BAAUTO) 2435 2910 Buy 70454 97.2 129.9 165.3 25.0 18.7 14.7 16.0 12.7 10.1 35.6 38.4 41.1 26.3 31.1 33.8Balkrishna Ind. (BALIND) 666 720 Hold 6436 50.6 55.7 58.5 13.5 12.3 11.7 8.2 7.7 6.6 17.8 17.7 19.0 21.3 17.8 17.7Bharat Forge (BHAFOR) 859 970 Buy 20017 32.8 40.1 46.9 26.2 21.4 18.3 14.8 12.6 10.9 18.6 22.3 25.1 22.2 24.2 23.7Bosch (MICO) 20116 25000 Hold 63164 426.0 478.2 610.3 58.5 52.2 40.9 38.5 35.4 27.9 18.2 17.6 19.1 19.4 19.4 21.3Eicher Motors (EICMOT) 17927 20545 Hold 48422 227.1 562.1 708.1 78.9 31.9 25.3 49.1 21.9 17.1 24.5 43.7 41.2 24.5 41.7 37.7Escorts (ESCORT) 158 152 Hold 1882 6.7 10.6 26.0 24.9 15.6 6.4 13.3 10.3 4.1 4.5 5.7 14.0 4.4 6.3 13.6Exide Industries (EXIIND) 144 175 Buy 12236 6.4 7.2 8.7 22.4 19.9 16.5 14.4 12.4 10.5 18.9 19.7 21.3 13.5 13.9 15.1Hero Mototcorp (HERHON) 2648 2625 Hold 52882 119.5 155.9 175.0 22.2 17.0 15.1 0.0 0.0 0.0 45.9 48.5 45.3 36.5 39.1 36.9JK Tyre & Ind (JKIND) 96 130 Buy 2168 14.5 22.6 24.7 6.6 4.2 3.9 5.2 3.8 3.5 18.7 23.5 22.7 23.3 27.5 23.5M&M (MAHMAH) 1254 1525 Buy 74038 50.7 61.6 78.8 24.7 20.4 15.9 18.0 11.5 9.0 14.5 17.0 19.9 17.1 16.5 18.2Mahindra CIE (MAHAUT) 250 300 Buy 8062 -2.4 8.8 13.1 NA 28.2 19.0 22.7 13.5 10.8 -4.1 12.3 16.9 5.9 11.5 15.9Maruti Suzuki (MARUTI) 4525 5090 Buy 136730 122.9 178.3 231.5 36.8 25.4 19.5 20.1 14.2 11.4 17.2 23.6 24.5 15.6 19.3 20.9Motherson (MOTSUM) 244 347 Hold 32308 6.5 10.7 18.8 37.5 22.7 13.0 15.1 12.4 8.2 24.7 27.9 38.7 25.9 34.5 46.0Tata Motors (TELCO) 402 480 Buy 122875 41.2 40.5 52.5 8.5 8.7 6.7 3.4 3.3 2.6 22.8 14.8 16.3 24.9 13.8 15.2Wabco India (WABTVS) 6708 6080 Hold 12745 63.6 114.8 168.9 105.4 58.4 39.7 57.2 37.2 26.4 14.0 20.5 23.5 18.2 24.4 27.8

Sector / CompanyRoE (%)EPS (|) P/E (x) EV/EBITDA (x) RoCE (%)



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Pankaj Pandey Head – Research [email protected]

ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai – 400 093

[email protected]


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november 6, 2015 ashok leyland (ashley) target : | … motors ltd -5.8 -14.0 13.6 37.3 research...

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