Valuation Of ASHOK LEYLAND

Particulars Mar-21(F) Mar-20(F) Mar-19(F) Mar-18(F) Mar-17(F) Mar-16 Mar-15 Mar-14 Mar-13 Mar-12 Mar-11 Mar-10 Mar-09 Mar-08 Mar-07

Total Operating Revenues

107035.3517 73817.484 52726.77 36363.29 26350.21 18,821.58 13,562.18 9,943.43 12,481.20 12,841.99 11,177.11 7,436.18 6,168.99 7,972.52 7,358.88

YoY % 45% 40% 45% 38% 40% 39% 36% -20% -3% 15% 50% 21% -23% 8% #DIV/0!

Total Expenses

103824.2911 72341.134 52726.77 34545.13 24505.7 17,372.82 13,345.39 10,606.83 12,362.40 12,193.96 10,419.76 6,984.02 6,045.10 7,442.26 6,868.48

YoY % 44% 37% 53% 41% 41% 30% 26% -14% 1% 17% 49% 16% -19% 8% #DIV/0!

Expense to sales 97% 98% 100% 95% 93% 92% 98% 107% 99% 95% 93% 94% 98% 93% 93%

Depreciation And Amortisation Expenses

631.89 550.32 652.1 497.2 502.11

443.67 416.34 377.04 380.78 352.81 267.43 204.11 178.41 177.36 150.57

YoY % 15% -16% 31% -1% 13% 7% 10% -1% 8% 32% 31% 14% 1% 18% #DIV/0!

Dep to fixed asset 9% 8% 10% 8% 9% 9% 8% 6% 6% 6% 5% 4% 4% 8% 9%

Finance Costs 410 350 375 400 350 273.54 393.51 452.92 376.89 255.25 188.92 101.85 157.3 83.63 31.82

YoY % 17% -7% -6% 14% 28% -30% -13% 20% 48% 35% 85% -35% 88% 163% #DIV/0!

Operating Cost 102,782.40 71,440.81 51,699.67 33,647.93 23,653.59 16,655.61 12,535.54 9,776.87 11,604.73 11,585.90 9,963.41 6,678.06 5,709.39 7,181.27 6,686.09

YoY % 44% 38% 54% 42% 42% 33% 28% -16% 0% 16% 49% 17% -20% 7% #DIV/0!

EBITDA 4,252.95 2,376.67 1,027.10 2,715.36 2,696.62 2,165.97 1,026.64 166.56 876.47 1,256.09 1,213.70 758.12 459.60 791.25 672.79

YoY % 79% 131% -62% 1% 24% 111% 516% -81% -30% 3% 60% 65% -42% 18% #DIV/0!

EBITDA TO SALES 4% 3% 2% 7% 10% 12% 8% 2% 7% 10% 11% 10% 7% 10% 9%

Total Tax Expenses 1233.355659 689.23421 297.859 787.4557 782.0212 447.43 107.39 -120.6 37 124 170.5 121.1 18.45 168.84 163.22

YoY % 79% 131% -62% 1% 75% 317% -189% -426% -70% -27% 41% 556% -89% 3% #DIV/0!

TAX TO EBITDA 29% 29% 29% 29% 29% 21% 10% -72% 4% 10% 14% 16% 4% 21% 24%

Profit/Loss For The Period

6422.121099 5167.2239 2636.339 2181.798 1317.511 721.78 334.81 29.38 433.71 565.98 631.3 423.67 190.25 469.31 444.25

YoY % 24% 96% 21% 66% 83% 116% 1040% -93% -23% -10% 49% 123% -59% 6% #DIV/0!

PAT - SALES 6% 7% 5% 6% 5% 4% 2% 0% 3% 4% 6% 6% 3% 6% 6%

Fixed Assets 7021 6879 6521 6215 5579 5,129.35 5,375.70 5,841.39 5,970.81 5,461.72 4,991.76 4,869.26 4,442.31 2,186.63 1,714.74

YoY % 2% 5% 5% 11% 9% -5% -8% -2% 9% 9% 3% 10% 103% 28% #DIV/0!

Fixed Assets 27% 40% 59% 48% 43% 45% 65% 72% 27% 23%

- SALES Margin

Total Current Liabilities

37462.37308 28050.644 18454.37 13454.42 8695.57 5,209.86 5,035.52 4,586.60 5,296.10 4,843.70 3,759.87 2,960.76 2,136.95 2,275.95 1,922.61

YoY % 34% 52% 37% 55% 67% 3% 10% -13% 9% 29% 27% 39% -6% 18% #DIV/0!

CL to Sales 35% 38% 35% 37% 33% 28% 37% 46% 42% 38% 34% 40% 35% 29% 26%

Total Current Assets

40673.43363 29526.994 18981.64 14545.32 9222.574 5,290.61 4,693.00 3,855.44 4,296.53 4,303.89 3,983.77 4,081.45 3,120.71 2,743.42 2,527.50

YoY % 38% 56% 31% 58% 74% 13% 22% -10% 0% 8% -2% 31% 14% 9% #DIV/0!

CA to Sales 38% 40% 36% 40% 35% 28% 35% 39% 34% 34% 36% 55% 51% 34% 34%

Working Capital 3,211.06 1,476.35 527.27 1,090.90 527.00 80.75 -342.52 -731.16 -999.57 -539.81 223.90 1,120.69 983.76 467.47 604.89

change in WC 1,734.71 949.08 -563.63 563.89 446.25 423.27 388.64 268.41 -459.76 -763.71 -896.79 136.93 516.29 -137.42 604.89

CAPEX -489.89 -192.32 -346.10 138.80 -52.46 -690.02 -882.03 -506.46 128.31 117.15 -144.93 222.84 2,077.27 294.53 1,564.17

FCFF(revenue model) 1,774.77 930.67 1,638.97 1,225.21 1,520.81 1,985.29 1,412.64 525.21 1,170.92 1,778.65 2,084.92 277.25

-2,152.41 465.30 ########

Total Assets 23,166.77 20,870.96 18,634.79 16,490.96 14,991.78 13,385.52 13,311.49 12,808.00 13,096.70 11,915.75 10,593.31 9,308.12 7,911.26 5,578.20 4,505.17

YoY % 11% 12% 13% 10% 12% 1% 4% -2% 10% 12% 14% 18% 42% 24% #DIV/0!

Cost Of Materials Consumed

73,694.46 52,638.90 35,566.82 24,871.91 17,765.65 12,252.17 8,626.64 5,909.69 7,539.42 9,121.48 8,064.50 5,333.83 4,390.59 5,834.61 5,491.44

YoY % 40% 48% 43% 40% 45% 42% 46% -22% -17% 13% 51% 21% -25% 6% #DIV/0!

Purchase Of Stock-In Trade

3,595.57 2,663.38 2,315.99 1,852.79 1,684.35 1,531.23 1,391.19 1,269.03 1,311.74 507.37 273.37 244.88 202.19 163.53 124.18

YoY % 35% 15% 25% 10% 10% 10% 10% -3% 159% 86% 12% 21% 24% 32% #DIV/0!

Operating And Direct Expenses

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0 0 45.51 50.3 57.48 41.7

YoY % #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! -100% -10% -12% 38% #DIV/0!

Changes In Inventories Of FG,WIP And Stock-In Trade

200 -350 200 400 -300

-521.44 -52.61 423.87 271.98 -167.01 -165.22 -251.85 -1.05 -97.48 -48.98

YoY % 891% -112% 56% -263% 1% -34% 23886% -99% 99% #DIV/0!

COGS 77,490.03 54,952.28 38,082.81 27,124.69 19,150.00 13,261.96 9,965.22 7,602.59 9,123.14 9,461.84 8,172.65 5,326.86 4,591.73 5,900.66 5,566.64

Total Shareholders Funds

7,805.46 7,227.28 6,691.93 6,254.14 5,844.99 5,514.14 5,118.69 4,447.88 4,455.10 4,208.17 3,962.96 3,656.31 3,473.90 2,148.98 1,894.57

YoY % 8% 8% 7% 7% 6% 8% 15% 0% 6% 6% 8% 5% 62% 13% #DIV/0!

Total Capital And Liabilities

23,166.77 20,870.96 18,634.79 16,490.96 14,991.78 13,385.52 13,311.49 12,808.00 13,096.70 11,915.75 10,593.31 9,308.12 7,911.26 5,578.20 4,505.17

YoY % 11% 12% 13% 10% 12% 1% 4% -2% 10% 12% 14% 18% 42% 24% #DIV/0!

Inventories 7,119.45 5,234.89 3,766.11 2,789.71 2,249.77 1,730.59 1,398.53 1,188.70 1,896.02 2,230.63 2,208.90 1,638.24 1,330.01 1,223.91 1,070.32

YoY % 36% 39% 35% 24% 30% 24% 18% -37% -15% 1% 35% 23% 9% 14% #DIV/0!

Cash And Cash Equivalents

65,905.32 33,797.60 16,094.09 7,450.97 3,371.48 1,568.13 751.29 11.69 13.94 32.56 179.53 518.92 88.08 451.37 434.94

YoY % 95% 110% 116% 121% 115% 109% 6327% -16% -57% -82% -65% 489% -80% 4% #DIV/0!

Current Investments

0.00 0.00 0.00 0.00 0.00 0 408.45 384.37 0 0

YoY % #DIV/0! #DIV/0!

Trade Receivables

1,414.06 1,400.06 1,372.60 1,307.24 1,188.40 1,250.95 1,257.69 1,299.01 1,419.41 1,230.25 1,164.50 1,022.06 957.97 375.84 522.88

YoY % 1% 2% 5% 10% -5% -1% -3% -8% 15% 6% 14% 7% 155% -28% #DIV/0!

Trade Payables

4,065.22 3,534.97 3,213.61 3,382.75 3,075.23 2,562.69 2,828.32 2,214.15 2,485.37 2,772.46 2,308.51 2,331.68 1,771.29 1,735.11 1,433.69

YoY % 15% 10% -5% 10% 20% -9% 28% -11% -10% 20% -1% 32% 2% 21% #DIV/0!

EBIT 3,621.06 1,826.35 375.00 2,218.16 2,194.51 1,722.30 610.30 -210.48 495.69 903.28 946.27 554.01 281.19 613.89 522.22

Basic EPS (Rs.) 22.57 18.16 9.26 7.67 4.63 2.54 1.18 0.11 1.63 2.13 4.75 3.18 1.43 3.53 3.36

CURRENT MARKET PRICE AS ON 31 MAR 2016 108.55 108.55 108.55 108.55 108.55 108.55 108.55 108.55 108.55 108.55 108.55 108.55 108.55 108.55 108.55

Equity Share Capital 284.59 284.59 284.59 284.59 284.59 284.59 284.59 266.07 266.07 266.07 133.03 133.03 133.03 133.03 132.39

Profit/Loss Before Tax 7,655.48 5,856.46 2,934.20 2,969.25 2,099.53 1,169.21 442.20 -91.22 470.71 689.98 801.80 544.77 208.70 638.15 607.47

YoY % 31% 100% -1% 41% 80% 164% -585% -119% -32% -14% 47% 161% -67% 5% #DIV/0!

DCF ANALYSIS

Particulars Mar-21 Mar-20 Mar-19 Mar-18 Mar-17

Mar-16 Mar-15

Mar-14 Mar-13

Mar-12 Mar-11 Mar-10 Mar-09

Dec-07

Dec-06

FCFF (EBITDA Formula) 1958.0221 1090.27 1828.08 1369.4 1666.42 2076.9 1456.19 252.21 1186.995 1813.5 2122.49 309.854 -2145.25 503.15

WACC 9% 9% 9% 9% 9%

Years (t) 5 4 3 2 1

Discounted FCFF 1273 772 1412 1153 1529

Sum of Discounted FCFF 6138

Terminal Value (Growth 5%) 51398

Dicsounted Terminal Value (t=5) 33405

Value of company (Sum of Discounted FCFF+Discounted Terminal Value)

39543

Shares Outstanding 284.59

FCFF per share 138.94802 Current Market Price (As on

12 Aug 2016) 89 Upside 56%

BUY CALL

Forecasting Financial Ratios Profitability Ratios Profitability Ratios Mar-21 Mar-20 Mar-19 Mar-18 Mar-17 Mar-16 Mar-15 Mar-14 Mar-13 Mar-12 Mar-11 Mar-10 Mar-09 Dec-07 Dec-06

Gross Profit Ratio

((Total Operating Revenues-COGS)/Total Operating Revenues) 28% 26% 28% 25% 27% 30% 27% 24% 27% 26% 27% 28% 26% 26% 24%

Return on Sales

[PAT/Total Operating Revenues) 6% 7% 5% 6% 5% 4% 2% 0% 3% 4% 6% 6% 3% 6% 6%

Return on Assets

[PAT/ Average Total Assets] 28% 25% 14% 13% 9% 5% 3% 0% 3% 5% 6% 5% 2% 8% 10%

Return on Equity

[PAT / Average Stockholders' Equity] 82% 71% 39% 35% 23% 13% 7% 1% 10% 13% 16% 12% 5% 22% 23%

Net Profit Ratio

[PAT/Total Operating Revenue] 6% 7% 5% 6% 5% 4% 2% 0% 3% 4% 6% 6% 3% 6% 6%

Liquidity Ratios Liquidity Ratios

Current Ratio [Current Assets / Current Liabilities] 1.085714 1.0526316 1.0285714 1.0810811 1.060606 1.015499 0.931979 0.840588 0.811263 0.888554 1.05955 1.378514 1.4603571 1.205396 1.314619

Quick Ratio

[(Current Assets-Inventory) / Current Liabilities] 0.895671 0.8660087 0.8244946 0.8737357 0.80188 0.683324 0.654246 0.58142 0.45326 0.428032 0.47206 0.825197 0.83797 0.667638 0.757918

Cash Ratio

[(Cash and cash equi. + current investment) / Current Liabilities] 1.75924 1.2048778 0.872102 0.5537935 0.387724 0.300993 0.230312 0.086352 0.002632 0.006722 0.04775 0.175266 0.0412176 0.198322 0.226224

Net Working Capital

[Current Assets - Current Liabilities] 3211.061 1476.3497 527.26774 1090.8988 527.0042 80.75 -342.52 -731.16 -999.57 -539.81 223.9 1120.69 983.76 467.47 604.89

Management Efficiency Ratios

Management Efficiency Ratios

Receivable Turnover

[Sales / Accounts Receivable] 75.69377 52.724628 38.413658 27.816787 22.1728 15.04583 10.7834 7.654622 8.793231 10.43852 9.59821 7.275679 6.4396484 21.21254 14.07375

Day Sales Outstanding

[365*( Trade Receivables/Sales)] 4.822061 6.922761 9.5018288 13.121573 16.46161 24.25921 33.84831 47.68361 41.5092 34.96664 38.0279 50.16714 56.680113 17.20681 25.93482

Inventory Turnover (COGS/Avg. Inventory) 10.88427 10.497308 10.111975 9.7231192 8.511992 7.663259 7.125496 6.395718 4.811732 4.241779 3.69987 3.251575 3.4524026 4.821155 5.200912

Days Inventory Outstanding

[365*( Inventory/ COGS)] 33.53465 34.770819 36.095817 37.539394 42.88068 47.62986 51.2245 57.06943 75.85626 86.0488 98.652 112.2533 105.72347 75.708 70.18

Accounts Payable Turnover

(COGS / Accounts Payable) 19.0617 15.545312 11.850464 8.0185314 6.22718 5.175015 3.523371 3.433638 3.670737 3.412796 3.54023 2.284559 2.5923084 3.400741 3.882736

Days Payable Outstanding

[365*(Accounts Payable/COGS)] 19.14834 23.479747 30.800481 45.519558 58.61401 70.53119 103.594 106.3012 99.43507 106.9504 103.101 159.7683 140.80115 107.3295 94.00587

Operating Cycle

[Days Inventory+Days Sales] 38.35671 41.69358 45.597646 50.660967 59.34229 71.88908 85.07281 104.753 117.3655 121.0154 136.68 162.4204 162.40359 92.9148 96.11482

Cash Conversion Cycle

[Day Sales O/S+Days Inventory O/S-Days Payable O/S] 19.20837 18.213833 14.797165 5.1414093 0.72828 1.357886

-18.52117 -1.5482 17.9304 14.065 33.5792 2.652171 21.602441

-14.41474 2.108945

Total Asset Turnover [Sales/ Total Assets] 4.620211 3.5368514 2.8294811 2.2050439 1.757644 1.406115 1.018833 0.776345 0.953003 1.077732 1.05511 0.798892 0.7797734 1.429228 1.63343

Leverage Ratios Leverage Ratios

Debt Ratio [Total Liabilities/Total Assets] 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1

Equity Ratio [Total Equity / Total Assets] 0.336925 0.3462841 0.3591094 0.3792464 0.389879 0.411948 0.384532 0.347274 0.34017 0.35316 0.3741 0.392809 0.4391083 0.385246 0.420532

Debt-Equity Ratio

[Total Liabilities / Total Equity] 2.968019 2.8878023 2.7846665 2.6368081 2.564895 2.42749 2.600566 2.879574 2.93971 2.831575 2.67308 2.545769 2.2773425 2.595743 2.377938

Times Interest Earned

[(PBT+Finance Cost) / Finance Cost] 19.67189 17.732737 8.8245272 8.4231332 6.998662 5.274366 2.123733 0.798596 2.248932 3.703154 5.24412 6.348748 2.3267641 8.630635 20.09082

Valuation Growth Ratios

EPS [PAT/NO. Of Share] 22.56622 18.15673 9.2636379 7.666459 4.629504 2.53621 1.176464 0.110422 1.63006 2.127185 4.74555 3.18477 1.4301285 3.527851 3.355616

Price-Earnings Ratio

[Current Market Price/EPS] 4.810287 5.9784993 11.717859 14.159079 23.44744 42.80008 92.26799 983.0462 66.59265 51.02989 22.8741 34.08409 75.902268 30.76944 32.34876

Book Value per Share

[Shareholder's Funds/No Of Share] 27.42705 25.395416 23.514274 21.975957 20.53828 19.37573 17.98619 16.71695 16.74409 15.81603 29.79 27.48485 26.113659 16.1541 14.31052

PB Ratio [Current Market Price/BV] 3.957772 4.2743935 4.616345 4.9394891 5.285253 5.602369 6.035186 6.493408 6.482884 6.863292 3.64384 3.949448 4.1568285 6.719656 7.585328

Valuation Ratios

DATA Required 2016

CMP ON 31 MARCH 2016 108.55 P/E 42.80008382

EPS ON 31 MARCH 2016 2.536209986 P/B 5.602368547

REVENUE ON 31 MARCH 2016 18,821.58 P/SALES RATIO 1.641320468

NO . O/S SHARE 285 PRICE TO CASH FLOW 18.43641689

NET WORTH 5,514.14 PRICE TO EARNING GROWTH RATIO 5.887803507

ANNUAL DIVIDEND 45.00 DIVIDEND YIELD 0.414555504

CASH FLOW FROM OPERATION 1675.61 MARKET CAP 30892.2445

EPS GROWTH 116% ENTERPRISE VALUE 30475.9945

SHORT TERM BORROWING 0 NET DEBT 416.25

LONG TERM BORROWING 1,984.38 EV/EBITDA 14.07036778

CASH & CASH EQUIVALENT 1,568.13 EV/SALES 1.619204897

EBITDA 2,165.97 EV/EBIT 17.69493962

Net Debt= SHORT TERM BORROWING+LONG TERM BORROWING-CASH & CASH EQUIVALENT

Analysis

Company Profiles:

Company : Ashok Leyland: Ashok Leyland is an Indian automobile manufacturing company based in Chennai, India. Founded in 1948, it is the 2nd largest

commercial vehicle manufacturer in India, 4th largest manufacturer of buses in the world and 16th largest manufacturer of trucks globally. Operating six

plants, Ashok Leyland also makes spare parts and engines for industrial and marine applications. With a joint venture with Nissan Motors of Japan the company

made its presence in the Light Commercial Vehicle (LCV) segment (<7.5 tons).

Discounted Cash Flow Valuation

1. Revenue Growth: The revenue growth of the companies has been assumed as follows:

Company : Ashok Leyland: Ashok Leyland is an 2nd largest commercial vehicle manufacturer in India Ashok Leyland has an potential to grow with an average

growth of 40-45% and on this basis the future operating revenue forecasting has been done with an growth rate of 40-45%. Fall in fuel prices has substantially

improved interest serviceability of the fleet operators leading to higher demand. The company expects to earn over one-fourth of its revenues from exports in

the next 3-5 years by expanding presence in Africa, South East and Latin American market.

2. The other financials are based on the revenue and the average/estimated of the last three –five years.

3. WACC (Weighted Average Cost of Capital) for all the three companies are calculated as follows:

WACC Calculation Ashok Leyland

WACC 9%

Weight of Debt 38.0%

Weight of Equity 62.0%

After-tax Cost of Debt 2.1%

Corporate tax rate 29.0%

Cost of Debt 3.0%

Cost of Equity 13.2%

Adjusted Risk free Rate 5.0%

Annual inflation rate 9.0%

Country Risk Premium 1.5%

Risk free Rate 8.0%

Unlevered Beta 1.82

Market Premium 4.0%

4. Terminal Growth Rate Assumption: T growth rate is taken 5 % assumption for all the three companies.

5. After calculating the value of the company the following recommendation can be given for each of the companies:

Name of the Company FCFF/ Share (Rs)

Current Market Price (Rs) Upside (%)

Recommendation

Ashok Leyland 138.9480213 89 (As on 12 Aug 2016) 56% BUY

This report has been prepared by Aakash Singh, MBA Finance Student (SIBM HYD) only for the learning purpose. It includes research analysis, projections, forecasts and other

predictive statements providing a basis for investment decisions. The views expressed therein are based solely on information available publicly/internal data/other reliable

sources believed to be true. The information is provided merely as a complementary service and do not constitute an offer, solicitation for the purchase or sale of any financial

instruments or neither me nor anyone responsible for the risk held by the investor.