Ashok Leyland - result...

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Ashok Leyland’s (AL) Q4FY17 EBITDA at INR7.3bn (down 7% YoY) was in line with Street estimates, albeit lower than ours. That said, management’s guidance stays very robust; a) 10‐15% M&HCV industry growth in FY18 (GDP, infra and mining revival) – we are at 8%; b) market share gain—across regions and segments—to continue (up 100bps in FY17 to 34%); c) strong response for new launches (Sunshine, GURU and Oyster) and sustained network expansion (5x over FY12‐17) to aid market share gains; d) non‐cyclical businesses gaining traction—new orders in defence, bigger scale of spares business and focused product strategy across export markets. We believe, this business momentum, a cohesive strategy that we like and AL’s unwavering profitability focus should drive industry leading margins, RoE and stock performance. Maintain ‘BUY’.

Weak product mix and higher input costs dent gross margin

AL’s Q4FY17 revenue at INR66bn (up 11% YoY) came in line with Street’s estimate.

However, EBITDA missed our estimate by 14% due to gross margin miss (28.1% versus

30.6% estimate) led by delay of export/defence and commodity cost impact. We

expect gross margin pressure to ease going forward with softening of steel prices and

normalisation of export orders. Reported PAT, at INR4.7bn, was aided by higher other

income and negative tax (INR3.25bn tax benefit from Hinduja Foundries’ merger).

New launches and reach expansion to sustain market share gains

Addressing white spaces in product portfolio coupled with dealership expansion across

non‐South regions will help sustain market share gains going forward. We believe the

company’s strategy of increasing local presence across export markets and product

launches comparable to global peers to help drive export growth. AL is targeting 30%

market share in ~500‐600K export opportunity

Outlook and valuations: Strategy on track; maintain ‘BUY’

Focus on widening product offerings & deepening distribution to propel current 15‐

year high market share and industry leading margin/RoE. We estimate ~25% EPS CAGR

over FY17‐19 and maintain ‘BUY/SO’ with INR125 TP (10x FY19E EV/EBITDA and assign

INR6 to Hinduja Finance stake. At CMP, the stock trades at FY19E PER of 13.7x.

RESULT UPDATE

ASHOK LEYLANDSubdued quarter; optimistic outlook intact

EDELWEISS 4D RATINGS

Absolute Rating BUY

Rating Relative to Sector Outperform

Risk Rating Relative to Sector High

Sector Relative to Market Underweight

MARKET DATA (R: ASOK.BO, B: AL IN)

CMP : INR 92

Target Price : INR 125

52‐week range (INR) : 112 / 74

Share in issue (mn) : 2,845.9

M cap (INR bn/USD mn) : 261 / 4,043

Avg. Daily Vol.BSE/NSE(‘000) : 12,160.5 SHARE HOLDING PATTERN (%)

Current Q3FY17 Q2FY17

Promoters *

50.4 50.4 50.4

MF's, FI's & BK’s 9.9 8.9 8.7

FII's 17.9 11.9 10.0

Others 21.9 28.8 30.9

* Promoters pledged shares (% of share in issue)

: 17.8

PRICE PERFORMANCE (%)

Stock Nifty

EW Auto Index

1 month 4.2 2.6 5.1

3 months 1.1 7.3 9.5

12 months (12.1) 18.9 28.4

Chirag Shah +91 22 6623 3367

[email protected]

Karthik Subramaniam +91 22 6620 3156

[email protected]

India Equity Research| Automobiles

May 26, 2017

Financials (INR mn)

Year to March Q4FY17 Q4FY16 % Chg Q3FY17 % Chg FY17 FY18E FY19E

Total operating Income 66,179 59,732 10.8 44,309 49.4 200,187 241,260 276,354

EBITDA 7,299 7,835 (6.8) 4,543 60.7 22,025 24,777 30,797

Adjusted Profit 9,198 3,465 165.4 2,308 298.6 15,585 14,547 18,936

Adjusted Diluted EPS 3.2 1.2 165.4 0.8 298.6 5.5 5.1 6.7

Diluted P/E (x) 16.7 17.9 13.8

EV/EBITDA (x) 11.4 9.8 7.5

ROAE (%) 27.0 22.6 26.4

Automobiles

2 Edelweiss Securities Limited

Q4FY17 conference call: Key highlights

Demand outlook

• Expects M&HCV industry to grow 10‐15% in FY18 led by anticipated revival in GDP,

infrastructure and mining. GST to have positive impact on GDP.

• Q1FY18 will be challenging given steep price hikes post BS‐IV transitions and supply‐

side issues at Bosch. But AL expects strong revival in demand in H2FY18.

• Mining industry is seeing signs of demand revival.

o AL is present in soft mining applications like cement and limestone mining (~75%

of addressable market), but not in deep mining applications.

• Tipper industry volumes in FY17 were ~51K units, up 30% YoY.

• Expects LCV industry growth to recover in FY18.

o With increase in number of highways and proliferation of hub‐and‐spoke

models, demand for LCVs should increase going forward.

o Globally, the share of LCVs to total CVs is ~75%; in India, the share of LCVs is much

lower at ~60%.

Market share

• AL’s overall M&HCV market share improved to 34% in FY17 from 33% in FY16.

• Gain in market share has been broad based across regions and segments.

• Focus on gaining market share on profitable basis.

o Aims to sustain market share momentum by focus on product & service quality

and strengthening distribution network.

o Service quality: AL promises service response time of 4 hours and pays a penalty in

case of delay all over India.

o Improving product quality: New iEGR technology in BS‐IV products is better suited

to Indian conditions than SCR technology of peers; it is easier in terms of

maintenance (lesser electronics). Fuel efficiency is ~10% better than AL’s

corresponding BS‐III variants. Has not test the fuel efficiency versus SCR product as

they are not yet available in the market.

o Network expansion on track: Network has improved to ~2,500 touch points from

500 in FY12. Strategy is to defend leadership in South and challenge the leadership

in other regions.

• Product pricing: EMI accounts for only 10% of total cost of a fleet operator. AL’s focus is

on balance costs like fuel, parts, etc.

Margin

• Gross margin impacted on account of weaker product mix (exports), lower defence

sales and higher commodity costs impact (steel prices).

• Effected average price hikes of ~4% in mid‐February, which could not entirely offset the

commodity inflation impact in Q4. Seeing some softening in global steel prices.

• Product mix: Lower exports in Q4FY17 was a timing issue, as certain shipments to Ivory

Coast (earlier scheduled for Q4FY17) will now be dispatched in Q2FY18.

• Did not resort to aggressive discounting to gain market share, but offered some

discounts to a few critical customers.

Ashok Leyland


• Gross margin for Hinduja Foundries business are healthy and accretive. It has been

EBIDTA positive for FY17 with marginal loss. Working hard to ensure PAT positive in

FY18.

LCV business

• Making good gross margins similar to M&HCV.

• Strategy to launch 1 model each quarter; the company remains positive on growth

prospects of the business.

New launches

• Sunshine has evinced strong response and currently enjoys waiting period; only bus

that meets frontal crash and anti‐rollover norms.

• GURU ICV receiving good response as well.

• In export markets (Middle East) has launched a new bus Oyster, which is compliant with

frontal crash and anti‐rollover norms and priced at par with Japanese offerings.

• 3‐pronged strategy for electric vehicles.

o Designing European styled Electric Vehicles based on the Optare technology.

o Working on in‐house ‘Circuit’ technology.

o Working with the government on the battery swapping technology.

Exports

• Reiterated strategy of exports to account for 1/3rd of total revenue over 3‐5 years.

Addressable market size ~600K units.

• Has targeted market share of 30% in each region and each segment it operates in with

a focused 4 to 5 products in each market.

• Export growth drivers:

o New launches (Oyster bus in Middle East) and new LCV bus (expected in 6 months)

to drive growth.

o Focus is to have 4‐5 products but make them world class to compete with

Japanese and European players. Pricing strategy will be at a discount to European

players, instead of cost plus basis.

o Started investing in local assembly plants (Bangladesh, Ivory Coast and Ras‐Al‐

Khaimah), which is helping improve visibility and leading to increased penetration.

o Focusing on expanding the distribution network across export markets.

o New products have better margins; with increase in share of new products,

exports’ profitability should improve going forward.

Defence and spares

• Has won more than 19 tenders in defence. Though orders’ size is small as these are trial

orders, the opportunity pie can be big.

• Most of the orders are for new products including armored protected vehicles, mine

protected vehicles , 8x8 gun carriers, 10x10 bridge launchers etc, which traditionally AL

did not participate in.

• Spares revenues for the year crossed INR10bn and maintained margins as well.

Hinduja Leyland Finance (HLFL)

• Healthy loan book growth of 40% with total book size of INR140bn and RoE of ~3%.

• 50% of the loan book is truck financing and balance is diversified across 3Ws, auto loans

and loans against property.

Automobiles


• Financing by HLFL will not be more than 15% AL’s volumes. AL’s stake is 57% and

investment is valued at INR7bn.

• HLFL through its subsidiary has forayed into housing (low cost housing). Profitability is

good and the housing book is around INR7bn in the first year.

BS‐IV transitioning

• AL’s cash‐and‐carry model resulted in low inventory at dealers’ end.

• According to the company, iEGR technology is best suited for Indian conditions. The

technology allows to easily replace the engine and the older engine can be sold in the

aftermarket.

• Has retrofitted 2,000 units to BS‐IV and may take 5‐6 months to retrofit the rest.

Around 1,000‐2,000 BS‐III vehicles will be exported as well.

• iEGR has 10% better fuel efficiency compared to AL’s BS‐III variants.

• Technological prowess:

o AL is the only player with iEGR with power output up to 400HP.

o AL was the only BS‐III player with a mechanical fuel pump.

Others

• Hinduja Foundries business turned EBITDA positive and AL expects it to turn EPS

accretive by end FY18.AL posted INR3.25bn tax benefit on account of the HFL merger

(given its accumulated losses), which have been accounted in Q4 itself.

• Turnaround of HFL is on track and losses in the past 12 months are down to INR1.03bn

versus INR3.87bn in previous 18 months.

• Impairment of subsidiaries:

o Impaired INR5.26bn of the loan and guarantee given to Optare. In FY16, it had

provided for INR1.26bn.

o Had taken 25% impairment of investment in Albonair in FY16 and took another

25% impairment as well.

o There was a write‐back of impairment charge of INR2.96bn on Nissan JV post

improvement in performance

Chart 1: Weaker product mix due to lower export sales Chart 2: Industry discounts remain at elevated levels

Source: Edelweiss research

7 6 7 6 6 7 7 8 9 8 7

12 14 12 14 15 14 15 16 16 15 13

16 18 14 13 14 16 17

18 18 19 18

32 30 39 36 35 34 35 32 26 32 41

18 14 17 18 19 15

19 18 19 15

10 15 19

11 13 10 14 9 8 13 12 10

0.0

20.0

40.0

60.0

80.0

100.0

Q2FY15

Q3FY15

Q4FY15

Q1FY16

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

(Mix %)

7.5 ‐ 12T 12‐16T 16‐25T >25T Buses Exports

10.0

12.0

14.0

16.0

18.0

20.0

0.0

70.0

140.0

210.0

280.0

350.0

Q2FY15

Q3FY15

Q4FY15

Q1FY16

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

(% of avg. M

&HCV realisation)

(INR '000 per vehicle)

Discount % of M&HCV realisation

Ashok Leyland


Chart 3: Weaker mix and high RM costs dent gross margin Chart 4: EBITDA margins trend


Table 1: Valuation snapshot


Table 2: Volume assumptions


10.0

15.0

20.0

25.0

30.0

35.0

Q2FY15

Q3FY15

Q4FY15

Q1FY16

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

(%)

Gross Margins (%)

(INR mn) FY19E

EBITDA 30,797

EV/EBITDA 10.0

Enterprise value 307,974

Net debt (29,728)

Equity value 337,702

No. of shares 2,846

Value of core business (INR) 119

Hinduja Finance ‐ 57% stake valued at 2.5x FY16 BV (INR) 6

Target price (INR) 125

Units FY16 FY17 FY18E FY19E

MHCV ‐ total 109,755 113,292 124,633 141,558

% YoY 41.3 3.2 10.0 13.6

Domestic ‐ AL 98,809 102,313 112,435 127,885

% YoY 48.7 3.5 9.9 13.7

Exports 10,946 10,979 12,197 13,673

% YoY (2.4) 0.3 11.1 12.1

Dost 30,603 31,774 34,316 37,061

% YoY 12.3 3.8 8.0 8.0

M&HCV domestic ‐ Industry 301,905 304,879 329,669 356,225

% YoY 29.8 1.0 8.1 8.1

AL M&HCV market share 32.7 33.6 34.1 35.9

0.0

3.0

6.0

9.0

12.0

15.0

Q2FY15

Q3FY15

Q4FY15

Q1FY16

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

(%)

EBIDTA Margin (%)

Automobiles


Financial snapshot (INR mn) Year to March Q4FY17 Q4FY16 % change Q3FY17 % change FY17 FY18E FY19E

Total operating Income 66,179 59,732 10.8 44,309 49.4 200,187 241,260 276,354 Raw material costs 47,603 42,062 13.2 31,337 51.9 139,573 173,095 197,271

Staff costs 4,118 3,326 23.8 3,616 13.9 15,309 17,616 20,246

Other expenses 7,158 6,509 10.0 4,813 48.7 23,279 25,771 28,039

Total expenditure 58,880 51,896 13.5 39,766 48.1 178,161 216,482 245,556

EBITDA 7,299 7,835 (6.8) 4,543 60.7 22,025 24,777 30,797

Depreciation 1,395 1,316 6.0 1,193 16.9 5,179 5,373 5,631

EBIT 5,904 6,519 (9.4) 3,350 76.2 16,846 19,405 25,167

Other income 404 218 84.8 235 71.6 1,363 2,347 2,879

Interest 423 541 (21.9) 311 35.9 1,554 670 602

Add: Exceptional items 229 328 (30.2) (637) (135.9) (3,354) ‐ ‐

Profit before tax 6,114 6,524 (6.3) 2,637 131.9 13,301 21,082 27,444

Provision for taxes (2,157) 1,400 NA 778 NA 1,070 6,536 8,507

Reported net profit 4,762 (1,408) (438.2) 1,859 156.2 12,231 14,547 18,936

Adjusted Profit 9,198 3,465 165.4 2,308 298.6 15,585 14,547 18,936

Diluted shares (mn) 2,846 2,846 2,846 2,846 2,846 ‐

Adjusted Diluted EPS 3.2 1.2 165.4 0.8 298.6 5.5 5.1 6.7

Diluted P/E (x) ‐ ‐ ‐ 16.7 17.9 13.8

EV/EBITDA (x) ‐ ‐ ‐ 11.4 9.8 7.5

ROAE (%) ‐ ‐ ‐ 27.0 22.6 26.4

As % of net revenues

Raw material 71.9 70.4 70.7 69.7 71.7 71.4

Employee cost 6.2 5.6 8.2 7.6 7.3 7.3

Other expenses 10.8 10.9 10.9 11.6 10.7 10.1

EBITDA 11.0 13.1 10.3 11.0 10.3 11.1

Adjusted net profit 13.9 5.8 5.2 7.8 6.0 6.9

Tax rate (35.3) 21.5 29.5 8.0 31.0 31.0

Ashok Leyland


Company Description

AL is the second‐largest commercial vehicle manufacturer in India. Hinduja Group holds 51%

stake in the company through the holding company, Hinduja Automotive (UK). The company

has six manufacturing plants at four locations in India—Ennore (Tamil Nadu), Hosur (Tamil

Nadu), Alwar (Rajasthan), Bhandara (Maharashtra) and Pantnagar (Uttaranchal). It focuses

on the M&HCV segment and has a significant presence in the bus segment. Investment Theme

AL is a pure play on the M&HCV segment. It has been a key beneficiary of sharp recovery in

higher tonnage segment/South region and has commendably improved balance sheet

(better FCF/ lower debt). We expect market share gains to sustain led by expanding product

portfolio in small and intermediate ICV segment and expansion of dealership network across

non‐South regions. Sharpening focus on high margin‐businesses like spares, defence and

exports is a potent margin trigger. Additionally, sharp recovery in demand over FY16‐19

versus our 9% estimate will aid margins further.

Key Risks

Pressure on fleet operators’ profitability

Capacity utilisation and freight rates are among the key drivers of profitability of fleet

operators. In light of the recent demonetisation move, any prolonged slowdown in demand

across sectors could adverse impact freight demand and rates, which could hit fleet

operators’ profitability and consequently truck demand. A longer than expected delay in

cash availability in the economy could also impair the ability of fleet operators to buy trucks.

Intensifying competition in M&HCV

Competitive landscape of the domestic truck industry is evolving from a duopoly structure

to a 4‐5 players market with emergence of newer players like Eicher Motors (VECV) and

Mahindra & Mahindra (M&M). AL is focused on gaining market share profitably, but

aggressive discounting by competition could hamper its efforts.

Commodity price inflation

Any adverse fluctuation in the prices of key raw materials (steel and aluminium) could hit

margins, if AL is unable to pass on the higher costs through price hikes in a weak demand

environment.


Automobiles

Financial Statements

Income statement (INR mn)

Year to March FY16 FY17 FY18E FY19E

Income from operations 189,373 200,187 241,260 276,354

Materials costs 131,949 139,573 173,095 197,271

Manufacturing expenses 2,425 2,480 2,846 3,149

Employee costs 13,851 15,309 17,616 20,246

Total SG&A expenses 18,603 20,799 22,925 24,890

Total operating expenses 166,827 178,161 216,482 245,556

EBITDA 22,546 22,025 24,777 30,797

Depreciation 4,879 5,179 5,373 5,631

EBIT 17,667 16,846 19,405 25,167

Add: Other income 1,176.2 1,362.7 2,347.27 2,879.27

Less: Interest Expense 2,476 1,554 670 602

Add: Exceptional items (8,102) (3,354) ‐ ‐

Profit Before Tax 8,265 13,301 21,082 27,444

Less: Provision for Tax 4,369 1,070 6,536 8,507

Reported Profit 3,896 12,231 14,547 18,936

Exceptional Items (3,819) (3,354) ‐ ‐

Adjusted Profit 7,715 15,585 14,547 18,936

Shares o /s (mn) 2,846 2,846 2,846 2,846

Adjusted Basic EPS 2.7 5.5 5.1 6.7

Diluted shares o/s (mn) 2,846 2,846 2,846 2,846

Adjusted Diluted EPS 2.7 5.5 5.1 6.7

Adjusted Cash EPS 4.4 7.3 7.0 8.6

Dividend per share (DPS) 1.0 2.0 2.4 3.1

Dividend Payout Ratio(%) 42.2 44.0 56.0 56.0

Common size metrics


Operating expenses 88.1 89.0 89.7 88.9

Materials costs 69.7 69.7 71.7 71.4

Staff costs 7.3 7.6 7.3 7.3

S G & A expenses 9.8 10.4 9.5 9.0

Depreciation 2.6 2.6 2.2 2.0

Interest Expense 1.3 0.8 0.3 0.2

EBITDA margins 11.9 11.0 10.3 11.1

Net Profit margins 4.1 7.8 6.0 6.9

Growth ratios (%)


Revenues 39.6 5.7 20.5 14.5

EBITDA 119.6 (2.3) 12.5 24.3

PBT 86.9 60.9 58.5 30.2

Adjusted Profit 229.9 102.0 (6.7) 30.2

EPS 229.9 102.0 (6.7) 30.2

Key Assumptions


Macro

GDP(Y‐o‐Y %) 7.2 6.5 7.1 7.7

Inflation (Avg) 4.9 4.8 5.0 5.2

Repo rate (exit rate) 6.8 6.3 6.3 6.3

USD/INR (Avg) 65.0 67.5 67.0 67.0

Sector

Aluminium prices (USD/t) 1,600 1,600 1,675 1,700

Company

MHCV ‐ domestic vol (% YoY) 48.7 3.5 9.9 13.7

Avg realisation (INR) 1,349,214 1,379,969 1,517,844 1,547,163

Avg realisation (% YoY) 4.4 2.3 10.0 1.9

RM cost/vehicle 940,086 962,132 1,089,001 1,104,420

Employee cost/vehicle 98,681 105,534 110,826 113,347

Average salary 1,351,185 1,391,721 1,579,603 1,737,563

Promotion cost (% revenue) 2.3 2.2 2.1 2.2

EBITDA/vehicle 160,634 151,830 155,883 172,419

Avg. Interest rate (%) 14.8 7.0 7.0 6.5

Depreciation rate (%) 5.7 6.5 6.5 6.5

Tax rate (%) 52.9 8.0 31.0 31.0

Dividend payout (%) 42.2 44.0 56.0 56.0

Net borrowings (INR mn) (15,037) (5,011) (1) ‐

Capex (INR mn) 1,208 4,028 3,000 4,000

Debtor days 24 19 14 15

Inventory days 41 53 57 58

Payable days 123 137 130 134

Cash conversion cycle (58) (65) (59) (61)


Ashok Leyland

Peer comparison valuation

Market cap Diluted P/E (X) EV / EBITDA (X) P/B (X)

Name (USD mn) FY18E FY19E FY18E FY19E FY18E FY19E

Ashok Leyland 4,043 17.9 13.8 9.8 7.5 4.5 4.0

Mahindra & Mahindra Ltd 12,923 19.3 16.8 11.7 10.1 3.0 2.6

Tata Motors Ltd 23,819 12.1 9.8 4.4 3.8 2.3 1.8

Median ‐ 17.9 13.8 9.8 7.5 3.0 2.6

AVERAGE ‐ 16.4 13.5 8.7 7.2 3.3 2.8


Cash flow metrics


Operating cash flow 16,756 22,576 25,917 26,764

Investing cash flow 3,876 (11,650) (25,063) (15,121)

Financing cash flow (12,332) (13,415) (8,818) (11,209)

Net cash Flow 8,300 (2,489) (7,964) 435

Capex (1,208) (4,028) (3,000) (4,000)

Dividend paid 3,254 6,850 8,148 10,606

Profitability and efficiency ratios


ROAE (%) 14.7 27.0 22.6 26.4

ROACE (%) 24.0 24.7 27.9 32.9

Inventory Days 41 53 57 58

Debtors Days 24 19 14 15

Payable Days 123 137 130 134

Cash Conversion Cycle (58) (65) (59) (61)

Current Ratio 1.1 1.2 1.1 1.2

Gross Debt/EBITDA 0.8 0.6 0.5 0.4

Gross Debt/Equity 0.3 0.2 0.2 0.2

Adjusted Debt/Equity 0.3 0.2 0.2 0.2

Net Debt/Equity 0.1 (0.2) (0.3) (0.4)

Interest Coverage Ratio 7.1 10.8 29.0 41.8

Operating ratios


Total Asset Turnover 2.3 2.6 3.0 3.2

Fixed Asset Turnover 3.8 4.1 4.9 5.9

Equity Turnover 3.6 3.5 3.7 3.8

Valuation parameters


Adj. Diluted EPS (INR) 2.7 5.5 5.1 6.7

Y‐o‐Y growth (%) 229.9 102.0 (6.7) 30.2

Adjusted Cash EPS (INR) 4.4 7.3 7.0 8.6

Diluted P/E (x) 33.8 16.7 17.9 13.8

P/B (x) 5.9 5.1 4.5 4.0

EV / Sales (x) 1.4 1.3 1.0 0.8

EV / EBITDA (x) 11.7 11.4 9.8 7.5

Dividend Yield (%) 1.0 2.2 2.6 3.4

Balance sheet (INR mn)

As on 31st March FY16 FY17 FY18E FY19E

Share capital 2,846 2,846 2,846 2,846

Reserves & Surplus 51,226 58,415 64,814 73,144

Shareholders' funds 54,071 61,261 67,660 75,990

Short term borrowings 18,210 11,463 11,463 11,463

Long term borrowings 250 1,986 1,986 1,986

Total Borrowings 18,460 13,450 13,449 13,449

Def. Tax Liability (net) 3,290 1,268 1,268 1,268

Sources of funds 75,822 75,978 82,377 90,707

Gross Block 87,469 90,469 93,469 97,469

Net Block 48,131 50,190 47,818 46,187

Capital work in progress 547 1,576 1,576 1,576

Total Fixed Assets 48,678 51,766 49,394 47,763

Non current investments 19,804 14,769 23,179 25,179

Cash and Equivalents 15,627 22,706 30,742 43,177

Inventories 16,250 25,011 29,785 34,128

Sundry Debtors 12,511 8,601 10,242 11,736

Loans & Advances 1,682 35 41 47

Other Current Assets 13,184 15,108 15,108 15,108

Current Assets (ex cash) 43,627 48,754 55,177 61,019

Trade payable 48,797 55,847 67,860 76,974

Other Current Liab 3,119 6,169 8,254 9,458

Total Current Liab 51,916 62,016 76,114 86,432

Net Curr Assets‐ex cash (8,288) (13,262) (20,938) (25,412)

Uses of funds 75,822 75,978 82,377 90,707

BVPS (INR) 15.4 17.9 20.2 23.1

Free cash flow (INR mn)


Reported Profit 3,896 12,231 14,547 18,936

Add: Depreciation 4,879 5,179 5,373 5,631

Interest (Net of Tax) 1,167 1,429 462 416

Others 17,076 8,712 13,210 6,257

Less: Changes in WC 10,262 4,975 7,675 4,475

Operating cash flow 16,756 22,576 25,917 26,764

Less: Capex 1,208 4,028 3,000 4,000

Free Cash Flow 15,548 18,547 22,917 22,764


Automobiles

Insider Trades Reporting Data Acquired / Seller B/S Qty Traded

04 Aug 2016 K Ram Kumar Sell 20500.00

*in last one year

Bulk Deals Data Acquired / Seller B/S Qty Traded Price

No Data Available

*in last one year

Holding – Top10 Perc. Holding Perc. Holding

Hinduja automotive l 33.72 Amas bank switzerlan 5.09

Jpmorgan chase & co 4.61 Life insurance corp 3.7

Morgan stanley 2.43 Norges bank 2.1

Government pension f 2.1 Abu dhabi investment 1.43

Blackrock 1.35 Kuwait investment au 1.3

*in last one year

Additional Data

Directors Data Dheeraj G. Hinduja Non Executive Chairman R. Seshasayee Non Executive Vice Chairman

Vinod K Dasari Managing Director Anuj Kathuria Executive Director

Anup Bhat Executive Director B. Venkat Subramaniam Executive Director

C. G. Belsare Executive Director Gopal Mahadevan Chief Financial officer

N V Balachandar Executive Director Nitin Seth Executive Director

Auditors ‐ Delloitte Haskins & Sells

*as per last annual report


Company Absolute

reco Relative

reco Relative

risk

Company Absolute

reco

Relative

reco

Relative

Risk

Amara Raja Batteries BUY None None Ashok Leyland BUY SO H

Bajaj Auto HOLD SU L Ceat Ltd BUY SO L

Eicher Motors BUY SO M Exide Industries BUY SP L

Hero MotoCorp HOLD SU H Mahindra & Mahindra Ltd BUY SO M

Maruti Suzuki India Ltd BUY SO H Minda Corporation BUY SO M

Motherson Sumi Systems HOLD SU H Suprajit Engineering BUY SO H

Tata Motors Ltd HOLD SP H

RATING & INTERPRETATION

ABSOLUTE RATING

Ratings Expected absolute returns over 12 months

Buy More than 15%

Hold Between 15% and - 5%

Reduce Less than -5%

RELATIVE RETURNS RATING

Ratings Criteria

Sector Outperformer (SO) Stock return > 1.25 x Sector return

Sector Performer (SP) Stock return > 0.75 x Sector return

Stock return < 1.25 x Sector return

Sector Underperformer (SU) Stock return < 0.75 x Sector return

Sector return is market cap weighted average return for the coverage universe within the sector

RELATIVE RISK RATING

Ratings Criteria

Low (L) Bottom 1/3rd percentile in the sector

Medium (M) Middle 1/3rd percentile in the sector

High (H) Top 1/3rd percentile in the sector

Risk ratings are based on Edelweiss risk model

SECTOR RATING

Ratings Criteria

Overweight (OW) Sector return > 1.25 x Nifty return

Equalweight (EW) Sector return > 0.75 x Nifty return

Sector return < 1.25 x Nifty return

Underweight (UW) Sector return < 0.75 x Nifty return


Automobiles

Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina, Mumbai – 400 098.

Board: (91‐22) 4009 4400, Email: [email protected]

Aditya Narain

Head of Research

[email protected]

Coverage group(s) of stocks by primary analyst(s): Automobiles

Ashok Leyland, Amara Raja Batteries, Bajaj Auto, Ceat Ltd, Eicher Motors, Exide Industries, Hero MotoCorp, Minda Corporation, Mahindra & Mahindra Ltd, Maruti Suzuki India Ltd, Motherson Sumi Systems, Suprajit Engineering, Tata Motors Ltd

Distribution of Ratings / Market Cap

Edelweiss Research Coverage Universe

Rating Distribution* 161 67 11 240* 1stocks under review

Market Cap (INR) 156 62 11

Date Company Title Price (INR) Recos

Recent Research

25‐May‐17 Amara Raja Batteries

Auto healthy; industrial sluggish; Result Update

837 Buy

24‐May‐17 TataMotors

Good quarter; capex guidance raised; Result Update

450 Hold

23‐May‐17 Motherson Sumi Systems

Good quarter; margin scale up key; Result Update

422 Hold

> 50bn Between 10bn and 50 bn < 10bn

Buy Hold Reduce Total

Rating Interpretation

Buy appreciate more than 15% over a 12‐month period

Hold appreciate up to 15% over a 12‐month period

Reduce depreciate more than 5% over a 12‐month period

Rating Expected to

One year price chart

70

80

90

100

110

120

May‐16

Jun‐16

Jul‐16

Jul‐16

Aug‐16

Sep‐16

Sep‐16

Oct‐16

Nov‐16

Nov‐16

Dec‐16

Jan‐17

Feb‐17

Feb‐17

Mar‐17

Apr‐17

Apr‐17

May‐17

(INR)

Ashok Leyland


Ashok Leyland

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Automobiles

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Ashok Leyland

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