Escorts (ESCORT)static-news.moneycontrol.com/.../Escorts_31012019.pdf · Escorts reported a healthy...
Transcript of Escorts (ESCORT)static-news.moneycontrol.com/.../Escorts_31012019.pdf · Escorts reported a healthy...
January 29, 2019
ICICI Securities Ltd | Retail Equity Research
Result Update
Healthy Q3, growth to taper in FY20E…
Escorts reported a healthy set of Q3FY19 numbers
Revenues increased 37.4% YoY to | 1,655 crore, with broad based
growth across divisions. Gross revenue from agri equipment
machinery (EAM) grew 36.3% YoY to | 1,293 crore tracking robust
tractor volumes growth of 36% YoY to 25,743 units
Gross revenue from construction equipment grew 44.0% YoY to
| 266 crore (volumes up 30.0% YoY to 1,413 units) while revenue
from railway equipment grew 34.1% YoY to | 97 crore
EBITDA in Q3FY19 grew 38.3% YoY to | 201 crore with consequent
EBITDA margins at 12.1%, up 8 bps YoY. A more than expected
increase in raw material costs was mitigated by lower effective
employee as well as other expenses. EBIT margins of the agri
machinery (tractors) segment came in at 14.3%, down 40 bps QoQ
Consequent PAT was at | 140 crore, up 52% YoY. It was supported
by higher other income (| 24 crore) as well as one-time exceptional
gains (| 11 crore) realised out of transfer of Rough Terrain cranes
business to the JV with M/s Tadano Ltd on a slump sales basis
Tractor growth to taper in FY20E, outperformance to continue
The domestic tractor industry has been at forefront of farm mechanisation
in India. The tractor industry saw record sales volume of 7.1 lakh units (up
22% YoY) in FY18 after ending FY17 at 5.8 lakh units (up 18% YoY).
Industry volumes in FY19E are expected at ~8 lakh units, up 12% YoY.
We expect growth momentum to loosen a bit tracking high base and
revert to its long term averages i.e. ~8-10% in FY20E. Escorts, on the
other hand, has been steadily gaining market share with strongholds in
the northern (Haryana, UP), Rajasthan, eastern (Assam) and central (Bihar,
Madhya Pradesh) belt. Its 9MFY19 domestic tractor sales volumes were at
~69,000 units, up 24.4% YoY vs. industry tractor sales volumes that were
at 6.24 lakh units, up 15.5% YoY; implying market share gains (80 bps)
with market share at December 2018 end at 11.04%.
Construction equipment & Railway segment to witness steady prospects!
Escorts is also a prominent player in the construction equipment market
domestically with key products being cranes, earth moving equipment
etc. This segment, which constitutes ~18% of its topline is witnessing
healthy growth traction and is linked to infrastructure spend domestically.
With central government election in sight and consequent weak execution
in the infrastructure space, we expect the division to see muted growth
prospects in H1FY20 with growth rebounding from H2FY20E onwards. In
the railways segment, which comprises ~6% of its topline, the company
has an order book of ~| 450 crore that will ensure healthy 20% topline
growth, going forward. EBIT margins in this segment are also healthy at
20% that will support further margin improvement, going forward.
Healthy B/S, return ratios, tapering growth to limit valuation, retain HOLD
Escorts has a near debt free balance sheet with marginal short-term debt
amounting to ~| 150 crore as of FY19E with consequent debt: equity at
0.05x. It has also successfully got transformed into a capital efficient
player with resultant RoCE in excess of 20% in FY18-20E. Going forward,
however, given the higher base we expect growth to taper in FY20E.
Consequent net sales & PAT growth in FY20E are expected at ~8.5%. We
build in ~40 bps improvement in EBITDA margins. We value Escorts at
| 700 i.e. 16.0x P/E on FY20E EPS of | 44.1 with a HOLD rating on the
stock.
Escorts (ESCORT) | 670
Rating matrix
Rating : Hold
Target : | 700
Target Period : 12 months
Potential Upside : 5%
What’s changed?
Target Changed from | 735 to | 700
EPS FY19E Changed from | 38.1 to | 40.7
EPS FY20E Changed from | 46.0 to | 44.1
Rating Unchanged
Quarterly performance
(| crore) Q3FY19 Q3FY18 YoY (%) Q2FY19 QoQ (%)
Revenues 1,655.1 1,219.8 37.4 1,528.3 18.4
EBITDA 200.5 140.9 38.3 185.6 27.3
EBITDA (%) 12.1 11.6 56.0 12.1 85 bps
Reported PAT 140.1 77.6 52.4 120.7 36.5
Key financials
| Crore FY17 FY18 FY19E FY20E
Net Sales 4,137 5,055 6,322 6,857
EBITDA 323.7 557.2 752.2 846.6
Net Profit 160.4 344.8 499.1 540.6
FDEPS (|) 13.1 28.1 40.7 44.1
Valuation summary
FY17 FY18 FY19E FY20E
P/E 51.2 23.8 16.5 15.2
Target P/E 53.5 24.9 17.2 15.9
EV / EBITDA 25.4 14.2 10.6 9.3
P/BV 4.1 3.2 2.7 2.3
RoNW 10.8 13.8 16.1 15.3
RoCE 13.7 21.0 23.5 22.7
Stock data
Particular Amount
Market Capitalization (| Crore) 8,212.7
Total Debt (FY18) (| Crore) 27.8
Cash & Investments (FY18) (| Crore) 210.7
EV (| Crore) 7,928.6
52 week H/L (|) 1019/542
Equity capital (| crore) 122.6
Face value (|) | 10
Research Analyst
Shashank Kanodia, CFA
Jaimin Desai
ICICI Securities Ltd | Retail Equity Research Page 2
Variance analysis
Q3FY19 Q3FY19E Q3FY18 YoY (Chg %) Q2FY19 QoQ (Chg %) Comments
Total Operating Income 1,655.1 1,624.2 1,205.0 37.4 1,398.4 18.4 All-round robust performance across segments helped the company post 37%
YoY jump in revenues
Raw Material Expenses 1,026.9 966.4 649.1 58.2 1,003.2 2.4 Higher input costs and slightly adverse product mix pushed up RM cost as a
percentage of sales
(Inc)/Dec in Stock in Trade and WIP 9.8 0.0 95.9 -167.7
Purchase of Traded Goods 114.5 113.7 56.8 101.5 108.4 5.7
Employee Expenses 119.6 113.7 104.9 14.1 113.0 5.8
Other Expenditure 183.7 211.1 153.3 19.9 183.9 -0.1 Strong volume growth led operating leverage benefit helped deliver marginal
sequential savings in other expenses
EBITDA 200.5 219.3 145.0 38.3 157.5 27.3
On a QoQ basis, lower employee & other expenses (-85 bps & -205 bps
respectively) helped boost EBITDA. However, the same was partly offset by
higher raw material cost (up 205 bps)
EBITDA Margin (%) 12.1 13.5 12.0 8 bps 11.3 85 bps
Interest 4.3 1.0 5.9 -27.8 3.9 10.9
Depreciation 21.5 20.8 17.9 19.9 21.5 0.2
Total Tax 69.9 71.2 37.5 86.4 51.6 35.4
PAT 140.1 141.3 92.0 52.4 102.7 36.5 Volume growth and margin expansion supported profitability
Key Metrics
Tractor Segment revenue (|) 1,293 1,289 948 36.3 1,043 23.9 Tractor revenue grew 36.3% YoY, led entirely by volume growth of 36% YoY to
25,743 units
Construction Equipment revenue (| crore) 266 247 185 44.0 249 6.8 Revenue grew 44.1% YoY, mainly driven by strong volume growth of 30% YoY
to 1,413 units
Railway Equipment revenue (| crore) 97 86 72 34.1 106 -8.8 The segment is driven by strong order book, which as of Q3FY19 was at | 450
crore and will be executed over next 13-15 months
Source: Company, ICICI Direct Research
Change in estimates
(| Crore) Old New % Change Old New % Change Comments
Revenue 6,001 6,234 3.9 6,697 6,786 1.3 Revenue growth revised upwards in line with the segmental revenue target guided
by the management
EBITDA 709 752 6.1 847 847 -0.1
EBITDA Margin (%) 11.8 12.1 30 bps 12.7 12.5 (20) bps Moderated margin estimates for FY20E, given limited scope for operating leverage
benefits as well and expect growth rate to taper
PAT 467 499 7.0 564 541 -4.1
EPS (|) 38.1 40.7 7.0 46.0 44.1 -4.1 Downward revision in margin estimates for FY20E results in downward revision in
PAT and consequent EPS estimates
FY19E FY20E
Source: Company, ICICI Direct Research
Assumptions
Current Earlier Comments
FY17 FY18 FY19E FY20E FY19E FY20E
Tractor volumes (nos) 63,786 80,417 96,022 105,625 91,767 100,026 We marginally revise upward our volume estimates for FY19E & FY20E primarily
tracking robust performance in 9MFY18 and Escorts DNA to outperform the industry
growth rates
Average ASP (|) 524,567 492,166 493,965 489,621 491,820 502,137 Broadly maintain ASP estimates
Source: Company, ICICI Direct Research
ICICI Securities Ltd | Retail Equity Research Page 3
Key conference call takeaways
Management outlook/guidance and demand
Industry growth outlook for FY19E has been revised downwards
to 10-12% YoY from earlier 12-15% YoY chiefly on the back of
muted festive season than anticipated
The company expects 3-5% YoY growth at the industry level in
tractor division in Q4FY19E owing to high base of Q4FY18.
However, Escorts is expected to post double digit growth, with
pick-up expected from March onwards
In the construction equipment space, the company expects the
industry to clock strong growth for Q4FY19E as well as double
digit volume growth for FY20. On the margins front, the company
maintained earlier guidance of 4-5% for FY19E
Railways division order book was at ~| 450 crore. The company
expects to register 20-25% YoY growth by FY20E
Escorts has gained market share to the tune of ~1.1% YoY in
9MFY19 (of this 0.2% via better product mix) and expects to
command 12.5-13.0% market share by FY20E
The company retained FY19E exports guidance of ~3000 units
Escorts is set to benefit from faster growth underway in northern
and eastern markets vis-à-vis rest of the country
Dealer inventory levels have normalised to 3.0-3.5 weeks of sales
Sales and margins
Escorts maintained FY19E EBITDA margin expansion guidance of
~100 bps YoY
A ~1.5% YoY rise in input costs and slightly adverse product mix
(higher proportion of <40 hp tractors) impacted margin profile
The company undertook price hikes of ~1.0% in Q3FY19
Discounting incidence is expected to creep up QoQ in Q4FY19E
Share of spares, etc, amounts to ~8-9% of revenue in 9MFY19
Others
The company expects to incur ~| 150-160 crore capex in FY19E
and ~| 250-300 crore capex in FY20E. Of this, ~| 100 crore is
related to machining, which would be put to use in increasing
capacity
Escorts will incur | 90 crore in FY19E towards capex for its JVs
with Tadano (| 30 crore, already incurred) and Kubota (| 60 crore,
to be incurred in Q4FY19E). A further | 60 crore will be incurred in
respect of the Kubota JV in FY20E. Capex for both JVs are in
addition to the earlier mentioned outlay
The company expects to be a part of future Train 18 projects
The company has for the first time participated in government
subsidy related tractor programmes in Assam. It estimates this
segment to be ~10% (i.e. ~80,000 units) of the overall tractor
industry in India
NBFC share of construction equipment financing was at 80-85%
for the company
ICICI Securities Ltd | Retail Equity Research Page 4
Company Analysis
Revenue growth to taper in FY20E!
The domestic tractor industry has been at the forefront of farm
mechanisation in India. The tractor industry saw record sales volume of
7.1 lakh units (up 22% YoY) in FY18 after ending FY17 at 5.8 lakh units (up
18% YoY). Industry volumes in FY19E are expected at ~8 lakh units, up
12% YoY. We expect growth momentum to slip a bit tracking a high base
and revert to its long term averages i.e. ~8-10% in FY20E. Escorts, on the
other hand, has been steadily gaining market share. Its 9MFY19 domestic
tractor sales volumes were at ~69,000 units, up 24.4% YoY vs. industry
tractor sales volumes that were at 6.24 lakh units, up 15.5% YoY;
implying market share gains (80 bps) with market share at December
2018 end at 11.04%. Escorts is also a prominent player in the construction
equipment market domestically with key products being cranes, earth
moving equipment etc. This segment, which constitutes ~18% of its total
topline, is witnessing healthy growth traction and is linked to
infrastructure spend domestically. With Lok Sabha elections in sight and
consequent weak execution in the infrastructure space, we expect the
division to see muted growth prospects in H1FY20 with growth
rebounding from H2FY20E onwards. In the railways segment, which
comprises ~6% of its topline, the company has an order book of ~| 450
crore, which will ensure healthy 20% topline growth, going forward.
Exhibit 1: Growth in revenues
3,367
4,093
4,995
6,234
6,786
(15.5)
21.6 22.0
24.8
8.8
(20)
(15)
(10)
(5)
-
5
10
15
20
25
30
0
1000
2000
3000
4000
5000
6000
7000
8000
FY16 FY17 FY18 FY19E FY20E
(%
)
(| crore)
Total Operating income Growth (%)
Source: Company, ICICI Direct Research
Exhibit 2: Segmental split in ESC revenues
2,734
3,346
3,958
4,743
5,172
497
607
780
1,109
1,171
228
242
287
382
443
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
FY16 FY17 FY18 FY19E FY20E
(| crore)
Tractors Construction Equipment Railway Equipment
Source: Company, ICICI Direct Research
ICICI Securities Ltd | Retail Equity Research Page 5
EBITDA margins to expand as utilisation levels improve
EBITDA margins of the agri business have moved up from 8.2% in FY16
to 14.7% in Q2FY19 on the back of 1) strong operating leverage; 2)
vendor rationalisation & value engineering and 3) employee cost
reduction through VRS. Apart from that, break even in the construction
equipment segment (expect EBIT margin to be 4-5%, going forward) &
higher margin in railway segment will supplement growth. Thus, we
expect EBITDA margins to expand to 12.1% & 12.5% in FY19E & FY20E,
respectively
Exhibit 3: Margins, costs annual trends and forecasts
177.0
323.7 557.2
752.2
846.6
5.3
7.9
11.2
12.1 12.5
-
2
4
6
8
10
12
14
0
100
200
300
400
500
600
700
800
900
FY16 FY17 FY18 FY19E FY20E
(%
)
(| crore
EBITDA EBITDA Margins (%)
Source: Company, ICICI Direct Research
Exhibit 4: Tractor ASPs on uptrend
531,392
524,567
492,166
493,965
489,621
(1.1)(1.3)
(6.2)
0.4
(0.9)
(7)
(6)
(5)
(4)
(3)
(2)
(1)
-
1
460,000
480,000
500,000
520,000
540,000
FY16 FY17 FY18 FY19E FY20E
(%
)
(| crore)
Tractor ASPs Growth (%)
Source: Company, ICICI Direct Research
Expect improvement in profitability as topline, margins grow
We expect an improvement in volumes & margins to impact profitability
positively. In SY09 and SY10, Escorts’ profit margins were in the range of
4-5%. However, the same has declined over the years with average PAT
margins at < 3% over SY11 to FY15. However, the performance has
significantly improved from FY16 onwards. The trend is likely to continue,
going forward. Thus, we expect profits to grow to | 541 crore in FY20E.
ICICI Securities Ltd | Retail Equity Research Page 6
Exhibit 5: Increase in profitability continues as higher tractor utilisation scales up margins
84
160
345
499
541
12.1
91.6
114.9
44.8
8.3
-
20
40
60
80
100
120
140
0
100
200
300
400
500
600
FY16 FY17 FY18 FY19E FY20E
(%
)
(| crore)
PAT Growth (%)
Source: Company, ICICI Direct Research
Return ratios further expected to move northwards!
Return ratios have historically been very low and reflected the poor
operating performance of the company. Also, capital allocation has been
an issue as capital has been blocked in unprofitable/low margin
businesses. However, the performance has significantly improved from
FY16 onwards. We expect return ratios to improve to 23% & 15% for RoE
& RoCE, respectively, for FY20E.
Exhibit 6: Return ratios to improve as asset turn improves on better utilisation
8.6
13.7
21.0 23.5
22.7
6.0
10.8
13.8
16.1 15.3
0
4
8
12
16
20
24
28
FY16 FY17 FY18 FY19E FY20E
(%
)
ROCE ROE
Source: Company, ICICI Direct Research
JVs with Kubota, Tadano to provide next leg of growth
The company entered into a 40:60 JV with Kubota Corporation for
technology collaboration and joint manufacturing of high end tractors,
and separately a 49:51 JV with Tadano Ltd to manufacture rough terrain
cranes and truck cranes of 20 tons and 80 tonne capacity. The capital
outlay for these JVs is at | 120 crore for Kubota (| 60 crore to be incurred
in Q4FY19E, rest in FY20E) and | 30 crore for Tadano (already incurred in
FY19). Through the Kubota JV, the company is aiming for an initial
capacity of 50,000 units per annum from FY21E. The company envisages
exports as a major leg of future growth with the JV expected to help on
that front by utilising Kubota’s global distribution network to export
Escorts tractors. For FY19E, the company expects to achieve export
volumes of 3,000 units and expand it to 8,000-10,000 units per annum by
FY22E. Apart from exports, jointly manufactured products will be sold
domestically by partners through their separate channel networks.
ICICI Securities Ltd | Retail Equity Research Page 7
Outlook & valuation
Escorts has a near debt free balance sheet with marginal short-term debt
amounting to ~| 150 crore as of FY19E with consequent debt: equity at
0.05x. It has also successfully transformed into a capital efficient player
with resultant RoCE in excess of 20% in FY18-20E. Going forward,
however, given the higher base, we expect growth to taper in FY20E.
Consequent net sales & PAT growth in FY20E are expected at ~8.5%. We
build in ~40 bps improvement in EBITDA margins. We value Escorts at
| 700 i.e. 16.0x P/E on FY20E EPS of | 44.1 and assign a HOLD rating to
the stock.
Exhibit 7: Valuations
Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE
(| cr) (%) (|) (%) (x) (x) (%) (%)
FY16 3351 4.4 6.8 -41.8 98.1 45.6 4.4 5.9
FY17 4093 22.1 13.1 91.6 51.2 25.4 8.1 11.7
FY18 4995 22.0 28.1 114.9 23.8 14.2 13.5 18.8
FY19E 6234 24.8 40.7 44.8 16.5 10.6 16.5 20.9
FY20E 6786 8.8 44.1 8.3 15.2 9.3 15.3 20.8
Source: Company, ICICI Direct Research
Exhibit 8: One year forward P/E (Escorts currently trading at 15.2x)
0
200
400
600
800
1000
1200
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Sep-1
3
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-1
4
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-1
5
Nov-15
Jan-16
Mar-16
May-16
Jul-16
Sep-1
6
Nov-16
Jan-17
Mar-17
May-17
Jul-17
Sep-1
7
Nov-17
Jan-18
Mar-18
May-18
Jul-18
Sep-1
8
Nov-18
Jan-19
(|)
Price 25.0x 20.5x 18.3x 16.0x 9.3x 4.9x 0.4x
Source: Bloomberg, ICICI Direct Research
ICICI Securities Ltd | Retail Equity Research Page 8
Recommended history vs. consensus
0
10
20
30
40
50
60
70
80
90
100
0
100
200
300
400
500
600
700
800
900
1,000
1,100
1,200
Jan-19Nov-18Aug-18Jun-18Apr-18Jan-18Nov-17Aug-17Jun-17Apr-17Jan-17Nov-16Aug-16Jun-16Mar-16Jan-16
(%
)(|)
Price Idirect target Consensus Target Mean % Consensus with BUY
Source: Bloomberg, Company, ICICI Direct Research
Key events
Date Event
Jan-08 Escorts discloses weak quarterly financials on PAT; company turns into a loss for Q1SY08 on weak operating performance
Dec-08 Escorts continues weak bottomline performance even though EBITDA margins improve to ~8% levels on account of one-off costs of ~| 18 crore
Feb-09 Escorts ties up with Bank of Rajasthan for tractor and dealer financing
Nov-09 Escorts reports strong EBITDA margins at 12.6% on account of sales growth of ~12% on YoY basis; however profits inflated via tax write-backs
Jan-10 Escorts management targets cost cutting initiatives to improve margins
Mar-10 Escorts business performance improves, profit levels improve owing to positive tractor cycle prior to onset of monsoon,lower costs
Nov-10 Escorts reports annual SY10 results witnesses unexpected rise in other expenses to 18% of net sales led by management payouts
Jan-11 Escorts barely breaks even after weak operating performance results in Q3SY11
Oct-11 Escorts reports results with ~61% rise in debt levels along with weak operating performance for SY11
Feb-12 Escorts announces merger of three group companies, of which Escorts' construction business is main
Apr-12 Promoters hike stake by ~4% in Escorts amid speculation of a takeover battle brewing
May-13 Management says Escorts to launch heavy duty tractors in 2015 along with improved results in Q2SY13
Aug-13 Escorts witnesses buying interest from "Dalal Street bull" Rakesh Jhunjhunwala. Purchases 5% stake in the company
Oct-13 Escorts reports improved financial performance with profit of | 168 crore for four trailing quarters. Company also extends financial year to March
Jan-15 Escorts launches new category of tractors named Anti Lift Tractors "ALT 4000" & "ALT 3500"
Feb-15 Company announces partnership with DLL ( De Lage Landen Financial services) to launch Escorts Credit which would provide retail tractor loans
Apr-15 Rakesh Jhunjhunwala increases stake to 8.14% in Q4FY15; stock closes 8% higher
Apr-15 Escorts enters into JV with Amul group for manufacturing specialised tractors named "Steeltrac", highly succesful speciality tractors
Source: Company, ICICI Direct Research
Top 10 Shareholders Shareholding Pattern
Rank Name Latest Filing Date % O/S Position (m) Change (m)
1 Behuria (Sutanu) 31-Dec-18 27.49 33.7 0.00
2 Harparshad & Co., Pvt. Ltd. 31-Dec-18 8.59 10.5 0.00
3 Jhunjhunwala (Rakesh Radheshyam) 31-Dec-18 8.16 10.0 0.00
4 Mathur (Girish Behari) 31-Dec-18 2.51 3.1 0.00
5 T. Rowe Price International (UK) Ltd. 31-Dec-18 2.43 3.0 0.00
6 Goldman Sachs Asset Management International 30-Sep-18 2.27 2.8 0.19
7 UTI Asset Management Co. Ltd. 30-Sep-18 1.89 2.3 -0.43
8 Big Apple Clothing Pvt. Ltd. 31-Dec-18 1.45 1.8 0.00
9 AAA Portfolio Pvt. Ltd. 31-Dec-18 1.38 1.7 0.00
10 The Vanguard Group, Inc. 31-Dec-18 1.28 1.6 0.01
(in %) Dec-17 Mar-18 Jun-18 Sep-18 Dec-18
Promoter 40.0 40.1 40.1 40.1 40.1
FII 21.2 24.4 24.1 22.4 21.7
DII 6.1 5.4 5.7 6.1 4.9
Others 32.7 30.2 30.1 31.4 33.4
Source: Reuters, ICICI Direct Research
Recent Activity
Investor name Value ($ mn) Shares (mn) Investor name Value ($ mn) Shares (mn)
Schroder Investment Management (Hong Kong) Ltd. 13.12 1.29 Kotak Mahindra Asset Management Company Ltd. -5.29 -0.52
Nanda (Nikhil) 4.29 0.42 Canara Robeco Asset Management Company Ltd. -4.07 -0.48
L&T Investment Management Limited 2.73 0.27 UTI Asset Management Co. Ltd. -3.63 -0.43
Goldman Sachs Asset Management International 1.59 0.19 Nanda (Ritu) -4.17 -0.41
Invesco Asset Management (India) Private Limited 0.79 0.08 HSBC Global Asset Management (Hong Kong) Limited -3.00 -0.36
Buys Sells
Source: Reuters, ICICI Direct Research
ICICI Securities Ltd | Retail Equity Research Page 9
.
Financial summary
Profit and loss statement | Crore
(Year-end March) FY17 FY18 FY19E FY20E
Total operating Income 4,093.2 4,995.1 6,234.1 6,785.7
Growth (%) 21.6 22.0 24.8 8.8
Raw Material Expenses 1,862.7 2,315.4 2,844.5 3,042.8
Employee Expenses 390.2 431.1 473.9 510.5
Other expenses 381.5 443.4 734.0 780.4
Total Operating Expenditure 3,769.5 4,437.9 5,481.9 5,939.1
EBITDA 323.7 557.2 752.2 846.6
Growth (%) 185.9 72.1 35.0 12.5
Depreciation 63.1 72.5 88.5 100.4
Interest 31.1 28.6 14.8 5.0
Other Income 43.5 59.4 87.4 71.7
PBT 218.3 508.9 749.1 812.9
Total Tax 57.9 164.1 250.0 272.3
PAT 160.4 344.8 499.1 540.6
Growth (%) 91.6 114.9 44.8 8.3
EPS (|) 13.1 28.1 40.7 44.1
Source: Company, ICICI Direct Research
Cash flow statement | Crore
(Year-end March) FY17 FY18 FY19E FY20E
Profit after Tax 160.4 344.8 499.1 540.6
Add: Depreciation 63.1 72.5 88.5 100.4
(Inc)/dec in Current Assets -284.6 -613.5 -504.7 -361.0
Inc/(dec) in CL and Provisions 102.6 391.7 194.3 142.3
CF from operating activities 41.5 195.4 277.2 422.3
(Inc)/dec in Investments 4.6 0.0 -50.0 0.0
(Inc)/dec in Fixed Assets -58.5 -105.3 -159.9 -252.0
Others 9.0 0.0 0.0 0.0
(Inc)/dec in Deferred Tax Asset -6.2 47.0 0.0 0.0
CF from investing activities -111.5 -123.6 -319.3 -312.4
Issue/(Buy back) of Equity 11.6 0.0 17.0 0.0
Inc/(dec) in loan funds 128.7 -200.4 122.2 -100.0
Dividend paid & dividend tax -13.2 -19.7 -21.1 -28.2
Inc/(dec) in Sec. premium 0.0 0.1 0.0 0.0
Others -103.2 231.8 -21.4 0.0
CF from financing activities 23.9 11.7 96.6 -128.2
Net Cash flow -46.1 83.5 54.5 -18.3
Opening Cash 274.5 228.4 311.9 366.4
Closing Cash 228.4 311.9 366.4 348.1
Source: Company, ICICI Direct Research
Balance sheet | Crore
(Year-end March) FY17 FY18 FY19E FY20E
Liabilities
Equity Capital 122.6 122.6 122.6 122.6
Reserve and Surplus 1,868.6 2,425.5 2,899.0 3,411.4
ESOP 0.0 0.0 0.0 0.0
Total Shareholders funds 1,991.2 2,548.1 3,021.6 3,533.9
Total Debt 228.2 27.8 150.0 50.0
Other non-current Liabilities 16.9 29.1 29.1 29.1
Long-term Provisions 19.4 15.3 15.3 15.3
Total Liabilities 2,255.6 2,620.3 3,216.0 3,628.3
Assets
Gross Block 2,336.4 2,371.0 2,521.0 2,771.0
Less: Acc Depreciation 825.9 849.1 925.2 1,012.3
Net Block 1,510.5 1,521.9 1,595.9 1,758.8
Capital WIP 26.6 46.8 46.8 46.8
Total Fixed Assets 1,537.0 1,568.7 1,642.7 1,805.6
Net Intangible Asset 52.0 53.1 50.6 39.3
Investments 422.8 413.9 553.9 613.9
Inventory 429.5 541.1 757.0 804.6
Debtors 458.0 600.0 768.6 929.5
Loans and Advances 15.6 18.1 23.9 21.8
Other Current Assets 271.1 634.5 737.0 891.5
Cash 228.4 311.9 366.4 348.1
Total Current Assets 1,402.6 2,105.4 2,652.9 2,995.6
Creditors 893.8 1,225.5 1,451.8 1,487.3
Provisions & Other Curr.Liab 360.0 406.2 382.7 478.7
Total Current Liabilities 1,253.8 1,631.7 1,834.5 1,966.0
Net Current Assets 148.8 473.8 818.4 1,029.6
Deferred Tax Asset 47.0 -19.7 -19.7 -19.7
Other non-current assets 36.7 102.5 121.9 122.3
Application of Funds 2,255.6 2,620.3 3,216.0 3,628.3
Source: Company, ICICI Direct Research
Key ratios
(Year-end March) FY17 FY18 FY19E FY20E
Per share data (|)
EPS 13.1 28.1 40.7 44.1
Cash EPS 18.2 34.0 47.9 52.3
BV 162.4 207.9 246.5 288.3
DPS 1.2 1.4 1.5 2.0
Cash Per Share 18.6 25.4 29.9 82.6
Operating Ratios
EBITDA Margin (%) 7.9 11.2 12.1 12.5
PBT / Net sales (%) 5.3 10.2 12.0 12.0
PAT Margin (%) 3.9 6.9 8.0 8.0
Inventory days 36.8 35.5 38.0 43.3
Debtor days 40.8 43.8 45.0 50.0
Creditor days 79.7 89.5 85.0 80.0
Return Ratios (%)
RoE 8.1 13.5 16.5 15.3
RoCE 11.7 18.8 20.9 22.7
RoIC 13.0 21.4 24.1 22.5
Valuation Ratios (x)
P/E 51.2 23.8 16.5 15.2
EV / EBITDA 25.4 14.2 10.6 9.3
EV / Net Sales 2.0 1.6 1.3 1.2
Market Cap / Sales 2.0 1.6 1.3 1.2
Price to Book Value 4.1 3.2 2.7 2.3
Solvency Ratios
Debt/EBITDA 0.7 0.0 0.2 0.1
Debt / Equity 0.1 0.0 0.0 0.0
Current Ratio 1.1 1.3 1.5 1.6
Quick Ratio 0.9 1.1 1.3 1.1
Source: Company, ICICI Direct Research
ICICI Securities Ltd | Retail Equity Research Page 10
ICICI Direct coverage universe (Auto & Auto Ancillary)
CMP M Cap
(|) TP(|) Rating (| Cr) FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E
Amara Raja (AMARAJ) 776 835 Hold 13261 27.6 30.2 39.8 28.1 25.7 19.5 14.8 13.1 10.2 23.3 22.0 24.7 16.0 15.2 17.1
Apollo Tyre (APOTYR) 211 260 Buy 12056 12.7 16.2 21.6 16.7 13.0 9.8 7.5 7.5 6.4 7.8 9.3 11.1 7.4 9.1 10.7
Ashok Leyland (ASHLEY) 83 115 Hold 23335 5.3 7.1 8.9 15.5 11.6 9.3 10.2 8.3 6.2 28.1 32.1 34.6 21.9 25.1 26.2
Bajaj Auto (BAAUTO) 2626 2410 Hold 75999 140.6 153.3 169.5 17.6 16.2 14.6 11.8 10.4 8.9 22.9 22.4 22.3 21.5 20.7 20.4
Balkrishna Ind. (BALIND) 848 1025 Hold 16384 38.2 50.6 59.7 22.2 16.8 14.2 16.5 12.0 10.0 22.4 26.1 26.2 18.1 26.1 26.2
Bharat Forge (BHAFOR) 480 700 Buy 22329 16.2 23.3 28.0 29.6 20.6 17.2 17.6 14.5 12.2 18.2 22.9 25.7 17.3 23.3 23.9
Bosch (MICO) 18526 20500 Hold 58172 449.1 593.7 661.5 41.3 31.2 28.0 27.0 21.9 19.2 14.4 16.4 16.3 21.4 24.4 24.3
Eicher Motors (EICMOT) 20050 25500 Buy 54656 718.9 926.0 1162.1 27.9 21.7 17.3 20.0 17.0 13.2 39.1 35.9 35.0 29.9 27.9 26.9
Escorts (ESCORT) 670 700 Hold 8213 28.1 40.7 44.1 23.8 16.5 15.2 14.2 10.6 9.3 18.8 20.9 20.8 13.5 16.5 15.3
Exide Industries (EXIIND) 230 285 Buy 19563 8.2 9.3 11.5 27.9 24.8 20.0 16.8 14.6 11.8 19.1 18.9 21.2 13.0 13.2 14.7
Hero Moto (HERHON) 2670 3350 Buy 53323 185.1 186.6 209.6 14.4 14.3 12.7 9.5 9.2 7.9 42.4 41.0 41.3 31.4 29.0 29.1
JK Tyre & Ind (JKIND) 96 100 Hold 2175 2.9 12.9 21.9 32.9 7.4 4.4 9.8 6.0 4.6 7.7 12.6 15.4 3.6 15.0 18.6
Mahindra CIE (MAHAUT) 232 280 Buy 8780 9.5 14.5 17.7 24.5 16.0 13.2 13.7 9.9 8.2 9.8 12.9 13.7 11.2 15.0 17.1
Maruti Suzuki (MARUTI) 6520 6000 Hold 196122 255.6 250.3 284.4 25.5 26.0 22.9 13.5 13.8 11.8 21.1 17.8 18.8 18.5 16.3 16.6
Motherson (MOTSUM) 151 165 Hold 47622 5.1 6.2 9.0 29.8 24.2 16.7 10.8 9.0 6.7 16.3 19.6 26.1 17.4 19.4 23.5
Tata Motors (TELCO) 173 200 Hold 51779 26.8 2.3 17.0 6.9 79.0 10.9 2.7 3.2 2.6 9.1 6.1 8.2 10.3 4.3 8.5
Wabco India (WABTVS) 6263 7200 Hold 11899 143.8 192.0 211.9 43.5 32.6 29.6 30.1 24.7 21.1 17.9 19.7 18.0 25.1 27.6 25.4
Sector / Company
RoE (%)EPS (|) P/E (x) EV/EBITDA (x) RoCE (%)
Source: Company, ICICI Direct Research
ICICI Securities Ltd | Retail Equity Research Page 11
RATING RATIONALE
RATING RATIONALE
ICICI Direct endeavours to provide objective opinions and recommendations. ICICI Direct assigns ratings to its
stocks according to their notional target price vs. current market price and then categorises them as Strong
Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is
defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
Pankaj Pandey Head – Research [email protected]
ICICI Direct Research Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
ICICI Securities Ltd | Retail Equity Research Page 12
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