FSAPPT 39 Edited

7/31/2019 FSAPPT 39 Edited

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By : Apurva Kale

Ayushi Chandra

Naveen Kadyan

Sahil Gambhir

Shri harsh

Financial Ratios Analysis


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Indian tyre industry size estimated to be aroundRs 35300 Cr, dominated by truck and bus

category

FinancialParameters

(in Cr)

2010-2011 2009-2010 2010-2011 2009-2010

Turnover 7,452 6,382 12,902 9,378

Gross Profit 1,745 1,283 3,681 3,249

Profit After Tax -38 63 412 441

Total Debt 4,211.18 3,281.28 5,058.14 4,509.15

Net Worth(Equity) 755.32 858.34 2,832.77 2,412.53

Key Financial Data

J.K. Tyre Apollo Tyres


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Liquidity Ratios: Provides information on a companysability to meet its short term, immediate obligations

Overall Apollo Tyres has better ability tomeet its short term obligations, althoughboth companies have very low cashratio

Current

Ratio

Cash ratio

Quick ratio


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Profitability Ratios: Provides information on theamount of income from each dollar of sales

Overall Apollo Tyres is more profitable thanJK Tyre mainly due to higher grossmargins

FinancialParameters

2011-2012

2010-2011

2011-20122010-2011

Operating ProfitMargin(%)

5% 5% 10% 11%

ROE -5% 7% 15% 18%

Gross Profit

Margin(%)25% 22% 30% 37%

Net Profit Margin(%) -1% 1% 3% 5%ROA -1% 1% 5% 6%



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Activity Ratio: Relates information on a companysability to manage its resources(its assets) efficiently

FinancialParameters

2012-2011 2011-2010 2012-2011 2011-2010

Asset Turnover Ratio 1.47 1.50 1.55 1.32

Account receivable

turnover ratio 6.89 7.16 10.60 9.30

Accounts payable

turnover2.32 2.92 3.48 3.02

Inventory Turnover

Ratio6.49 5.96 4.37 3.49

Average age of

inventory56.23 61.24 83.57 104.60

J.K. Tyre is better at managing inventory and thus has betterworking capital management. Also higher asset turnover for J.K.Tyre shows higher utilization of assets. Both the companies

have low receivables turnover ratio.



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Solvency Ratios: Solvency ratios provides informationon a companys ability to meet its long term obligations

Both the companies have high leverage although J.K. Tyresdebt/equity ratio is unusually high, and thus poses very

high risk of insolvency.

Year 2011- 2012

Year 2010- 2011


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Shareholder ratio:A shareholder ratio describes thecompanys financial condition in terms of amounts per

share of stock

FinancialParameters

2012-2011 2011-2010 2012-2011 2011-2010

EPS (9.31) 15.23 8.18 8.75

P/E (9.13) 6.15 9.70 7.95

Book value per share 183.96 209.05 56.20 47.87

Dividend yield 0.12 0.13 0.32 0.36

Dividend payout ratio -27% 20% 6% 6%

J.K. tyres is incurring losses and thus destroyingshareholder wealth. Even though J.K. has very highleverage as well as net losses, it continues give dividends.



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Dupont Analysis

The ROE of either companies can be calculated as follows

:ROE = Return on Sales X Asset Turnover X Leverage

(PAT/Total Sales) (Total Sales / Assets)(Assets / Equity)

Factors 2011-2012

2010-2011

ROS -0.55% 1.05%

ATO 1.47 1.51

Leverage 6.81 5.02

ROE -5.06% 7.29%

Factors 2011-2012

2010-2011

ROS 3.39% 4.99%

ATO 1.55 1.32

Leverage 2.96 3.04

ROE 14.55% 18.27%

The main reason for negative ROEis negative returns on sales andhigh leverage. Also, high degreeof leverage poses financial risk

Even tough Return on assets inonly 3% for 2011-12, ROE is muchhigher due to high leverage

JK Tyre Apollo Tyres


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Bibliography

M ar ' 12 M ar ' 11 M ar ' 10 M ar ' 09 M ar ' 12 M ar ' 11 M ar ' 10 M ar ' 09

Liquidi ty Rati os Liquidity Ratios

C u rr e nt a s s et / Cu r re n t l i ab i li t y C u rr e nt R a ti o 0 . 87 1 . 06 0 . 91 0 . 93 C u rr e nt R a ti o 1 . 32 1 . 43 1 . 28 1 . 30

The current ratio of the two companies is quite

comparable. While forApollo the ratio has been

consistently higherthan 1forJK it has been slightly les s

than 1except forthe last year.

(Current asset-prepaid expenses-

inventory)/Current liabilityQ ui ck r at io 0 .5 1 0 . 57 0 .5 1 0 . 51 Q ui ck r at io 0 .5 3 0 . 56 0 .6 7 0 . 52

A higherQuick ratio furtherempahises the fact that

Apollo Tyres has abettermanaged liquidity prospects

than JK tyres.

Cash+Cash advances/Current

LiabilitiesC as h r at io 0 .0 5 0 .0 7 0 .0 6 0 .0 4 Ca sh r at io 0 .0 7 0 .0 9 0 .1 8 0 .2 4

Apollo tyres has ahighercash ratio than JK Tyres forall

the years

t ty t t ty t

O p er a ti n g Pr o fi t / Ne t S a l es O p er a ti n g Pr o fi t M a rg i n( % ) 5 % 5 % 1 3% 6 % O pe r at i ng P r of i t M ar g in ( %) 1 0% 1 1% 1 5% 9 % A ve r ag e o p . M ar g in i s h i g h er f o rA p ol l o

N et P ro fi t/ Eq ui ty R OE - 5. 06 % 7 .2 9% 2 5. 85 % - 16. 20 %R OE 1 4. 54 8% 1 8. 27 1% 3 3. 20 2% 1 0. 31 0%Apollo tyres has ahigherROEthan JK Tyres forall the

years

G ro ss P ro fi t/ Ne t Sa l es G ro ss P ro fi t Ma rg in (% ) 2 5% 2 2% 3 3% 2 2% G ro ss P ro fi t Ma rg in (% ) 3 0% 3 7% 4 1% 2 8%Apollo tyres has ahigherGross Profit Margin(%) than JK

Tyres forall the years

P AT /N et Sa le s N et Pr ofi t Ma rgi n( %) - 1% 1% 5% - 2% Ne t P rof it Ma rg in (% ) 3% 5% 8% 3%A ty g N t t g t


Profit+Interest(after

tax)/Debt+Net worth

Return On Capital

Employed(%)1% 5% 18% -3%

Return On Capital

Employed(%)12% 12% 22% 11%

Apollo tyres has ahigherReturn On Capital Employed(%)

than JK Tyres forall the years

Net Profi t/Total Ass ets ROA -1% 1% 7% -4% ROA 5% 6% 11% 4%Apollo tyres has ahigherROA than JK Tyres forall the

years

ActivityRatios Activity Ratios

N e t S a le s / As s e t A s s et T u rn o ve r R at i o 1 . 47 1 . 51 1 . 33 3 . 31 A s s e t T u rn o ve r R at i o 1 . 55 1 . 32 1 . 68 2 . 82Apollo tyres has ahigherAsset TurnoverRatio than JK


Net Credit Sales/Account

Receivables

Account receivable

turnoverratio6.89 7.16 7.28 10.06

Account receivable

turnoverratio10.60 9.30 10.32 22.23

C O G S/Ac c ou n ts p ayable Ac c ou n ts p ayable tu rn over 2 .3 2 2 .9 2 2 .1 8 3 .6 4 Ac co u n ts p ayable tu rno ver 3 .4 8 3 .0 2 2 .8 9 4 .5 1Apollo tyres has ahigherAccounts payable turnover

than JK Tyres forall the years

C O G S/Average In ven to ry In ven to ry Tu rn overR at io 6 .4 9 5 .9 6 5 .4 5 8 .7 3 In ven to ry Tu rn overR at io 4 .3 7 3 .4 9 4 .6 9 5 .7 4Apollo tyres has alowerInventory TurnoverRatio than

JK Tyres forall the years

365/Inventory TurnoverRatio Average age of inventory 56.23 61.24 66.91 41.83Average age of inventory 83.57 104.60 77.84 63.59A t y g Av g g v t y t

JK Tyres forall the years

Solvency Ratios SolvencyRatios

Debt/Assets

De bt r atio 0.82 0.76 0.71 0.76 Debt r atio 0. 60 0. 62 0. 54 0. 48

Apollo tyres has ahigherDebt ratio than JK Tyres forall

the years

Financial Ratios for ApolloTyresFinancial Ratios for JKTyres

YearlytrendFormulas

FSAPPT 39 Edited

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