Group 8_Ashok Leyland

8/10/2019 Group 8_Ashok Leyland

1/15

PRESENTED BYHimanshu Kanaujia, PGP2011650

Ishita Kishore, PGP2011657Manish Kumar, PGP2011709Piran Engineer, PGP2011778

Pragya Jain, PGP2011785Shah Kunal Rajendra, PGP2011865

Sumit Malhotra, PGP2011906


2/15

We would analyse different financial ratios ofthe company over last 10 years

analyse its financial performance.

We would also discuss various issues andfactors related to different ratios and theirimportance.


3/15

2011 2010 2009 2008 2007 2006 2005 2004 2003 2002

profit margin 0.0554110.0517890.0293170.0568030.0581620.0567510.0589550.0571450.0448920.040045

total asset turnover 1.7166161.2450821.1226762.6133812.8877542.5327222.0737642.2187011.6441581.209082

equity multiplier 1.6707611.6215851.5636721.4129871.3380191.489879 1.75386 1.47433 1.7478141.856348

ROE 0.1589220.1045610.0514670.2097550.2247320.2141460.2144250.1869270.1290060.089879

0

0.5

1

1.5

2

2.5

3

3.5

R

a

o

Chart 1

ROE = Profit Margin Profit/Sales) * Total Asset Turnover

Sales/Assets) * Equity Multiplier Assets/Equity

The company is showing a mixed trend in terms of ROE.

From 2002-07 ROE is increasing except 2006.

ROE


4/15


5/15

0

10

20

30

Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11

R

a

o

Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11

Inventory Turnover Ratio 6.42 5.41 5.31 7.97 8.59 8.39 9.09 8.68 6.22 4.85

Interest Coverage Ratio 5.24 6.35 2.3 9.36 21.96 12.13 12.68 5.82 2.78 2.15

Inventory Turnover Ratio 6.42 5.41 5.31 7.97 8.59 8.39 9.09 8.68 6.22 4.85

Chart:3

FATR, Interest Coverage, Inventory Turnover

Fixed Asset Turnover Ratio (FATR) = Net Sales

Net Fixed Asset

Inventory Turnover Ratio = SalesInventory

Interest Coverage Ratio = Earnings before interest and taxesEBIT)

Interest Expense


6/15

FATR, Interest Coverage, Inventory Turnover

The fixed-asset turnover ratio measures a company's abilityto generate net sales from fixed-asset investments

In Ashok Leyland, it can be seen that the Fixed Assetsutilization has shown various deviations in the past 10 years.

Inventory turnover is the ratio of cost of goods sold toaverage inventory. It is an activity / efficiency ratio and it

measures how many times per period, a business sells andreplaces its inventory again.

In case of Ashok Leyland, as far as sales are concernedsignificant changes in the sales can be observed during thepast 10 years.

Interest coverage ratio relates the fixed interest charges to

the income earned by the business. It is used to determinehow easily a company can pay interest expenses onoutstanding debt

Significant high ratio has been observed only during the years2005-2007 during which it varied from 12.68 in 2005 to ashigh as 21.96 in 2007


7/15

Period2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001

Net Sales 17,492.13 16,414.25 11,759.6 9,987.33 11,222.05 10,265.81 7,811.02 6,671.41 5,318.14 4,587.38 3,901.95

YOY %Change 6.57 39.58 17.75 -11.00 9.31 31.43 17.08 25.45 15.93 17.57

Total

Expenditure 13,613.41 12,870.24 9,304.78 7,849.85 8,986.88 8,523.66 6,754.14 5,182.33 4,268.77 3,342.73 2,946.55

YOY %

Change 5.77 38.32 18.53 -12.65 5.43 26.20 30.33 21.40 27.70 13.45

PBIDT/Sales

(%) 10.19 10.59 8.07 9.76 9.25 10.03 10.12 11.11 11.8 12.71

As can be seen in the recent years PBDIT/sales has shown anincrease over the past two years after a sharp dip. The sharpdip can be attributed to the recession, particularly during the

year 2008. The increase is effected due to the greaterincrease in net sales over the past year than the increase inexpenditures. This is an indicator of the fact that operationalefficiency has picked up again.


8/15

Period

2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001

Loan Funds 45,145.53 43,296.84 34,750.2 27,842.55 21,669.93 19,324.04 16,796.12 14,864.18 14,245.40 11,323.97 11,992.3

YOY %

Change 4.27 24.59 24.81 28.48 12.14 15.05 13.00 4.34 25.80 -5.57

Total

Liabilities 56,300.73 52,806.84 42,385.7 34,609.60 28,298.76 23,454.80 20,705.41 18,270.07 17,239.16 14,426.27 15,199.2

YOY %

Change 6.62 24.59 22.47 22.30 20.65 13.28 13.33 5.98 19.50 -5.09

Sales 18,675.88 17,544.51 12,509.7 10,812.45 12,585.80 11,573.99 8,769.08 7,407.19 5,943.35 5,032.52 4,328.51

YOY %

Change 6.45 40.25 15.70 -14.09 8.74 31.99 18.39 24.63 18.10 16.26

Here the sales upon net assets ratio peaks in 2008. After2008 the ratio decreases even though the sales have

increased due to the fact that the company has taken hugeloans. The loans may have been taken for the sake of capacityexpansion.


9/15

Price-Earnings Ratio P/E Ratio)Period P/E Ratio

Percentage change

March 2011 12.87 -32.26

March 2010 19.00 32.22

March 2009

14.37 33.06March 2008 10.80 -12.34

March 2007 12.32 -23.48

March 2006 16.10 64.12

March 2005 9.81 -40.73

March 2004 16.55 60.68

March 2003 10.30 -0.20

March 2002 10.32 -

Table:P/E Ratio of Ashok Leyland for the past 10 years.

A high P/E suggests that investors are expecting higherearnings growth in the future compared to companies witha lower P/E

In case of Ashok Leyland, some years have been particularlygood when P/E ratio has shown a major increase of up to64.12% (in 2006)


10/15

Price to Book Value Ratio P/BV Ratio)Period P/BV Ratio Percentage change

March 2011 2.85 -10.38

March 2010 3.18 178.95

March 2009 1.14 -48.42

March 2008 2.21 -18.75

March 2007 2.72 -23.16

March 2006 3.54 61.64

March 2005 2.19 -25.51

March 2004 2.94 137.10

March 2003 1.24 31.91

March 2002 0.94 -

Table:P/BV Ratio of Ashok Leyland for the past 10 years.

A high P/BV indicates vice versa that markets believe thecompany's assets to be undervalued or that the company is

earning and is expected to earn in the future a high return onits assets. In case of Ashok LeylandsP/BV ratio it has been quite static

others than times when it touched almost to a value of 3.54


11/15

Price/Cash EPS P/CEPS)Period P/CEPS Ratio Percentage change

March 2011 8.85 -29.14

March 2010 12.49 79.45

March 2009

6.96 -9.14March 2008 7.66 -15.17

March 2007 9.03 -20.86

March 2006 11.41 66.08

March 2005 6.87 -36.57

March 2004 10.83 101.30

March 2003 5.38 5.91

March 2002 5.08

Table:P/CEPS Ratio of Ashok Leyland for the past 10 years.

Cash EPS differs from basic earnings per share (EPS), The higher a company's cash EPS, the better it is

considered to have performed over the period. Currently the ratio has decreased in the last one year

period. Due to decrease in the market price of the share rather

than the increase in Cash EPS indicating that the

shareholders were not expecting the company to performthe way it did in the 2009-10 period.


12/15

EV/EBIDTA Ratio

Period EV/EBIDTA RatioPercentage change

March 2011 7.99 -26.0185

March 2010

10.8 38.10742

March 2009 7.82 36

March 2008 5.75 -14.9408

March 2007 6.76 -16.44

March 2006 8.09 54.98084

March 2005 5.22 -27.6006

March 2004 7.21 60.57906

March 2003 4.49 -1.75055

March 2002 4.57 -

Table: EV / EBIDTA Ratio of Ashok Leyland for the past 10 years.

P/E ratios are impacted by a company's choiceof capital structure companies which raise money viadebt will have lower P/Es (and therefore look cheaper)than companies that raise an equivalent amount of

money by issuing shares It is difficult to use P/E ratios to compare different


13/15

Market Cap to Sales RatioPeriod Market Cap/Sales Ratio

Percentage change

March 2011 0.61 -33.6957

March 2010 0.92 -61.9565

March 2009 0.35 45.71429

March 2008 0.51 17.64706

March 2007 0.60 33.33333

March 2006 0.80 -36.25

March 2005 0.51 49.01961

March 2004 0.76 -51.3158

March 2003

0.37 -5.40541

March 2002 0.35 --

Table: Market Cap/Sales Ratio of Ashok Leyland for the past 10 years.

The Market Cap to Salesratio, also referred as the Price toSalesratio

This is an important point for small investors to note. Manysay that they have limited capital and therefore, opt to buyshares that are cheaper in price. They end up buying a smallcap or mid cap share.

Ashok Leyland currently has a value of 0.61 of Market Cap/

Sales ratio. It could be undervalued


14/15

Economic Value Added

EVA is one of the most recent and important methods to judgethe performance of a company.

It is an internal management performance measure thatcompares net operating profitto total cost of capital

EVA = NOPAT c x WACC)Where NOPAT: Net operating profit after tax = EBIT x (1-tax rate)

C: Capital employedWACC: Weighted average cost of capital

Economic Value Added is calculated for FY11 as follows:

NOPAT = 760.15WACC= 15.91%C= 2701.28Therefore, we get EVA = 330.42 crore
http://www.investinganswers.com/term/operating-profit-2796http://www.investinganswers.com/term/cost-capital-112http://www.investinganswers.com/term/cost-capital-112http://www.investinganswers.com/term/cost-capital-112http://www.investinganswers.com/term/operating-profit-2796


15/15

THANK YOU

Group 8_Ashok Leyland

Documents

Transcript of Group 8_Ashok Leyland