1

SYNOPSIS

WABCO-TVS (INDIA) is a joint venture between TVS Group and WABCO Holdings Inc.

The company has pioneered the manufacture of air-assisted and air brake systems for commercial vehicles in India.

Net Sales and PAT of the company are expected to grow at a CAGR of 25% and 30% over 2010 to 2013E respectively.

WABCO Announces Agreement with IVECO to Supply Anti-Lock Braking Systems with Breakthrough Technology to Certify Electronic Stability Control

WABCO-TVS (INDIA) Limited supplies original equipment fitments for vehicles manufactured by Ashok Leyland, TATA Motors etc.

During the quarter, the company has reported Net Profit increased to Rs.426.01 million from Rs.337.88 million in previous year same quarter.

Years Net sales EBITDA Net Profit EPS P/E

FY 11 8949.97 2059.66 1274.32 67.18 17.34

FY 12E 10516.21 2387.50 1522.30 80.26 14.52

FY 13E 11988.48 2700.95 1737.50 91.60 12.72

Stock Data:

Sector: Auto Components

Face Value Rs. Rs.5.00

52 wk. High/Low (Rs.) 1524.95/863.00

Volume (2 wk. Avg.) 225.00

BSE Code 533023

Market Cap (Rs.In mn) 22097.72

Share Holding Pattern

1 Year Comparative Graph

BSE SENSEX Wabco-TVS(India) Ltd

C.M.P : Rs.1165.00 Target Price : Rs.1316.00 Date : 03rd Jan 2012 BUY

WABCO-TVS (INDIA) LTD Result Update: Q2 FY 12

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Peer Group Comparison

Name of the company CMP(Rs.) Market

Cap.(Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)

Wabco-TVS (India) Ltd 1165.00 22097.72 67.18 17.34 5.71 100.00

Bosch 6849.55 215068.3 335.03 20.44 5.25 400.00

Jamna Auto 88.50 3483.8 12.71 6.96 2.66 20.00

Gabriel India 40.25 2890.8 7.95 5.06 1.55 100.00

Investment Highlights

Q2 FY12 Results Update

Wabco-TVS (India) Ltd disclosed results for the quarter ended Sep 2011. Net sales

for the quarter increased by 17% to Rs.2644.22 million as compared to

Rs.2259.38 million during the corresponding quarter last year. During the

quarter, the company has reported Net Profit increased to Rs.426.01 million from

Rs.337.88 million in previous year same quarter. The Basic EPS of the company

stood at Rs.22.46 for the quarter ended Sep 2011.

Quarterly Results - Standalone (Rs in mn)

As At Sep-11 Sep-10 %change

Net sales 2644.22 2259.38 17

PAT 426.01 337.88 26

Basic EPS 22.46 17.81 26

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Basic EPS of the company stood at Rs. 22.46

4

Break up of Expenditure

Expenditure for the quarter stood at Rs.2025.40mn, which is around 17% higher

than the corresponding period of the previous year. Raw material cost of the

company for the quarter accounts for 53% of the sales of the company and stood

at Rs.1413.94mn from Rs.1279.59mn of the corresponding period of the previous

year. Other Expenditure cost increased 18%YoY to Rs.366.16mn from

Rs.310.31mn and accounts for 14% of the revenue of the company for the

quarter.

OPM and NPM for the quarter stood at 24% and 16% respectively from 24% and

15% respectively of the same period of the last year.

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FY11 Performance

Net profit of the company has increased at 62% yoy Rs.1274.32mn from

Rs.785.86mn of same period of last year. Total revenue for the year stood at

Rs.8949.97 mn from Rs.6075.11 which is 47% increased than that of a year ago.

EPS for the year stood at Rs.67.18 per equity share of Rs.5.00 each.

Operating profit of the company stood at Rs.2059.66 mn. OPM for the year stood

at 23.01%. Expenditure of the company increased 46% YoY to Rs.6932.63 mn.

Interest expenses for the year stood at Rs.1.69mn.

Board recommends Dividend

WABCO-TVS (India) Ltd has recommended a dividend of Rs. 5.00 per share, i.e.

100% for the year ended March 31, 2011, absorbing a sum of Rs. 1,102.23

lakhs (inclusive of dividend distribution tax). This is subject to approval by the

shareholders of the Company in the ensuing Annual General Meeting.

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Company Profile

WABCO-TVS (INDIA) is a joint venture between TVS Group and WABCO Holdings Inc.

The company has pioneered the manufacture of air-assisted and air brake systems

for commercial vehicles in India. With a commitment of total satisfaction to

customers, their company has achieved a share of business in the OE (Original

Equipment) segment greater than 85% and a market share in the after-market

greater than 75%.

WABCO-TVS (INDIA) Limited is the leading provider for air brake actuation systems

for commercial vehicles.

WABCO, one of the leading providers of electronic braking, stability, suspension and

transmission control systems to the global commercial vehicle industry, and TVS

Group, a leading producer of automotive components, two-wheelers, electronic

hardware and a major distributor of automotives and spare parts in addition to

operating goods transport and financial services, in May 2007 announced their

intention to transfer the brakes business of their Indian joint-venture Sundaram

Clayton Ltd (SCL) to a new wholly-owned subsidiary, WABCO-TVS (INDIA) Ltd.,

(WABCO-TVS) through a demerger plan.

The company's Research and Development center is full-fledged and state-of-the-art

to facilitate design, development, simulation and testing. A team of professional

engineers powered with the best production facilities gear us up to translate design

competence into excellence in manufacturing through concepts such as cellular

manufacturing and operation standards.

WABCO-TVS have a solid foundation in its domestic market leadership and

pioneering R&D efforts. Comprehensive TQM (Total Quality Management) practices

enable the company in being a competitive world-class manufacturer in terms of

quality, cost and timely delivery of products.

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Cellular manufacturing gives it the flexibility to respond in tune to customer needs.

Comprehensive integration of the supply chain through implementation of ERP

(Enterprise-Wide Resource Planning) programme has further enhanced WABCO-TVS

(INDIA) responsiveness.

WABCO-TVS have a solid foundation in its domestic market leadership and

pioneering R&D efforts. A comprehensive TQM (Total Quality Management) practice

enables WABCO-TVS in being a competitive world-class manufacturer in terms of

quality, cost and timely delivery of products.

With intensive R&D efforts and high quality standards, its products have found

global acceptance. Today Australia, Malaysia, UK, Singapore, South Asia, North

America, Venezuela and the Middle East are part of its export network.

Products:

The company is the leading provider for air brake actuation systems for commercial

vehicles.

Clientele:

WABCO-TVS (INDIA) Limited supplies original equipment fitments for vehicles

manufactured by Ashok Leyland, TATA Motors, Vehicle Factory (Jabalpur), Bharat

Earthmovers, TAFE, Volvo, SUTLEJ, CATERPILLAR, Eicher Motors, Swaraj Mazda,

Force Motors, Mahindra & Mahindra, Tata Cummins (Engines) and a host of other

trailer manufacturers.

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Financial Results

12 Months Ended Profit & Loss Account (Standalone)

Value(Rs.in million) FY10A FY11A FY12E FY13E

12m 12m 12m 12m

Description

Net Sales 6075.11 8949.97 10516.21 11988.48

Other Income 19.57 42.32 52.90 63.48

Total Income 6094.68 8992.29 10569.11 12051.96

Expenditure -4737.97 -6932.63 -8181.62 -9351.02

Operating Profit 1356.71 2059.66 2387.50 2700.95

Interest -28.94 -1.69 -0.24 -0.25

Gross Profit 1327.77 2057.97 2387.26 2700.7

Depreciation -144.45 -144.25 -148.58 -153.03

Profit before Tax 1183.32 1913.72 2238.68 2547.66

Tax -397.46 -639.40 -716.38 -810.16

Profit after Tax 785.86 1274.32 1522.30 1737.50

Equity Capital 94.84 94.84 94.84 94.84

Reserves 2608.35 3772.45 5294.75 7032.26

Face Value(Rs.) 5.00 5.00 5.00 5.00

EPS 41.43 67.18 80.26 91.60

*A=Actual, *E=Estimated

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Quarterly Ended Profit & Loss Account (Standalone)

Value(Rs.in million) 30-Mar-11 30-Jun-11 30-Sep-11 30-Dec-11

3m(A) 3m(A) 3m(A) 3m(E)

Description

Net Sales 2480.66 2449.93 2644.22 2564.89

Other Income 17.25 9.19 12.41 14.27

Total Income 2497.91 2459.12 2656.63 2579.16

Expenditure -1922.3 -1929.68 -2025.4 -1977.53

Operating Profit 575.61 529.44 631.23 601.63

Interest -1.99 -0.22 0.00 1.98

Gross Profit 573.62 529.22 631.23 603.62

Depreciation -37.2 -36.83 -38.06 -36.09

Profit before Tax 536.42 492.39 593.17 567.52

Tax -192.17 -150.92 -167.16 -181.61

Profit after Tax 344.25 341.47 426.01 385.92

Equity Capital 94.84 94.84 94.84 94.84

Face Value(Rs.) 5.00 5.00 5.00 5.00

Total No. of Shares 18.97 18.97 18.97 18.97

EPS 18.15 18.00 22.46 20.35

*A=Actual, *E=Estimated

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Key Ratio

Particulars FY10 FY11 FY12E FY13E

EPS (Rs.) 41.43 67.18 80.26 91.6

EBITDA Margin (%) 22.33% 23.01% 22.70% 22.53%

PAT Margin (%) 12.94% 14.24% 14.48% 14.49%

P/E Ratio (x) 28.84 17.34 14.52 12.72

ROE (%) 29.07% 32.95% 28.25% 24.38%

ROCE (%) 35.42% 49.46% 41.50% 35.72%

EV/EBITDA (x) 16.71 10.73 9.26 8.18

Book Value (Rs.) 142.51 203.88 284.14 375.74

P/BV 8.39 5.71 4.10 3.10

Charts:

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Outlook and Conclusion

At the current market price of Rs.1165.00, the stock is trading at 14.52 x FY12E and 12.72 x FY13E respectively.

Price to Book Value of the stock is expected to be at 4.10 x and 3.10 x respectively for FY12E and FY13E.

Earning per share (EPS) of the company for the earnings for FY12E and FY13E is seen at Rs.80.26 and Rs.91.60 respectively.

Net Sales and PAT of the company are expected to grow at a CAGR of 25% and 30% over 2010 to 2013E respectively.

WABCO Announces Agreement with IVECO to Supply Anti-Lock Braking Systems with Breakthrough Technology to Certify Electronic Stability Control

WABCO-TVS (INDIA) Limited supplies original equipment fitments for vehicles manufactured by Ashok Leyland, TATA Motors etc.

During the quarter, the company has reported Net Profit increased to Rs.426.01 million from Rs.337.88 million in previous year same quarter.

On the basis of EV/EBITDA, the stock trades at 9.26 x for FY12E and 8.18 x for FY13E.

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We expect that the company will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs.1316.00 for Medium to Long term investment.

Industry Overview

Poised to grow by over four-fold to US$ 113 billion by 2020, the Indian auto

component industry is one of the front runners for grabbing the global auto

components outsourcing market.

The total passenger car production in the country will jump four times to reach 9

million cars by 2020, according to Automotive Component Manufacturers' Association

(ACMA). Although a major chunk of this will come from the fast growing domestic

market, exports are likely to form around 35 per cent of the total market by 2020.

"India would be among the top-five vehicle producing countries in the world by 2020,"

said Vinnie Mehta, Executive Director, ACMA.

A recent ACMA report puts the turnover of the auto component industry at about US$

26 billion in 2010-11, up 18 per cent from US$ 22 billion in 2009-10. The report

states that 40 per cent of the auto component industry was dominated by body and

structural products in 2009, 20 per cent by engines and exhaust, and 10 per cent

each by suspension and braking parts, transmission and steering parts, electronics

and electrical and interiors. By 2015, body and structural will account for 35 per cent

of the auto component industry, engines and exhaust 20 per cent, suspension and

braking parts, transmission and steering parts and electronics and electrical will

account for 13 per cent each and interiors 9 per cent.

The potential compound annual growth rate (CAGR) of the auto component industry is

estimated to be around 18 per cent in the period 2010-11. Exports from the auto

component industry are estimated to be worth US$ 5 billion in 2010-11, according to

the ACMA report.

Europe is likely to have accounted for 36.9 per cent of India's auto components

exports in 2010-11, followed by Asia with 28.1 per cent and North America with 24 per

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cent. The industry has witnessed a shift in the composition of exports over the years.

Investments in the auto component industry are estimated at US$ 12 billion in 2010-

11, according to ACMA.

Destination India

India has proven product-development capabilities and proximity to emerging

markets. The Asian country is also turning out to be an attractive destination as a

global outsourcing hub and manufacturing base for original equipment manufacturers

(OEMs), especially after the global economic downturn.

With the finalisation of the Automotive Mission Plan (AMP) India is expected to become

a preferred destination for design and manufacture of automobile. The plan envisaged

an investment of US$ 40 billion and provided a road map to help transform India into

a global automobile player. The AMP proposed a 25-point plan that included making

India a manufacturing and export hub for small cars, multiutility vehicles, two and

three-wheelers, tractors and components.

Furthermore, Indian companies are compliant with global automotive standards, e.g.

the Japanese Industrial Standard Committee (JISC) and

DeutschesInstitutfürNormung (DIN). India offers the advantage of low manufacturing

costs due to economies of scale, low design, research and labour costs, and local

sourcing of tools and components. Large Indian players contribute around 43 per cent

of the total production, while foreign companies such as Magna, Visteon, Valeo,

Bosch, Federal-Mogul Corporation and Denso contribute 15 per cent.

Auto component exports are expected to grow to US$ 30 billion by 2020. India’s share

in the global auto components market is expected to rise from 0.9 per cent in 2008–09

to 2.5 per cent in 2015.

Investments

Auto component maker Jamna Auto would set up two new manufacturing units in

Tamil Nadu, with an investment of around US$ 17.95 million. The new units, at Hosur

and Chennai, will produce parts for commercial vehicles.

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The world’s first facility to manufacture carbon foam batteries will be set up at Bavla

near Ahmedabad. Firefly Energy India is planning to build a plant to produce carbon

foam batteries at an investment of US$ 28.05 million, the company’s chairman

MukeshBhandari said.

The US$ 1-billion Pawan Kumar Ruia Group is taking big strides in the auto ancillary

space. The group has added yet another German company to its portfolio by acquiring

the assets of automotive fasteners firm, Acument GmbH & Co KG , for an undisclosed

sum.

Bangalore-based Pragati Automation Pvt Ltd (PAL), an Ace Group company engaged in

the manufacture of servo drives and motors, is foraying into Chinese market with the

setting up of its assembly plant in Shanghai. The company is also expanding its

capacities in Bangalore, Belgaum and Kolhapur in Maharashtra. It has drawn up a

capital expenditure plan of US$ 11.22 million for expansion, a top company official

said.

Automotive components maker Amtek Auto has formed a joint venture with South

Korean automaker Autech Corporation to manufacture vehicles for defence, para-

medical,fire fighting and waste management sectors to capitalise on the booming

demand for specialised vehicles. The Delhi-based company will set up an assembly

facility at Daruhera in Haryana with an initial capacity of 10,000 units per year.

JK Tyre& Industries Ltd has signed a memorandum of understanding (MoU) with the

Government of Tamil Nadu for setting up US$ 325.74 million greenfield facility at

Sriperumbudur. The facility would generate US$ 43.43 million every year for the

exchequer and create 1,000 skilled jobs, said RaghupatiSinghania, Vice Chairman and

Managing Director of the company.

German auto component major and industry technology provider Bosch Group has

made an upward revision in its Indian investment programme for 2010-2012 on the

back of booming domestic auto market. VK Viswanathan, President,Bosch India said

the group had decided to increase its investment quantum to US$ 517.5 million from

the proposed US$ 450 million. The group will utilise this investment for its six

separate entities in India.

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Policy Initiatives

The Ministry of Heavy Industries and Public Enterprises has envisaged the AMP 2006-

2016 to promote growth in the sector. It targets to:

• Increase turnover to US$ 122 billion–US$ 159 billion by 2016 from US$ 34

billion in 2006

• Increase export revenue to US$ 35 billion by 2016

• Provide employment to additional 25 million people by 2016

Moreover, the announcement of Union Budget 2011-12 brought cheers to the auto

components industries in several ways. Some of the highlights are:

• Retained the custom duty rates on auto components.

• Retained the excise duty on small cars, two wheelers and three wheelers at 10

per cent

• Enhanced and unified the export duty on all types of iron ore to 20 per cent ad

valorem. Export duty on iron ore pellets fully exempted.

• Full exemption of basic customs duty on stainless steel scrap.

• Reduced the basic customs duty on Ferro-nickel from 5 per cent to 2.5 per

cent.

• A concessional rate of Nil BCD CVD at 5 per cent and full exemption from SAD

is being extended to specified parts of the hybrid vehicles, namely, battery pack,

battery charger, AC/DC electric motors, and motor controllers.

• Full exemption on basic customs duty and 4 per cent excise duty on batteries

imported by manufacturers for replacement market.

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_______________ ____ _________________________ Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation

for the purchase or sale of any financial instrument or as an official confirmation of any

transaction. The information contained herein is from publicly available data or other

sources believed to be reliable but do not represent that it is accurate or complete and it

should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s

affiliates shall not be in any way responsible for any loss or damage that may arise to any

person from any inadvertent error in the information contained in this report. This document

is provide for assistance only and is not intended to be and must not alone be taken as the

basis for an investment decision.

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