Apollo Tyres (APOTYR) | 200 - static-news.moneycontrol.comstatic-news.moneycontrol.com/static-mcnews/2019/02/Apollo-Tyres_09-2... · February 6, 2019 ICICI Securities Ltd | Retail

February 6, 2019

ICICI Securities Ltd | Retail Equity Research

Result Update

Inexpensive valuations, steady prospects…

Apollo Tyres (ATL) posted a disappointing set of Q3FY19 numbers

Consolidated revenues came in at | 4,718 crore (up 16.5% YoY)

Consolidated EBITDA increased 6.2% YoY to | 527 crore. EBITDA

margins came in at 11.2% (up 20 bps QoQ). Margins came in lower

on account of significantly higher raw material cost, partly mitigated

by lower employee as well as other expenses

Consolidated PAT declined 19.3% YoY to | 197.9 crore

ATL has made a provision to the tune of | 60 crore during the quarter

with respect to default on unsecured inter corporate deposits of

IL&FS Financial Services. Total provisions made till date on this

account is to the tune of | 100 crore with exposure at | 200 crore

ATL has maintained its capex plans of ~| 5500 crore in FY18-21E,

with ~| 1500 crore capex spend in FY19E & ~| 2000 crore capex

spend in FY20E. The new capacity is largely in the TBR & PCR space

Replacement market rescues; double digit growth in domestic business

Domestically, ATL realises ~60% sales from the replacement market,

~30% from the OEM segment with the remaining from exports at ~10%.

Given the higher share of replacement market, the company witnessed

limited impact from the present slowdown in auto OEM sales

domestically. In Q3FY19, its volume growth in the domestic operations

was at ~11%. The company has maintained its double digit growth

guidance for Q4FY19 as well as FY20E. Sensing the weak OEM demand,

however, APT did roll back its price increase undertaken at the end of

November 2018 and currently hold slightly above average finished goods

inventory (five weeks vs. the usual trend of four weeks). Incorporating the

details, consequently on a standalone basis, we expect revenues to grow

at a CAGR of 15.2% in FY18-20E to | 13,670 crore in FY20E.

Savings in raw material costs (crude linked) to drive margin expansion

Rubber and crude derivatives form the bulk of raw material cost for any

tyre manufacturer. In case of rubber, the prevailing price is hovering at

| 125/kg, largely flat vs. the Q3FY19 average price of | 126/kg & | 131 /kg

in Q2FY19. Crude, on the other hand, was down sharply at US$62.7/barrel

vs. average of US$68/barrel in Q3FY19 and ~US$75/barrel in Q2FY19.

This should result in a drop in crude derivative prices thereby benefitting

tyre companies. A case in point is carbon black, the prices of which are

expected to be down to the levels of ~| 75/kg vs. | 90/kg+ in Q3FY19.

We believe this will drive margin expansion of tyre manufacturers starting

Q4FY19. Conservatively, on a consolidated basis, for ATL, we build in 210

bps expansion in EBITDA margins to 14% in FY20E.

Favourable risk-reward, margin recovery to aid PAT growth, retain BUY

The auto ancillary segment is largely bearing the brunt of a slowdown in

auto OEM sales with share prices of all major auto ancillaries moving

southwards. However, there is a distinction between auto ancillary totally

dependent of auto OEM for their product sales & auto ancillary

possessing healthy replacement demand, which can potentially outpace

OEM growth. Tyres companies form the latter part of the pie wherein

their product act as a consumable and have a steady replacement market

that is almost 2x+ the auto OEM market. Thus, steady replacement

demand prospects coupled with a drop in key raw material prices make

us relatively positive on the tyre space. Going forward, on a consolidated

basis, we expect sales and PAT to grow at a CAGR of 14% and 33%,

respectively, in FY18-20E. We value Apollo at | 225 i.e. 10x P/E on FY20E

EPS of | 22.5 with a BUY rating on the stock.

Rating matrix

Rating : Buy

Target : | 225

Target Period : 12 months

Potential Upside : 12%

What’s Changed?

Target Changed from | 260 to | 225

EPS FY19E Changed from | 16.2 to | 14.2

EPS FY20E Changed from | 21.6 to | 22.5

Rating Unchanged

Quarterly Performance

(| Crore) Q3FY19 Q3FY18 YoY Q2FY19 QoQ

Revenues 4,718.3 4,050.1 16.5 4,257.4 10.8

EBITDA 527.3 496.4 6.2 467.2 12.8

EBITDA (%) 11.2 12.3 -108 bps 11.0 20 bps

Reported PAT 197.9 245.3 -19.3 146.0 35.5

Key Financials

| Crore FY17 FY18 FY19E FY20E

Net Sales 13,063 14,674 17,744 19,009

EBITDA 1,846.4 1,651.3 2,136.2 2,687.1

Net Profit 1,098.6 723.9 811.8 1,284.4

EPS (|) 19.2 12.7 14.2 22.5

Valuation summary

FY17 FY18 FY19E FY20E

P/E (x) 10.4 15.8 11.9 8.9

Tgt P/E (x) 11.7 17.7 15.8 10.0

EV/EBITDA (x) 7.6 8.4 6.7 5.7

P/BV (x) 1.6 1.2 1.1 1.0

RoNW (%) 15.1 7.4 9.1 11.1

RoCE (%) 13.6 7.8 9.1 11.0

Stock data

Particular Amount

Market Capitalization (| Crore) | 11441 Crore

Total Debt (FY18) (| Crore) 4,445.7

Cash & Investments (FY18) (| Crore) 1,937.8

EV (| Crore) 13,948.7

52 week H/L (|) 307 / 192

Equity capital (| crore) | 57.2 Crore

Face value (|) | 1

Price performance (%)

1M 3M 6M 12M

Apollo Tyres -13.2 -5.9 -29.4 -19.6

JK Tyres -14.0 -18.1 -33.1 -49.1

CEAT Ltd -16.1 -6.2 -21.7 -32.2

MRF Ltd -9.9 -9.3 -23.5 -12.5

Balkrishna Industries -10.7 -25.5 -37.0 -25.6

Research Analyst

Shashank Kanodia, CFA

[email protected]

Jaimin Desai

[email protected]

Apollo Tyres (APOTYR) | 200

ICICI Securities Ltd | Retail Equity Research Page 2

Variance analysis- Consolidated

(| crore) Q3FY19 Q3FY19E Q3FY18 YoY (%) Q2FY19 QoQ (%) Comments

Total Operating Income 4,718 5,004 4,050 16.5 4,257 10.8 Topline came in below our estimates primarily tracking lower-than-expected

volume growth numbers in both standalone as well as overseas business

Raw Material Expenses 2,785 2,625 2,260 23.2 2,423 14.9 RM costs were up 200 bps QoQ vs. our estimate of decline in costs

Employee Expenses 648 761 530 22.3 607 6.8

Other expenses 757 935 763 -0.8 760 -0.3 Other expenses came in lower primarily tracking operating leverage benefits

EBITDA 527 684 496 6.2 467 12.8

EBITDA Margin (%) 11.2 13.7 12.3 -108 bps 11.0 20 bps Margins came in lower than our estimates primarily tracking increase in raw

material costs that was partly compensated by lower other expenses as well as

lower employee costs

Depreciation 201 211 151 32.8 196 2.5

Interest 48.5 47.5 41.0 18.3 46 5.3 Interest costs was broadly in line with our estimates with company paying ~4%

average yield on its borrowed money

Other income 33.2 49.4 46.4 -28.5 12.3 169.6

Tax 52.9 124.0 105.0 -49.6 51 3.4

PAT 197.9 311.1 245.3 -19.3 146.0 35.5 PAT came in lower primarily tracking lower-than-expected sales as well as margin

amid provisioning of | 60 crore for loss on investment (I&LFS) vs. our estimate of |

40 crore

EPS (|) 3.5 5.4 4.3 -19.3 2.6 35.5

Key Metrics

Revenue (| crore)

India 3,159 2,702 16.9 3,151 0.2 17% YoY growth in the Indian operations is constituted by 11% of volume growth

and 6% of product as well as pricing mix

Europe 1,628 1,399 16.4 1,181 37.9 In the European division, the volume growth was in high single digits amid nearly

flat market leading to market share gains for the company

EBIT Margin (%)

India 8.3 11.7 (340) bps 8.8 (50) bps Margin depletion was largely led by increase in raw material costs

Europe 2.2 2.7 (50) bps -0.7 290 bps

Source: Company, ICICI Direct Research

Change in estimates

(| Crore) Old New % Change Old New % Change Comments

Revenue 17,867 17,969 0.6 19,994 19,253 -3.7 Marginally revise revenue estimates over FY19E, FY20E

EBITDA 2,131 2,136 0.2 2,602 2,687 3.3

EBITDA Margin (%) 11.9 11.9 -4 bps 13.0 14.0 94 bps

Sharp correction in crude derivative raw material prices like carbon black, makes us

upgrade our margin estimates for FY20E

PAT 927 812 -12.4 1,235 1,284 4.0

EPS (|) 16.2 14.2 -12.4 21.6 22.5 4.0

We incorporate the remaining | 100 crore provisioning for loss on investment (I&LFS)

in Q4FY19, which leads to downward revision in PAT estimates for FY19E. Broadly

maintain estimates for FY20E

FY19E FY20E

Source: Company, ICICI Direct Research;


Conference call highlights

Management Outlook/Guidance and Demand

In the domestic market, the demand scenario was muted in

January 2019 but is expected to improve in February and March.

Overall Q4FY19E is expected to be better than Q3FY19 although an

elevated YoY base would weigh on the quarter optically. FY20E is

expected to see double digit growth over FY19E

For FY20E, the European business is expected to grow in high

single digits against flattish industry growth

The 16% standalone business YoY revenue growth was due to

11% volume growth and 5% improvement in mix and pricing

European sales growth was entirely volume driven while ATL

gained market share across categories

The company’s aftermarket segment grew ~11-12% YoY,

augmenting market share. OEM space displayed flattish growth

against de-growth in industry

ATL’s radialisation levels on the CV side, i.e. truck-bus radials (TBR)

was at 55-60%

OEM slowdown post October led to increased inventory levels at

the company by a week to about five weeks

Revenue & margins

Softness in input material cost is expected to act as a tailwind in

Q4FY19E. The company expects input costs to remain benign even

in FY20E

The company hopes to improve margins back towards ~13-14%

levels, going forward

ATL rolled back a 2% price hike taken in November

Segmental mix of standalone 9MFY19 revenues were as follows –

aftermarket 60%, OEM 30% and exports 10%. Also, CV 62%, PV

18%, light trucks 8%, others 12%

For Q3FY19, landed costs of various raw materials were (|/kg) –

natural rubber 137, carbon black 95, steel cords – 150, synthetic

rubber 150

For Europe operations, input costs were up 2% QoQ and 6% YoY

in Q3FY19

Reifencom revenues were flat YoY with 7% margins

Others

Gross debt was at ~| 4,700 crore and is up marginally QoQ; net

debt is at | 4,000 crore. Debt is expected to peak out in FY20

As of Q3FY19, ATL has reached production levels of 8,000 units

per day (PV) and 250 units per day (TBR) at the Hungary plant.

FY19E targeted levels are 12,000 units per day for PV

Capex plans are on track, with ~| 1,000-1,500 crore expected for

FY19E and ~| 2,500-3,000 crore for FY20E (Andhra Pradesh

greenfield expansion)

The Andhra Pradesh plant is set to come online in Q4FY20E and

will eventually have capacity of 15,000 units per day (PV – radial)

and 3,000 units per day (TBR)

Chennai TBR plant utilisation levels are at ~85-89%

On a general basis, the life cycle of CV tyres is at one year while in

the PV space, it is at three to four years


Company Analysis

Global player – with good business diversification across geographies!

A quick glance at Apollo’s consolidated performance shows an increase

in contribution of the European subsidiary from FY10 onwards. Revenue

from Europe have increased from ~24% in FY10 to ~30% in FY15. The

share had dropped to 27% in FY16 primarily due to internal factors

(namely implementation of SAP impacting sales volumes) and due to

external factor (unfavourable weather & currency movement). However,

the management remained optimistic on demand, which recovered in

FY17 along with large part of internal issues sorted out thereby increasing

its share back to 30%. In terms of segment mix, replacement: OEM share

was at 77: 23 respectively. In the category mix, T&B accounts for 42% of

its revenue, PV accounts for 40% of revenue while the remaining 10%,

6%, 2% is derived from off-highway, LCV & other segments, respectively.

Exhibit 1: Revenue break-up - Geography-wise

5,490

8,158

8,507

8,712

8,938

8,682

8,934

10,300

12,598

13,670

2,234

2,850 2,992

3,943 4,032 3,284

4,091

4,630

5,353

5,583

1,183

1,308 1,502

1,271 321

-

-

-

-

-

3,000

6,000

9,000

12,000

15,000

18,000

FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19E

FY20E

(| crore)

India Europe South Africa


Revenue growth strong on radial TB side!

We factor in revenue growth at ~14% CAGR in FY18-20E, mainly led by

volume. We believe domestic demand will improve on the back of

radialisation trend in the truck bus segment. The radialisation trend has

promoted companies for higher capacity within the segment in India.

ATL’s truck bus radial (TBR) capacity is currently operating at ~90%

utilisation level. Therefore, it is expanding its TBR capacity in a phased

manner. Further, the imposition of anti-dumping duty on Chinese tyres

will favour domestic tyre players. ATL has also smartly used its nylon

capacity (that was underutilised given the radialisation trend) and is

producing off-highway tyres, which has resulted in strong growth in FY18.

Exhibit 2: We expect revenue growth at ~16% CAGR in FY18-20E

8,868

12,153

12,795

13,413

12,785

11,849

13,180

14,841

17,969

19,253

9.2

37.0

5.3 4.8

-4.7-7.3

11.212.6

21.1

7.1

-15

-10

-5

0

5

10

15

20

25

30

35

40

-

3,000

6,000

9,000

12,000

15,000

18,000

FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19E FY20E

(%

)

(| crore)

Sales % growth



Savings in raw material costs (crude linked) to drive margin expansion

Rubber and crude derivatives form the bulk of raw material cost for any

tyre manufacturer. In case of rubber, the prevailing price is hovering at

| 125/kg, largely flat vs. the Q3FY19 average price of | 126/kg & | 131 /kg

in Q2FY19. Crude, on the other hand, is down sharply at US$62.7 /barrel

vs. average of US$68/barrel in Q3FY19 and US$75/barrel in Q2FY19. This

should result in a drop in crude derivative prices thereby benefitting tyre

companies (starting Q4FY19). Conservatively, on a consolidated basis, for

ATL, we build in 210 bps expansion in EBITDA margins to 14% in FY20E

(11.9% in FY19E and 11.1% in FY18).

Exhibit 4: Margin movement with RM trend

56.0

52.4

56.9

50.8

53.4

49.5

49.9

49.2

51.9

52.7

57.2

59.8

58.0

56.3

55.4

56.7

57.8

59.8

14.9

15.8

16.6

17.7

16.1

17.2

16.0 16.3

14.2 14.4

11.1

8.3

10.5

12.312.8

12.3

11.0 11.2

36

40

44

48

52

56

60

64

4

6

8

10

12

14

16

18

20

Q2FY15

Q3FY15

Q4FY15

Q1FY16

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18

Q2FY18

Q3FY18

Q4FY18

Q1FY19

Q2FY19

Q3FY19

(%

)

(%

)

Raw materials/Sales Contribution OPM (LHS)


Exhibit 5: Natural rubber prices have been volatile!

94

160

124.7

80

100

120

140

160

180

200

220

240

260

Mar-12

Jun-12

Sep-1

2

Dec-12

Mar-13

Jun-13

Sep-1

3

Dec-13

Mar-14

Jun-14

Sep-1

4

Dec-14

Mar-15

Jun-15

Sep-1

5

Dec-15

Mar-16

Jun-16

Sep-1

6

Dec-16

Mar-17

Jun-17

Sep-1

7

Dec-17

Mar-18

Jun-18

Sep-1

8

Dec-18

(|/Kg)

Production cut by top natural rubber

producing countries like Thailand,

Indonesia and Malaysia led to rise in NR

Floods in Thailand & demand

from China led NR prices to


Exhibit 3: EBITDA margins to recover, going forward

978

1,166

1,457

1,876

1,931

1,997

1,846

1,651

2,136

2,687

11.0

9.6

11.4

14.0

15.1

16.9

14.0

11.1

11.9 14.0

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

-

500

1,000

1,500

2,000

2,500

3,000


(%

)

(| crore)

EBITDA EBITDA Margins (%)


A case in point is carbon black, the prices of which are

expected to be down to levels of ~| 75/kg vs. | 90/kg+ in

Q3FY19


Strong capital structure in capital intensive, cyclical business!

Despite the capital intensiveness and cyclicality of the business, ATL has

managed to maintain a decent balance sheet strength. With FY18, D/E at

comfortable 0.5x levels. The company has a huge expansion plan of over

~| 13,500 crore in FY17-21E. To fund this huge capex, ATL has, in the

past, raised equity via the QIP route to the tune of | 1500 crore (6.3 crore

shares at | 238/share). According to the management, post this issue,

ATL will be in a comfortable position to meet its major requirements.

Exhibit 6: Comfortable debt position!

0.8 0.8

0.7

0.2

0.0 0.0

0.3

0.3 0.3

0.3

14.8 15.1

17.6

23.2 24.7

18.8

13.6

7.8 9.1

11.0

-

5

10

15

20

25

30

-

0.2

0.4

0.6

0.8

1.0


(%

)

(x)

Nebt Debt/Equity RoCE


Exhibit 7: CFOs on up trend!

295

387

773

1,534

1,795

1,683

1,474

1,457

1,431

2,056

1,042

907

533

433

784

1,171

3,847

3,479

1,500 3,000

2,222

2,550

2,651

1,613

801

1,389 3

,245

4,446

4,596

4,696

-

400

800

1,200

1,600

2,000

2,400

2,800

3,200

3,600

4,000

4,400

4,800


(| crore)

CFO Capex Debt


Profitability to remain elevated as demand returns & gross margins expand!

With the expected demand revival, we believe volumes will improve as

OEM demand is likely to increase, thereby driving its revenue, going

forward. Thus, profitability is likely to remain at decent levels, with PAT

margins likely to come in at >6% from FY20E onwards.

Exhibit 8: Profit margins to remain as operational improvement kicks in!

440

432

601 1

,044

1,015

1,091

1,099.1

723.9

961.9

1,284.4

5.0

3.6

4.7

7.8 7.9

9.2

8.3

4.9

5.4

6.7

2

3

4

5

6

7

8

9

10

-

200

400

600

800

1,000

1,200

1,400


(%

)

(| cro

re)

PAT PAT Margin (%)

Source: Company press release, ICICI Direct Research


Outlook and valuation

The auto ancillary segment is largely bearing the brunt of the slowdown

in auto OEM sales with share prices of all major auto ancillaries moving

southwards. However, there is a distinction between auto ancillary totally

dependent on auto OEM for their product sales & auto ancillary having

healthy replacement demand, which can potentially outpace OEM

growth. Tyres companies form the latter part of the pie wherein their

product act as a consumable and have a steady replacement market that

is almost 2x+ the auto OEM market. Thus, steady replacement demand

prospects coupled with drop in key raw material prices makes us

relatively positive on the tyre space. Going forward, on a consolidated

basis, we expect sales and PAT to grow at a CAGR of 14% and 33%,

respectively, in FY18-20E. We value Apollo at | 225 i.e. 10x P/E on FY20E

EPS of | 22.5 with a BUY rating on the stock.

Exhibit 9: Valuation

Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE

(| cr) (%) (|) (%) (x) (x) (%) (%)

FY17 13,180 11.2 19.2 (2.2) 10.4 7.6 15.1 13.6

FY18 14,841 12.6 12.7 (34.1) 15.8 8.4 7.4 7.8

FY19E 17,969 21.1 14.2 12.2 14.1 6.7 9.1 9.1

FY20E 19,253 7.1 22.5 58.2 8.9 5.7 11.1 11.0


Exhibit 10: One year forward P/E (ATL currently trading at 8.9x)

0

50

100

150

200

250

300

350

Feb-12

Apr-12

Jun-12

Aug-12

Oct-12

Dec-12

Feb-13

Apr-13

Jun-13

Aug-13

Oct-13

Dec-13

Feb-14

Apr-14

Jun-14

Aug-14

Oct-14

Dec-14

Feb-15

Apr-15

Jun-15

Aug-15

Oct-15

Dec-15

Feb-16

Apr-16

Jun-16

Aug-16

Oct-16

Dec-16

Feb-17

Apr-17

Jun-17

Aug-17

Oct-17

Dec-17

Feb-18

Apr-18

Jun-18

Aug-18

Oct-18

Dec-18

Feb-19

(|)

Price 13.3x 11.2x 10.2x 9.2x 6.2x 4.2x 2.1x

Source: Reuters, ICICI Direct Research


Recommended history vs. consensus

0.0

20.0

40.0

60.0

80.0

100.0

0

50

100

150

200

250

300

350

400

Feb-19Nov-18Aug-18May-18Feb-18Nov-17Aug-17May-17Mar-17Dec-16Sep-16Jun-16Mar-16Dec-15

(%

)(|)

Price Idirect target Consensus Target Mean % Consensus with BUY

Source: Bloomberg, Company, ICICI Direct Research

Key events

Date Event

Oct-10 Rubber prices start moving up on production concerns in Thailand on excessive rains

Aug-11 Rubber prices begin to stabilise as production picks up

Jun-13 Apollo announces Cooper Tire deal acquisition

Oct-13 Cooper deal under pressure on China labour strike

Oct-13 Cooper Tire files suit against Apollo

Dec-13 Cooper Tire terminates deal with Apollo; court dismisses Cooper appeal

Feb-14 Cooper Tire files suit against Apollo

Jun-14 Apollo to invest ~|400 crore at its Kerala facility to expand its Off-highway tyre capacity

Sep-14 Company to invest greenfield facility at Hungary and is likely to invest Euro 475 million over next 4 to 5 years

Sep-14 Apollo Tyre Africa voluntarily decides to cease its business operations

Oct-14 RBI hikes FII limit for investment upto 45% of paid up capital in Apollo Tyre

May-15 Apollo plans to invest |1500 crore to expand its Truck bus radial (TBR) capacity at its Chennai plant from 6000 units/ day to 9000 units/day

Aug-15 Board approves ATL's plans to raise debt of | 2,000 crore by way of rupee term loan, foregin currency term loan, NCDs from time to time


Top 10 Shareholders Shareholding Pattern

Rank Name Latest Filing Date % O/S Position (m) Change (m)

1 Neeraj Consultants Pvt. Ltd. 31-Dec-18 12.9 73.8 0.00

2 Franklin Templeton Asset Management (India) Pvt. Ltd. 31-Dec-18 8.2 46.9 -2.30

3 HDFC Asset Management Co., Ltd. 31-Dec-18 7.0 39.9 9.60

4 Apollo Finance, Ltd. 31-Dec-18 7.0 39.8 -0.98

5 Sunrays Properties & Investment Company Pvt. Ltd. 31-Dec-18 6.3 36.3 0.00

6 Sacred Heart Investment Company Pvt. Ltd. 31-Dec-18 4.3 24.4 0.00

7 Motlay Finance Pvt. Ltd. 31-Dec-18 3.0 16.9 0.00

8 Classic Auto Tubes, Ltd. 31-Dec-18 2.7 15.5 0.00

9 DSP Investment Managers Pvt. Ltd. 31-Dec-18 2.7 15.4 -2.35

10 ICICI Prudential Asset Management Co. Ltd. 31-Dec-18 2.5 14.3 -0.10

(in %) Dec-17 Mar-18 Jun-18 Sep-18 Dec-18

Promoter 39.4 40.3 40.4 40.6 40.8

FII 26.4 24.3 23.0 21.0 20.0

DII 18.1 20.0 21.1 21.8 22.6

Others 16.0 15.4 15.6 16.6 16.6


Recent Activity

Investor name Value Shares Investor name Value Shares

HDFC Asset Management Co., Ltd. +32.56M +9.60M DSP Investment Managers Pvt. Ltd. -7.95M -2.35M

Reliance Nippon Life Asset Management Limited +8.37M +2.47M Franklin Templeton Asset Management (India) Pvt. Ltd. -7.81M -2.30M

Templeton Asset Management Ltd. +4.83M +1.65M Norges Bank Investment Management (NBIM) -3.90M -1.33M

J O Hambro Capital Management Limited +4.36M +1.29M Apollo Finance, Ltd. -3.34M -0.98M

IDFC Asset Management Company Private Limited +2.50M +0.85M City of London Investment Management Co. Ltd. -2.54M -0.87M

Buys Sells



.

Financial summary

Profit and loss statement | Crore

(Year-end March) FY17 FY18 FY19E FY20E

Total operating Income 13,180.0 14,840.5 17,969.4 19,253.3

Growth (%) 11.2 12.6 21.1 7.1

Raw Material Expenses 6,890.1 8,395.5 10,216.0 10,604.0

Employee Expenses 1,742.1 2,156.6 2,535.4 2,674.8

Other Expenses 2,701.5 2,637.1 3,081.8 3,287.4

Total Operating Expenditure 11,333.6 13,189.3 15,833.1 16,566.2

EBITDA 1,846.4 1,651.3 2,136.2 2,687.1

Growth (%) -7.6 -10.6 29.4 25.8

Depreciation 461.8 592.6 781.7 847.1

Interest 102.9 162.9 185.1 195.1

Other Income 154.1 116.5 112.2 79.2

PBT 1,435.5 1,012.3 1,081.6 1,724.0

Exceptional items 0.4 0.0 200.0 0.0

Total Tax 336.5 288.4 269.8 439.6

Reported PAT 1,098.6 723.9 811.8 1,284.4

Growth (%) -2.2 -34.1 12.2 58.2

EPS (|) 19.2 12.7 14.2 22.5


Cash flow statement | Crore


Profit after Tax 1,098.6 723.9 961.9 1,284.4

Add: Depreciation 461.8 592.6 781.7 847.1

(Inc)/dec in Current Assets -772.0 -682.6 -911.2 -419.6

Inc/(dec) in CL and Provisions 685.9 823.3 598.4 344.0

CF from operating activities 1,474.4 1,457.1 1,430.8 2,056.0

(Inc)/dec in Investments 107.3 -944.6 200.0 1,000.0

(Inc)/dec in Fixed Assets -3,847.0 -3,479.0 -1,500.0 -3,000.0

Others 297.6 450.2 -15.3 79.0

CF from investing activities -3,442.0 -3,973.4 -1,315.3 -1,921.0

Issue/(Buy back) of Equity 0.0 0.0 6.3 0.0

Inc/(dec) in loan funds 1,855.4 1,201.1 150.0 100.0

Dividend paid & dividend tax -164.5 -219.3 -201.0 -201.0

Others 19.6 1,796.7 -6.3 0.0

CF from financing activities 1,710.5 2,778.5 -51.0 -101.0

Net Cash flow -257.6 262.2 64.4 34.0

Opening Cash 594.2 336.6 598.8 663.2

Closing Cash 336.6 598.8 663.2 697.2


Balance sheet | Crore


Liabilities

Equity Capital 50.9 57.2 57.2 57.2

Reserve and Surplus 7,239.1 9,719.4 10,480.3 11,563.7

Total Shareholders funds 7,290.0 9,776.6 10,537.5 11,620.9

Total Debt 3,244.5 4,445.7 4,595.7 4,695.7

Deferred Tax Liability 766.1 838.9 1,015.7 1,088.3

Total Liabilities 11,907.2 15,936.6 17,013.1 18,320.3

Assets

Gross Block 11,557.8 15,640.9 17,409.1 21,409.1

Less: Acc Depreciation 5,519.6 6,112.2 6,893.8 7,741.0

Net Block 6,432.6 10,867.8 11,654.3 13,807.2

Capital WIP 2,872.3 2,268.2 2,000.0 1,000.0

Total Fixed Assets 9,305.0 13,136.0 13,654.3 14,807.2

Investments 396.2 1,342.5 1,142.5 142.5

Goodwill on consolidation 177.4 206.1 206.1 206.1

Inventory 2,645.5 2,945.4 3,446.2 3,692.4

Debtors 1,127.5 1,435.0 1,723.1 1,846.2

Loans and Advances 45.0 75.7 91.7 98.3

Other current assets 460.1 504.6 611.0 654.6

Cash 336.6 598.8 663.2 697.2

Total Current Assets 4,614.7 5,559.5 6,535.2 6,988.7

Creditors 1,731.8 2,447.1 2,707.7 2,901.2

Provisions 404.3 338.1 374.1 400.9

Total Current Liabilities 2,136.0 2,785.2 3,081.9 3,302.1

Net Current Assets 2,478.7 2,774.3 3,453.3 3,686.6

Application of Funds 11,907.2 15,936.6 17,013.1 18,320.3


Key ratios


Per share data (|)

EPS 19.2 12.7 14.2 22.5

Cash EPS 27.3 23.0 27.9 37.3

BV 127.4 170.9 184.2 203.1

DPS 0.3 0.5 0.4 0.3

Cash Per Share 5.9 10.5 11.6 12.2

Operating Ratios (%)

EBITDA Margin 14.0 11.1 11.9 14.0

PBT / Net sales 10.5 7.1 7.5 9.6

PAT Margin 9.5 8.3 4.9 6.7

Inventory days 73.3 72.4 70.0 70.0

Debtor days 31.2 35.3 35.0 35.0

Creditor days 48.0 60.2 55.0 55.0

Return Ratios (%)

RoE 15.1 7.4 9.1 11.1

RoCE 13.6 7.8 9.1 11.0

RoIC 15.9 8.5 9.7 10.6

Valuation Ratios (x)

P/E 10.4 15.8 11.9 8.9

EV / EBITDA 7.6 8.4 6.7 5.7

EV / Net Sales 1.1 0.9 0.8 0.8

Market Cap / Sales 0.9 0.8 0.6 0.6

Price to Book Value 1.6 1.2 1.1 1.0

Solvency Ratios

Debt/Equity 0.4 0.5 0.4 0.4

Current Ratio 2.0 1.8 1.9 1.9

Quick Ratio 0.8 0.7 0.8 0.8



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) 771 835 Hold 13164 27.6 30.2 39.8 27.9 25.5 19.4 14.8 13.1 10.2 23.3 22.0 24.7 16.0 15.2 17.1

Apollo Tyre (APOTYR) 200 225 Buy 11226 12.7 14.2 22.5 15.5 13.8 8.7 6.7 6.7 5.7 7.8 9.1 11.0 7.4 9.1 11.1

Ashok Leyland (ASHLEY) 82 115 Hold 23165 5.3 7.1 8.9 15.4 11.5 9.2 10.2 8.3 6.2 28.1 32.1 34.6 21.9 25.1 26.2

Bajaj Auto (BAAUTO) 2767 2380 Hold 80059 140.6 149.7 167.2 17.8 16.7 14.9 11.9 11.3 9.3 22.9 21.1 21.7 21.5 20.3 20.2

Balkrishna Ind. (BALIND) 796 1025 Hold 15393 38.2 50.6 59.7 20.8 15.8 13.3 16.5 12.0 10.0 22.4 26.1 26.2 18.1 26.1 26.2

Bharat Forge (BHAFOR) 484 700 Buy 22527 16.2 23.3 28.0 29.9 20.8 17.3 17.6 14.5 12.2 18.2 22.9 25.7 17.3 23.3 23.9

Bosch (MICO) 19168 20500 Hold 60186 449.1 593.7 661.5 42.7 32.3 29.0 27.0 21.9 19.2 14.4 16.4 16.3 21.4 24.4 24.3

Eicher Motors (EICMOT) 20994 25500 Buy 57230 718.9 926.0 1162.1 29.2 22.7 18.1 20.0 17.0 13.2 39.1 35.9 35.0 29.9 27.9 26.9

Escorts (ESCORT) 683 700 Hold 8366 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) 218 235 Hold 18551 8.2 8.4 9.8 26.5 26.1 22.3 15.2 14.1 12.0 19.1 17.6 19.1 13.0 12.2 13.1

Hero Moto (HERHON) 2874 3000 Buy 57397 185.1 174.5 199.9 15.5 16.5 14.4 8.7 9.0 7.7 42.4 38.0 39.0 31.4 26.9 27.4

JK Tyre & Ind (JKIND) 89 100 Hold 2020 2.9 12.9 21.9 30.6 6.9 4.1 9.8 6.0 4.6 7.7 12.6 15.4 3.6 15.0 18.6

Mahindra CIE (MAHAUT) 227 280 Buy 8584 9.5 14.5 17.7 24.0 15.7 12.9 13.7 9.9 8.2 9.8 12.9 13.7 11.2 15.0 17.1

Maruti Suzuki (MARUTI) 7134 6000 Hold 214604 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) 137 165 Hold 43201 5.1 6.2 9.0 27.1 22.0 15.2 10.8 9.0 6.7 16.3 19.6 26.1 17.4 19.4 23.5

Tata Motors (TELCO) 176 200 Hold 52658 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) 6353 6800 Hold 12071 143.8 172.2 212.3 44.2 36.9 29.9 28.0 24.1 19.1 17.9 17.8 18.2 25.1 25.7 26.0

Sector / Company

RoE (%)EPS (|) P/E (x) EV/EBITDA (x) RoCE (%)



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

[email protected]


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Apollo Tyres (APOTYR) | 200 - static-news.moneycontrol.comstatic-news.moneycontrol.com/static-mcnews/2019/02/Apollo-Tyres_09-2... · February 6, 2019 ICICI Securities Ltd | Retail