Apollo Tyres (APOTYR) | 280 - content.icicidirect.comcontent.icicidirect.com/mailimages/IDirect_ApolloTyres_Q1FY18.pdf · August 8, 2017 ICICI Securities Ltd | Retail Equity Research

August 8, 2017

ICICI Securities Ltd | Retail Equity Research

Result Update

Margins to recover from Q2FY18!

Apollo Tyres’ (ATL) Q1FY18, consolidated revenues were at | 3,283

crore (down 0.9% YoY) vs. our estimate of | 3,649 crore. Revenue

was impacted mainly after 1) the domestic business reported volume

de-growth of 4% volume impacted by transition to BS IV norms &

implementation of GST in Q1FY18 while 2) currency fluctuations

impacted European operations. Revenues from Asia Pacific Middle

East and Africa (APMEA) grew 0.9% YoY to | 2,584 crore while

revenue from Europe declined 3.6% YoY to | 1016 crore

EBITDA margins came in at 8.3% (down 795 bps YoY & 280 bps

QoQ) mainly due to higher cost raw material inventory, which

impacted the gross margin (down 1045 bps YoY & 312 bps QoQ).

Subsequently, consolidated PAT declined 72% YoY to | 88.3 crore

below our estimate of | 254.7 crore

ATL expects OEM & replacement (being impacted by GST) demand

to revive gradually. It expects the benefit of low cost inventory to

accrue from Q2FY18 onwards. The start-up cost of its Hungary plant

& Truck radial sale will exert some pressure on margins in European

operations

Re-stocking (post GST), ADD supplementing demand

ATL is well placed to benefit from the radialisation story in India. It enjoys

a 25% market share in truck tyre segment (in both TBB & TBR). The

company is likely to improve radial volumes and is increasing its radial

capacity, (phase 1 of radial capacity has been commissioned in Q4CY16)

with full capacity set to come on stream in mid-2018, thus driving its

growth. Further, the Directorate General of Anti-dumping & Allied Duties

(DGAA) has recommended imposition of anti-dumping duty of $245/MT

to 452/MT on TBR tyres imported from China. We believe if the same is

implemented it would be positive for Indian TBR players (like ATL) as 1) it

would narrow the pricing gap (10%-12%) between cheaper Chinese &

Indian TBR tyres; 2) thereby helping Indian players to increase their

market share in the overall pie. The management believes though the

quantum of Chinese TBR has reduced (from high of 155,000/month in the

past) due to demonetisation; the TBR import still are at high level of

~100,000/month & can go down <70,000/month with the duty. The re-

stocking of tyre inventory by the dealer (post GST) will further boost

demand. Thus, management is positive on demand outlook, going ahead.

Margin impacted in Q1FY18E but expected to recover

Average prices of natural rubber (NR) from its lows in February 2016

(| 94/kg) moved northwards to | 159/kg in February 2017 and are

currently at | 131/kg. Q1FY18 margins were impacted mainly due to high

cost raw material inventory as - average NR cost for ATL was at | 170/kg

(includes | 15/kg logistics cost) while that of synthetic rubber & carbon

black was at | 170/kg and | 65/kg, respectively. ATL expects benefits of

low cost inventory to accrue from Q2FY18 onwards thereby supporting

margins on a QoQ basis. The start-up cost in Hungary plant & truck radial

sale is likely to impact margins in the near term. However, they are

expected to move southwards as the volume picks up, going forward.

Thus, we expect lower margins in FY18E with an improvement in FY19E.

Decent business case as valuations remain fair!

ATL is investing in more diversified, rapid growth areas coupled with a

larger scale of business in coming years. Further, the management

expects demand to recover, going forward. Thus, we maintain BUY

rating, valuing ATL at 13x FY19E EPS to arrive at a target price of | 315.

Rating matrix

Rating : Buy

Target : | 315

Target Period : 12 months

Potential Upside : 13%

What’s Changed?

Target Changed from | 280 to | 315

EPS FY18E Changed from | 19.7 to | 17.3

EPS FY19E Changed from | 23.3 to | 24.2

Rating Unchanged

Quarterly Performance

(| Crore) Q1FY18 Q1FY17 YoY Q4FY17 QoQ

Revenues 3,282.5 3,311.6 -0.9 3,325.6 -1.3

EBITDA 273.3 538.8 -49.3 369.9 -26.1

EBITDA (%) 8.3 16.3 -795 bps 11.1 -280 bps

Reported PAT 88.3 315.2 -72.0 228.2 -61.3

Key Financials

| Crore FY16 FY17E FY18E FY19E

Net Sales 11,740 13,063 14,107 15,690

EBITDA 1,997.5 1,846.4 1,646.9 2,114.4

Net Profit 1,123.0 1,099.0 866.0 1,222.2

EPS (|) 22.3 21.8 17.2 24.2

Valuation summary

FY16 FY17E FY18E FY19E

P/E (x) 12.9 12.8 16.3 11.5

Tgt P/E (x) 14.1 14.5 18.3 13.0

EV/EBITDA (x) 7.2 9.0 10.7 8.2

P/BV (x) 2.1 1.9 1.8 1.6

RoNW (%) 16.5 15.1 10.8 13.5

RoCE (%) 18.8 13.6 10.2 13.0

Stock data

Particular Amount

Market Capitalization (| Crore) | 14115 Crore

Total Debt (FY17) (| Crore) 3,244.5

Cash & Investments (FY17) (| Crore) 731.3

EV (| Crore) 16,627.7

52 week H/L (|) 288 / 166

Equity capital (| crore) | 50.4 Crore

Face value (|) | 1

Price performance (%)

1M 3M 6M 12M

Apollo Tyres Ltd 10.3 16.1 56.3 63.2

JK Tyres -2.0 -6.2 40.2 61.8

CEAT Ltd -4.7 9.3 58.3 99.7

MRF Ltd -2.8 -0.5 34.5 83.0

Balkrishna Industries Ltd -3.2 8.7 44.6 123.4

Research Analyst

Nishit Zota

[email protected]

Vidrum Mehta

[email protected]

Apollo Tyres (APOTYR) | 280

ICICI Securities Ltd | Retail Equity Research Page 2

Variance analysis- Consolidated

(| crore) Q1FY18 Q1FY18E Q1FY17 YoY (%) Q4FY17 QoQ (%) Comments

Total Operating Income 3,282 3,649 3,312 -0.9 3,326 -1.3 Revenues came in lower mainly after 1) domestic business witnessed 4%

volume de-growth mainly impacted by transition to BS IV norms &

implementation of GST and 2) currency fluctuations impacted European

operations

Raw Material Expenses 1,947 1,942 1,619 20.3 1,869 4.2 Higher raw material cost, which impacted gross margin of the company

(down 1045 bps YoY & 312 bps QoQ)

Employee Expenses 431 478 449 -3.9 412 4.7

Other expenses 630 753 705 -10.6 675 -6.5

EBITDA 273 475 539 -49.3 370 -26.1

EBITDA Margin (%) 8.3 13.0 16.3 -795 bps 11.1 -280 bps Higher input cost dragged margins

Depreciation 126 131 106 18.7 137 -7.9

Interest 34.0 30.1 26.9 26.4 25 37.3

Other income 8.8 34.9 27.8 -68.5 50.0 -82.5

Tax 33.8 94.2 118.1 -71.4 30 11.6

PAT 88.3 254.7 315.2 -72.0 228.2 -61.3 Lower-than-expected topline & margin resulted in lower profits against our

estimates

EPS (|) 1.8 5.1 6.3 -72.0 4.5 -61.3

Key Metrics

Revenue (| crore)

India 2,585 2,561 0.9 2,691 -4.0 Revenue grew 1% YoY; after volume declined 4% while value (on the back of

price hikes) grew 5% in Q1FY18

Europe 1,016 1,055 -3.6 988 2.9 Its core European operations grew 3% YoY but currency fluctuation impacted

overall performance

EBIT Margin (%)

India 4.4 14.1 -968 bps 8.5 -411 bps Margins were lower mainly due to high cost raw material inventory

Europe 2.4 8.8 -646 bps 3.9 -152 bps Margins were lower mainly due to high cost raw material inventory

Source: Company, ICICIdirect.com Research

Change in estimates

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

Revenue 15,014 14,254 -5.1 16,420 15,871 -3.3 Revenue estimates revised lower

EBITDA 1,808 1,647 -8.9 2,100 2,114 0.7

EBITDA Margin (%) 12.0 11.6 -49 bps 12.8 13.3 53 bps Lower-than-expected margins in Q1FY18; has prompted us to revise FY18

estimates. However,margins are likely to improve in FY19E, which is largely

in line with the management expectations

PAT 992 866 -12.7 1,177 1,222 3.8

EPS (|) 19.7 17.2 -12.7 23.3 24.2 3.9

FY18E FY19E



Key conference call takeaways

The management is positive on the demand outlook, going forward.

The re-stocking of the tyre inventory by dealer (post GST) will further

boost replacement demand while it expects the OEM segment to

gradually recover, going forward

The management expects the benefit of low cost inventory (raw

material cost down 5-9%) to come in from Q2FY18 onwards thus

supporting margins. However, the start-up cost of its Hungary plant &

truck radial sale will exert some pressure on margins in European

operations

For Q1FY18, the standalone business (India) grew ~1%, as volumes

declined 4% but value (price) grew 5% YoY. According to the

management, in Q1FY18 truck volumes declined ~10% (mainly due

to transition from BS III to BS IV norms) while passenger vehicle

volumes witnessed marginal growth. The replacement segment was

impacted as dealer liquidated the stock ahead of implementation of

GST

For Q1FY18, revenue from its core European operations Vredestein

was at €110 million (mn) vs. €107 mn last year. Revenues from

Reifencom were at €36 million (mn) vs. €40 mn. The currency

fluctuation impacted the European operations

According to the management, imposition of anti-dumping duty will

narrow the price gap between the Chinese & Indian TBR tyres by 10-

12%. The current Chinese TBR import is at 100,000/month and can

move <70,000/month if the duty is levied

Average landed cost for various raw material for Q1FY18 is at – NR at

| 170/kg, synthetic rubber | 170/kg, fabric | 300/kg and carbon black

at | 65/kg


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 has 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, resulting in

increase in inventory and working capital) and due to external factor

(unfavourable winter season and 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

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

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

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

respectively.

Exhibit 1: Revenue break-up - Geography-wise

5,037

5,490

8,158

8,507

8,712

8,938

8,682

8,934

9,737

10,609

1,990 2,234

2,850 2,992

3,943 4,032 3,284

4,091

4,559

5,081

1,097 1,183

1,308 1,502

1,271 321

-

-

-

-

-

3,000

6,000

9,000

12,000

15,000

18,000

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17E

FY18E

FY19E

(| c

rore)

India Europe South Africa


Exhibit 2: Profitability contribution - Geography-wise

661

413

499

736

930

1,106

1,346

1,179

1,040

1,175

224

298

386

432 5

57

479

256

307

236

261

-

400

800

1,200

1,600

2,000

FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E

(| c

rore)

India Europe



Revenue growth strong on radial TB side!

We have factored in revenue growth at ~10% CAGR in FY17-19E, mainly

led by mix of both volume & value. We believe the domestic market will

improve but the radialisation trend in the truck bus segment. The

radialisation trend has promoted the 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 capacity

from 6,000 units to 12,000 units in a phased manner over the next 12-18

months. Further with the expectation of anti-dumping duty on the

Chinese TBR segment will favour domestic tyre players (specifically ATL

which is the market leader in the T&B segment). ATL also has smartly

used its nylon capacity (that was under utilised given the radialisation

trend) and is producing off-highway tyres, which has resulted in strong

growth in FY17. ATL witnessed high growth as demand from mining

segment revived and its business grew 60% in FY17.

Exhibit 3: We build modest revenue growth at 10% CAGR in FY17-19E

8,868

12,153

12,795

13,413

12,785

11,849

13,180

14,254

15,871

9.2

37.0

5.3 4.8

-4.7

-7.3

11.2

8.1

11.3

-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 FY17E FY18E FY19E

(%

)

(| c

rore)

Sales % growth


Higher cost inventory drag margin in Q1FY18; though expected to recover!

ATL’s margins have expanded from 9.6% to 15.1% from FY12 to FY15

and further increased to 16.7% in FY16 on the back of a reduction in raw

material prices. Prices of natural rubber (NR - account for ~40% of raw

material cost) declined from | 250/kg in 2011 to ~| 94/kg in February

2016. From its lows in February 2016 the price moved northwards to

| 159/kg in February 2017 to | 131/kg in July 2017. According to the

management, Q1FY18 margins were impacted mainly due to high cost

raw material inventory as - average NR cost for ATL was at | 170/kg

(includes | 15/kg logistics cost) while that of synthetic rubber & carbon

black was at | 170/kg and | 65/kg, respectively. ATL expects benefits of

low cost inventory to accrue from Q2FY18 onwards thereby supporting

margins QoQ. The start-up cost in Hungary is likely to impact margins in

the near term. However, as volumes pick up, the same is expected to

move higher, going forward. Thus, we expect margins to remain soft in

FY18E though they are expected to sharply recover in FY19E to >13%.


Exhibit 5: Margin movement with RM trend

58.9

58.6

57.2

56.7

56.0

52.4

56.9

50.8

53.4

49.5

49.9

49.2

51.9

52.7

57.2

52.7

13.2

16.0

14.3

13.2

14.9

15.8

16.6

17.7

16.1

17.2

16.016.3

14.2 14.4

11.1

8.3

36

40

44

48

52

56

60

64

4

6

8

10

12

14

16

18

20

Q2FY14

Q3FY14

Q4FY14

Q1FY15

Q2FY15

Q3FY15

Q4FY15

Q1FY16

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18

(%

)

(%

)

Raw materials/Sales Contribution OPM (LHS)


Exhibit 6: Natural rubber prices have been volatile!

212

94

160

80

100

120

140

160

180

200

220

240

260

Sep-11

Feb-12

Jul-12

Dec-12

May-13

Oct-13

Mar-14

Aug-14

Jan-15

Jun-15

Nov-15

Apr-16

Sep-16

Feb-17

Jul-17

(|/Kg)

Production cut by top natural rubber

producing countries like Thailand,

Indonesia and Malaysia led to rise in

NR prices

Floods in Thailand & demand

from China led NR prices to

move northwards


Exhibit 4: EBITDA margins to recover, going forward

978

1,166

1,457

1,876

1,931

1,997

1,846

1,647

2,114

11.0

9.6

11.4

14.0

15.1

16.9

14.0

11.6

13.3

-

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


(%

)

(| c

rore)

EBITDA EBITDA Margins (%)



Strong capital structure in capital intensive, cyclical business!

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

managed to maintain decent balance sheet strength. With FY16, D/E at

comfortable 0.4x levels, we believe this is the company’s greatest

strength in the good RoCE business. We believe the company has a huge

expansion plan of over >| 6,000 crore over FY17-19E, with an investment

of ~€475 million in Eastern Europe over FY17-19E. For FY18E, its capex is

likely to be at | 2,500 crore, with an investment of ~€180 million in

Europe, which will help the company to serve the increasing demand,

going forward. Despite this, we believe it would be maintained at a decent

level of D/E of ~0.4x. This is because CFO generation remains strong and

would contribute to the bulk of the expenditure.

Exhibit 7: Comfortable debt position in high RoCE business!

0.8 0.8

0.7

0.2

0.0 0.0

0.3

0.4

0.4

14.8 15.1

17.6

23.2

24.7

18.8

13.6

10.2

13.0

-

5

10

15

20

25

30

-

0.2

0.4

0.6

0.8

1.0


(%

)

(x)

Nebt Debt/Equity RoCE


Strong CFO generation with manageable debt levels, despite capex plans!

From ~| 295 crore in FY11, the CFO has increased to ~| 1764 crore in

FY17, mainly due to lower input cost (natural rubber) and more price

discipline maintained by domestic players in the past. With OEM demand

reviving, we expect volumes to improve, going forward. This would

further sustain CFOs, even as ATL embarks on capex in FY17-19E in

Eastern Europe and on enhancing capacity in the domestic business.

Exhibit 8: CFOs on up trend!

295

387

773

1,534

1,795

1,683

1,475

1,626

1,806

1,042

907

533

433

784

1,171

3,847

2,500

1,500

2,222

2,550

2,651

1,613

801 1,389

3,245 4,045

3,845

-

400

800

1,200

1,600

2,000

2,400

2,800


(| c

rore)

CFO Capex Debt



Profitability to remain at elevated levels as demand returns!

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

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

forward. Further, according to the management, the margin pressure is

likely to ease out, going forward, as the benefit of low cost inventory will

accrue from Q2FY18 onwards thereby supporting bottomline. Thus,

profitability is likely to remain at decent levels, with PAT margins likely to

come in at >7%, going forward.

Exhibit 10: EBITDA growth vs. interest/depreciation trend

978

1,166

1,457

1,876

1,931

1,997

1,846

1,647

2,114

185

287

313

284

183

93

103

143

150

272

326

397

411

411

427

462

499

524

-

500

1,000

1,500

2,000

2,500


(| c

rore)

EBITDA Interest Depreciation


Exhibit 9: Profit margins to remain as operational improvement kicks in!

440

432

601

1,044

1,015

1,091

1,099.2

866.0

1,222.2

5.0

3.6

4.7

7.8 7.9

9.2

8.3

6.1

7.7

2

3

4

5

6

7

8

9

10

-

200

400

600

800

1,000

1,200

1,400


(%

)

(|

crore)

PAT PAT Margin (%)

Source: Company press release, ICICIdirect.com Research


Outlook and valuation

ATL’s revenue growth remained subdued in FY15 & FY16. However, it has

seen a recovery in FY17, on the back of a demand revival in the OEM

space. The company is further investing in its TBR capacity (where its

current utilisation is >90% and there is a shift in trend from bias to radial

tyres in India). This is likely to drive its volume growth, going forward.

Similarly, in Europe, its new facility is slated to aid the current capacity

crunch faced by Vredestein coupled with strong domestic demand, which

is expected to improve in the coming years. With a decent D/E profile,

return ratios and strong operating cash flow, the company is much better

placed in this business cycle vis-à-vis previous up cycles due to its largely

diversified and global scale of business.

ATL is investing in more diversified, rapid growth areas coupled with a

larger scale of business in coming years. Going forward, the management

expects demand to recover on the back of re-stocking of tyres (de-

stocking happened ahead of implementation of GST) and favourable shift

from Chinese players to Indian OEM’s (specifically ATL, which is among

the leading player in T&B segment and the new capacity in place to cater

the need). Hence, we build in revenue CAGR of 10% in FY17-19E. The

margins are also expected to move northwards (from 8.3% in Q1FY18)

thereby driving profitability going forward. Also, positive development

from the government in terms of restricting import of Chinese tyres will

benefit ATL. Thus, we maintain BUY recommendation and value the stock

at 13x FY19E EPS to arrive at a target price of | 315.

Exhibit 11: Valuation

Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE

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

FY16 11,849 (7.3) 22.3 17.6 12.6 7.2 16.5 18.8

FY17E 13,180 11.2 21.8 (2.1) 12.8 9.0 15.1 13.6

FY18E 14,254 8.1 17.2 (21.2) 16.3 10.7 10.8 10.2

FY19E 15,871 11.3 24.2 41.1 11.5 8.2 13.5 13.0



Recommended history vs. consensus

0.0

20.0

40.0

60.0

80.0

100.0

0

50

100

150

200

250

300

350

Aug-17Apr-17Dec-16Aug-16Apr-16Dec-15Aug-15

(%

)(|)

Price Idirect target Consensus Target Mean % Consensus with BUY

Source: Bloomberg, Company, ICICIdirect.com 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-Mar-17 0.14 72.1 29.63

2 Apollo Finance, Ltd. 31-Mar-17 0.07 36.8 0.00

3 Sunrays Properties & Investment Company Pvt. Ltd. 12-May-17 0.07 36.3 0.58

4 Sacred Heart Investment Company Pvt. Ltd. 31-Mar-17 0.05 24.4 14.98

5 Franklin Templeton Asset Management (India) Pvt. Ltd. 31-Mar-17 0.04 18.7 -11.03

6 Motlay Finance Pvt. Ltd. 12-May-17 0.03 16.9 0.22

7 Templeton Asset Management Ltd. 30-Jun-17 0.03 15.5 1.38

8 Classic Auto Tubes, Ltd. 31-Mar-17 0.03 14.5 0.00

9 Mehta (Ashwin Shantilal) 31-Mar-17 0.03 13.5 0.00

10 Dimensional Fund Advisors, L.P. 30-Jun-17 0.02 12.4 0.00

(in %) Jun-16 Sep-16 Dec-16 Mar-17 Jun-17

Promoter 44.2 44.2 44.2 44.2 44.2

FII 33.0 33.0 33.4 31.6 27.3

DII 10.3 10.9 10.3 11.8 15.3

Others 12.7 12.0 12.2 12.4 13.3

Source: Reuters, ICICIdirect.com Research

Recent Activity

Investor name Value Shares Investor name Value Shares

Neeraj Consultants Pvt. Ltd. 95.36 29.63 Constructive Finance Pvt. Ltd. -95.36 -29.63

Sacred Heart Investment Company Pvt. Ltd. 48.22 14.98 Apollo International, Ltd. -53.24 -16.54

DSP BlackRock Investment Managers Pvt. Ltd. 11.69 3.30 Franklin Templeton Asset Management (India) Pvt. Ltd. -35.51 -11.03

Sundaram Asset Management Company Limited 10.50 2.96 Kanwar (Onkar Singh) -2.84 -0.80

Amit Dyechem Pvt. Ltd. 5.02 1.56 Union Investment Luxembourg S.A. -2.13 -0.66

Buys Sells

Source: Reuters, ICICIdirect.com Research


.

Financial summary

Profit and loss statement | Crore

(Year-end March) FY16 FY17E FY18E FY19E

Total operating Income 11,848.6 13,180.0 14,253.6 15,870.7

Growth (%) -7.3 11.2 8.1 11.3

Raw Material Expenses 5,954.8 6,890.1 7,761.1 8,435.1

Employee Expenses 1,570.8 1,742.1 1,903.6 2,054.7

Other Expenses 2,325.5 2,701.5 2,942.0 3,266.5

Total Operating Expenditure 9,851.1 11,333.6 12,606.7 13,756.3

EBITDA 1,997.5 1,846.4 1,646.9 2,114.4

Growth (%) 3.5 -7.6 -10.8 28.4

Depreciation 426.8 461.8 498.9 523.7

Interest 92.6 102.9 143.4 149.9

Other Income 68.0 154.1 161.3 210.9

PBT 1,593.8 1,435.8 1,166.0 1,651.6

Exceptional items 0.0 0.0 0.0 0.0

Total Tax 467.7 336.5 299.9 429.4

PAT 1,123.0 1,099.0 866.0 1,222.2

Growth (%) 17.6 -2.1 -21.2 41.1

EPS (|) 22.3 21.8 17.2 24.2


Cash flow statement | Crore


Profit after Tax 1,123.0 1,099.0 866.0 1,222.2

Add: Depreciation 426.8 461.8 498.9 523.7

(Inc)/dec in Current Assets -457.6 -772.0 -17.0 -356.8

Inc/(dec) in CL and Provisions 590.8 685.9 278.4 416.6

CF from operating activities 1,683.0 1,474.7 1,626.3 1,805.6

(Inc)/dec in Investments -401.8 107.3 0.0 0.0

(Inc)/dec in Fixed Assets -1,171.1 -3,847.0 -2,500.0 -1,500.0

Others -569.4 297.6 54.4 82.0

CF from investing activities -2,142.3 -3,442.0 -2,445.6 -1,418.0

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

Inc/(dec) in loan funds 588.6 1,855.4 800.0 -200.0

Dividend paid & dividend tax -130.2 -145.0 -161.1 -177.2

Others 0.0 0.0 0.0 0.0

CF from financing activities 458.4 1,710.4 638.9 -377.2

Net Cash flow -0.8 -257.3 -180.3 10.5

Opening Cash 595.0 594.2 336.9 156.6

Closing Cash 594.2 336.9 156.6 167.0


Balance sheet | Crore


Liabilities

Equity Capital 50.9 50.9 50.9 50.9

Reserve and Surplus 6,553.7 7,239.1 7,944.0 8,989.0

Total Shareholders funds 6,604.6 7,290.0 7,994.9 9,039.9

Total Debt 1,389.2 3,244.5 4,044.5 3,844.5

Deferred Tax Liability 701.2 766.1 828.5 922.5

Total Liabilities 8,946.4 11,907.2 13,517.0 14,520.1

Assets

Gross Block 9,986.2 11,557.8 15,430.1 17,430.1

Less: Acc Depreciation 5,430.2 5,519.6 6,018.5 6,542.2

Net Block 5,057.7 6,432.6 9,806.1 11,282.3

Capital WIP 969.4 2,872.3 1,500.0 1,000.0

Total Fixed Assets 6,027.1 9,305.0 11,306.1 12,282.3

Investments 505.9 396.2 396.2 396.2

Goodwill on consolidation 198.2 177.4 177.4 177.4

Inventory 1,939.1 2,645.5 2,538.3 2,695.8

Debtors 1,084.3 1,127.5 1,210.6 1,347.9

Loans and Advances 84.7 45.0 48.6 54.2

Other current assets 398.0 460.1 497.6 554.1

Cash 594.2 336.9 156.6 167.0

Total Current Assets 4,100.3 4,615.0 4,451.7 4,819.0

Creditors 1,543.2 1,731.8 1,874.4 2,087.1

Provisions 329.2 404.3 437.6 487.2

Total Current Liabilities 1,872.3 2,136.0 2,312.0 2,574.3

Net Current Assets 2,228.0 2,479.0 2,139.7 2,244.7

Application of Funds 8,946.4 11,907.2 13,517.0 14,520.1


Key ratios


Per share data (|)

EPS 22.3 21.8 17.2 24.2

Cash EPS 30.7 31.0 27.1 34.6

BV 131.0 144.6 158.6 179.3

DPS 0.2 0.3 0.4 0.3

Cash Per Share 11.8 6.7 3.1 3.3

Operating Ratios (%)

EBITDA Margin 16.9 14.0 11.6 13.3

PBT / Net sales 13.3 10.5 8.1 10.0

PAT Margin 8.0 5.0 3.4 4.8

Inventory days 59.7 73.3 65.0 62.0

Debtor days 33.4 31.2 31.0 31.0

Creditor days 47.5 48.0 48.0 48.0

Return Ratios (%)

RoE 16.5 15.1 10.8 13.5

RoCE 18.8 13.6 10.2 13.0

RoIC 23.5 15.9 9.6 11.8

Valuation Ratios (x)

P/E 12.9 12.8 16.3 11.5

EV / EBITDA 7.2 9.0 10.7 8.2

EV / Net Sales 1.2 1.3 1.2 1.1

Market Cap / Sales 1.2 1.1 1.0 0.9

Price to Book Value 2.1 1.9 1.8 1.6

Solvency Ratios

Debt/Equity 0.2 0.4 0.5 0.4

Current Ratio 1.9 2.0 1.9 1.8

Quick Ratio 0.8 0.8 0.8 0.8



ICICIdirect.com coverage universe (Auto & Auto Ancillary)

CMP M Cap

(|) TP(|) Rating (| Cr) FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E

Amara Raja (AMARAJ) 804 930 Hold 13733 28.0 33.2 40.4 28.7 24.2 19.9 17.3 14.9 12.4 25.8 27.4 28.0 18.5 19.3 19.6

Apollo Tyre (APOTYR) 280 315 Buy 14094 21.8 17.2 24.2 12.8 16.3 11.5 10.7 10.7 8.2 13.6 10.2 13.0 15.1 10.8 13.5

Ashok Leyland (ASHLEY) 113 120 Buy 31965 4.3 4.4 6.3 26.3 25.7 17.8 13.3 12.3 9.4 23.9 25.1 29.7 25.0 18.8 22.7

Bajaj Auto (BAAUTO) 2936 2780 Hold 84956 132.3 136.6 164.7 21.3 20.6 17.1 17.0 16.5 13.3 30.3 29.0 30.9 22.5 21.1 22.2

Balkrishna Ind. (BALIND) 1617 1800 Buy 15629 74.0 80.2 105.5 21.6 20.0 15.2 13.9 12.7 9.5 23.0 23.9 26.8 20.2 23.9 26.8

Bharat Forge (BHAFOR) 1187 1300 Buy 27666 29.9 40.1 47.6 39.7 29.6 24.9 20.8 13.9 11.7 16.1 22.2 26.9 14.6 17.9 21.2

Bosch (MICO) 24204 26400 Buy 76000 570.5 564.0 658.9 41.5 42.0 35.9 35.8 30.1 25.0 16.9 16.4 17.0 24.8 24.1 25.4

Eicher Motors (EICMOT) 31795 30500 Buy 85878 655.9 833.2 1019.4 48.5 38.2 31.2 24.8 18.4 14.7 39.2 41.1 39.1 36.0 33.6 30.9

Exide Industries (EXIIND) 215 270 Buy 18258 8.2 8.8 10.5 26.3 24.5 20.5 16.2 13.8 11.6 18.5 19.0 20.3 14.0 13.7 14.8

Hero Moto (HERHON) 3934 4475 Buy 78560 156.9 169.1 198.3 25.1 23.3 19.8 16.4 15.5 13.1 48.7 44.0 46.0 35.8 33.4 33.9

JK Tyre & Ind (JKIND) 162 215 Buy 3670 16.6 18.1 31.0 9.8 8.9 5.2 8.1 6.5 4.6 11.2 11.8 16.7 15.8 18.2 24.4

M&M (MAHMAH) 1401 1630 Buy 86984 67.0 68.2 83.2 20.9 20.6 16.8 16.8 13.2 10.6 16.4 19.2 21.1 13.7 14.5 15.6

Mahindra CIE (MAHAUT) 245 280 Buy 7897 4.5 9.7 12.9 54.7 25.1 19.0 20.0 13.3 11.0 5.4 10.3 12.1 6.9 10.7 12.9

Maruti Suzuki (MARUTI) 7757 8500 Buy 234430 242.9 284.5 354.1 31.9 27.3 21.9 22.1 18.5 14.9 26.3 27.5 28.8 20.3 20.7 21.8

Motherson (MOTSUM) 337 450 Hold 47294 11.1 16.7 22.9 30.4 20.1 14.7 15.1 10.5 7.8 16.0 22.2 28.4 19.6 23.1 25.0

Tata Motors (TELCO) 430 560 Buy 129727 22.3 42.9 52.6 21.5 11.2 9.1 6.6 4.8 4.2 11.6 16.8 17.1 15.0 22.0 21.1

Wabco India (WABTVS) 5498 6250 Buy 10445 112.5 130.2 168.6 48.8 42.2 32.6 29.2 26.0 20.1 16.9 16.7 18.0 23.6 23.1 24.9

Sector / Company

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



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