Equirus Securities Bajaj Auto - Business Standard...Bajaj Auto Ltd. Absolute –ADD Relative – BENCHMARK 13% Upside in 13Months May 21, 2018 Analyst: Ashutosh Tiwari [email protected]

May 21, 2018 Analyst: Ashutosh Tiwari [email protected] (+91-8128694112 +91 79-40504017) Page 1 of 12

Before reading this report, you must refer to the disclaimer on the last page.

Bajaj Auto Ltd. Absolute : ADD

Relative : BENCHMARK

4QFY18 Result: Estimate (),PT (), Rating () Regular Coverage 13% upside in 13 Months

Volume growth to revive, but margins to compress in FY19, upgrade to ADD as its priced in Auto

© 2018 Equirus All rights reserved

Rating Information

Price (Rs) 2,722

Target Price (Rs) 3,038

Target Date 30th Jun'19

Target Set On 21st May''18

Implied yrs of growth (DCF) 15

Fair Value (DCF) 2,718

Fair Value (DDM) 1,115

Ind Benchmark BSEAUTO

Model Portfolio Position NA

Stock Information

Market Cap (Rs Mn) 787,657

Free Float (%) 50.70 %

52 Wk H/L (Rs) 3472.6/2694.5

Avg Daily Volume (1yr) 312,768

Avg Daily Value (Rs Mn) 938

Equity Cap (Rs Mn) 2,894

Face Value (Rs) 10

Bloomberg Code BJAUT IN

Ownership Recent 3M 12M

Promoters 49.3 % 0.0 % 0.0 %

DII 8.5 % -0.3 % 0.8 %

FII 17.2 % 0.0 % -0.2 %

Public 25.0 % 0.3 % -0.6 %

Price % 1M 3M 12M

Absolute -4.6 % -9.6 % -8.4 %

Vs Industry 1.5 % -7.6 % -11.6 %

Bajaj Auto -7.3 % -0.6 % -2.8 %

TVS Motors -15.7 % -11.7 % 7.1 %

Standalone Quarterly EPS forecast

Rs/Share 1Q 2Q 3Q 4Q

EPS (18A) 33.0 38.4 32.9 37.3

EPS (19E) 36.8 40.0 36.5 39.7

Bajaj Auto’s (BJAUT) 4Q EBITDA at Rs 13.15bn (+45% yoy, +7% qoq) came in 4% ahead

of EE on lower other expenses led by 42bps EBITDA margin beat. We believe after a

239bps yoy market share loss in motorcycles during FY18, FY19 would be a crucial year

for BJAUT as it fights for survival in the domestic 2W market — this is reflected in its

recent price cuts for CT100 and Pulsar 150. In terms of 3Ws, we expect volumes to

remain flat in FY19 off a high base. However, exports should fare well given a revival in

BJAUT’s key markets and entry into new countries. We slightly cut FY19E EBITDA

margins to 18.9% given competitiveness in the domestic 2W market. Post correction

over last three months, we see limited downside and upgrade the stock to ADD (from

REDUCE) with a Jun’19 TP of Rs 3,038 set at 18x Jun’19 EPS (Mar’19 TP: Rs 3,137).

BJAUT fights for 2W market share; domestic margins to moderate: After a 239bps

market share loss in the motorcycle segment for BJAUT in FY18E, it’s a question of

survival for the company as its new launch, Discover, failed to enthuse customers. A

price cut in CT100 was a desperate attempt to regain some of the lost ground in the

entry segment. The company also cut prices of Pulsar 150 to make room for its new

Twin Disc brake variant launch. In history we have seen BJAUT bouncing back after bad

market loss years, like in FY16 and same can happen again. We expect BJAUT’s

domestic motorcycle sales to grow 11% off last year’s low base; however due to price

cuts, the domestic 2W segment could weigh on BJAUT’s EBITDA margins.

Good exports growth in FY19 to partly cushion margin decline: 2W exports grew 15%

yoy in FY18 due to a revival in BJAUT’s key markets like Nigeria, and entry into new

markets. The economies of some of BJAUT’s key Africa markets are dependent on

crude oil, and thus a sharp revival in crude should spur demand. While BAJUT is not

aggressive in taking price hikes in export markets due to increased competitiveness,

INR depreciation should help counter the RM impact. Besides, as exports generate

better margins, the pressure on domestic margins would be partly negated.

EBITDA up 45% yoy on 33% yoy volume growth: 2W volumes grew 22% yoy in 4Q led

by a revival in domestic as well as export volumes. 3W volumes were up 118% yoy as

removal of permits in Maharashtra boosted domestic demand while exports jumped off

a low base. EBITDA margins at 19.4% improved 8ps qoq as a 98bps gross margin

contraction was more than offset by an 84bps/22bps qoq decline in other expenses/

employee costs. Other income grew 62% qoq, but half of the increase was driven by

Rs 700mn MTM gains on investment, which were reversed in April.

Estimate Revision:

Current

Change from previous

(%)

Rs Mn FY19E FY20E FY19E FY20E

Sales 279,336 307,806 -0.6% -0.3%

EBITDA 52,674 58,047 -1.1% -0.9%

PAT 47,310 52,925 -0.9% 0.2%

EPS 163.5 182.9 -0.9% 0.2%

Consolidated Financials

Rs. Mn YE Mar FY18A FY19E FY20E FY21E

Sales 251,649 279,336 307,806 342,680

EBITDA 47,816 52,674 58,047 64,626

Depreciation 3,148 3,491 3,772 4,075

Interest Expense 13 0 0 0

Other Income 12,123 14,019 16,641 18,984

Reported PAT 42,829 47,310 52,925 59,189

Recurring PAT 42,509 47,310 52,925 59,189

Total Equity 204,252 228,924 257,469 292,278

Gross Debt 0 0 0 0

Cash 171,582 195,109 220,730 252,739

Rs. Mn YE Mar FY18A FY19E FY20E FY21E

Earnings 146.9 163.5 182.9 204.5

Book Value 706 791 890 1,010

Dividends 60.0 65.0 70.0 70.0

FCFF 213.4 148.9 161.4 182.7

P/E (x) 18.5 16.6 14.9 13.3

P/B (x) 3.9 3.4 3.1 2.7

EV/EBITDA (x) 13.0 11.4 9.9 8.4

ROE (%) 22 % 22 % 22 % 22 %

Core ROIC (%) 59 % 84 % 90 % 98 %

EBITDA Margin (%) 19 % 19 % 19 % 19 %

Net Margin (%) 17 % 17 % 17 % 17 %

Bajaj Auto Ltd. Absolute –ADD Relative – BENCHMARK 13% Upside in 13Months

May 21, 2018 Analyst: Ashutosh Tiwari [email protected] (+91-8128694112, +91-79-40504017) Page 2 of 12

Exhibit 1: Domestic quarterly 2W volume mix (in ‘000 units)

Source: Company, Equirus Securities

Exhibit 2: Quarterly 2W export volume mix (In ‘000 units)

Source: SIAM, Equirus Securities

Exhibit 3:3W domestic & export sales volumes (in ‘000 units)

Source: Company, Equirus Securities

Exhibit 4:Export & domestic sales (Rs bn); exports as % of sales vs. EBITDA margins

Source: SIAM, Equirus Securities

319

278

258

200

195

181 290

230

217

184

231

251

204

149

186

282

244

240

54 61

57

26 18 13

13 45 54

35 29 25

31 45

36

32 24 25

102 109 124

172 164 127

126 119 128

169

223 218

165 137

134

151

119 113

527 494 491

462 439

379

486 469 475 469

549 580

459 414 427

584

466 498

0

100

200

300

400

500

600

700

3Q

FY14

4Q

FY14

1Q

FY15

2Q

FY15

3Q

FY15

4Q

FY15

1Q

FY16

2Q

FY16

3Q

FY16

4Q

FY16

1Q

FY17

2Q

FY17

3Q

FY17

4Q

FY17

1Q

FY18

2Q

FY18

3Q

FY18

4Q

FY18

>75cc & <=110cc >110cc <=125cc >125cc but <=150cc >150 <= 200 cc >=200cc

235

219

241

248

251

137 2

44

258

214

137

172

155

158

158

168

183

207

211

30 25

38 80 45

39

24 26

20

22 27

26 22 24 35 30

38 41

55 47

56

60 62

74

72 97

70

79

90 99 75 73 85 64

61 56

34 35

36

38 38

34

38

46

42

35

26 29 28 22

41 36 34 36

360 331

384

438 406

294

389

434

352

284

324 318 290 287

349 335 352 359

0

50

100

150

200

250

300

350

400

450

3Q

FY14

4Q

FY14

1Q

FY15

2Q

FY15

3Q

FY15

4Q

FY15

1Q

FY16

2Q

FY16

3Q

FY16

4Q

FY16

1Q

FY17

2Q

FY17

3Q

FY17

4Q

FY17

1Q

FY18

2Q

FY18

3Q

FY18

4Q

FY18

>75cc & <=110cc >110cc <=125cc >125cc but <=150cc >150 <= 200 cc >=200cc

44 44 56

75 55 49 51

67 66 71 75 74 54 50 52

85 110

122

62 66 58

82

84

61

87

86

58 49 47 60

49 37

60

68

73 67

106 110 114

156

139

110

138

153

124 120 122 135

103

87

113

153

0

20

40

60

80

100

120

140

160

3Q

FY14

4Q

FY14

1Q

FY15

2Q

FY15

3Q

FY15

4Q

FY15

1Q

FY16

2Q

FY16

3Q

FY16

4Q

FY16

1Q

FY17

2Q

FY17

3Q

FY17

4Q

FY17

1Q

FY18

2Q

FY18

3Q

FY18

4Q

FY18

Domestic Export

41% 42% 43% 46%

47% 44% 47% 47%

41% 38%

36% 35% 38%

36%

46%

37% 38% 35%

22.1% 18.9% 17.6% 18.9%

21.7%

17.7% 20.4% 21.7% 21.1% 21.5% 20.5% 21.4% 20.6%

18.5% 17.2% 19.7% 19.3% 19.4%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0

10

20

30

40

50

60

3Q

FY14

4Q

FY14

1Q

FY15

2Q

FY15

3Q

FY15

4Q

FY15

1Q

FY16

2Q

FY16

3Q

FY16

4Q

FY16

1Q

FY17

2Q

FY17

3Q

FY17

4Q

FY17

1Q

FY18

2Q

FY18

3Q

FY18

4Q

FY18

Domestic Exports Exports as % of Sales EBITDA Margin



Earnings call takeaways

Industry & business update

BJAUT expects industry (motorcycle) growth of about 10-11% in FY19.

In April, the domestic industry grew by 19% but BJAUT by a much sharper 24%. The

company expects demand to stay healthy going ahead.

The wedding season has been strong and the company topped industry growth — a

trend which is expected to continue ahead.

In CT, there was a price cut in the kick-start model, while BJAUT took price hikes

across models in May’14.

In case of Pulsar, the company has introduced the new Twin Disc model at the

current price point and cut prices of the existing model by Rs 2,000-2,500.

BJAUT has some capacity constraints for CT and Pulsar Twin Disc.

In March and May’18, BJAUT took price hikes of 1-1.5% for 2Ws/3Ws to compensate

for commodity price inflation. The company doesn’t expect to raise prices in the

next 2-3 months.

For the next year, management expects EBITDA margins to remain around 20-21%

(including other income ex-treasury and excluding CSR expenses).

3Ws, spares and exports are high-margin propositions with margins of >20%, while

domestic MC <20%.

Other income increased due to one-off MTM benefits of 0.7bn.

BJAUT has about ~4,000 customer touch points and intends to have ~710 dealerships

by Mar’31.

Dealer margins are ~4.5% of the acquisition cost of the vehicle for dealers.

Domestic 2W volumes, product pipeline

Overall share in the domestic market was ~16%.

The company expects to gain market share driven by Pulsar and CT.

In CT100, the company took a price cut of ~Rs 3,000. At the product level, CT100 is

being sold at a negative EBITDA.

BJAUT expects to maintain Avengers numbers as last year numbers were higher.

About ~40% of 2W sales are financed.

BJAUT has launched Pulsar Twin Disc, a new variant of Pulsar in 4Q.

Total monthly volumes from the Pulsar family are likely at Rs 65,000-70,000 in FY19.

BJAUT has launched new models such as New Discover 110, Discover 125 recently;

the combined volume is 18,000 vehicles per month and the company expects clock

volumes of ~25k per month going ahead.

BJAUT aims to improve domestic volumes and market share in the coming quarters.

Domestic 3W volumes

BJAUT’s saw its highest-ever quarterly 3W sales at 188,989 vehicles, up 118% yoy.

Domestic market share was at 58% in FY18 as against 50% in FY17.

The company expects Delhi, Telangana, West Bengal and Karnataka to open up

permits in the near future.

In the diesel segment, BJAUT has a 34% market share and expects to be the market

leader in the near future.

BJAUT expects to exceed its sales targets for the year.

Electric 3Ws are work-in-progress and a decision on the launch would be taken later.

Exports, spare parts, taxes & capex

Exports are doing well led by currency availability in Nigeria (>30,000 run-rate), a

stabilizing crude, focus on the sports segment in Latin America, and addition of new

models in Philippines and Malaysia.

CV exports were driven by a recovery in Egypt.

For FY18, exports in value terms stood at Rs 97.03bn, a 23% growth over FY17.

Realization per US$ was INR 67.2, and BJAUT expects upside from current rates.

New markets contributed about 14% to total exports volumes.

BJAUT has hedged about 80% of exports for USD fluctuations using range-forwards.

The company expects to close the year with about 1.9mn vehicles in exports.

BJAUT sees ~10% growth in the domestic spare parts business.

FY19E capex guidance is at Rs 2.5-3bn, mainly towards tooling and debottlenecking.

The combined 2W and 3W capacity is ~6.6mn units, with 720,000 3Ws and the

remaining 2Ws.



Quarterly performance, Standalone

(Rs mn) 4QFY18 4QFY18E 3QFY18 4QFY17 % Change

Comments 4QFY18E 3QFY18 4QFY17

Net Sales 67,733 66,832 63,693 48,973 1% 6% 38%

Raw Material 46,969 46,114 43,547 33,203 2% 8% 41%

Employee Cost 2,670 2,673 2,652 2,273 0% 1% 17%

Other Expenses 4,942 5,347 5,180 4,438 -8% -5% 11%

Total Expenditures 54,581 54,134 51,379 39,913 1% 6% 37%

EBITDA 13,152 12,698 12,315 9,060 4% 7% 45%

EBITDA before MTM 13,152 12,698 12,315 9,060 4% 7% 45%

Depreciation 879 788 747 757 12% 18% 16%

EBIT 12,274 11,910 11,568 8,303 3% 6% 48%

Interest 3 0 3 2 0% 25%

Other Income 3,667 2,838 2,269 2,936 29% 62% 25%

PBT 15,937 14,748 13,833 11,236 8% 15% 42%

Tax 5,138 4,424 4,309 3,218 16% 19% 60%

Recurring PAT 10,799 10,324 9,524 8,018 5% 13% 35%

Extraordinaries 1,204 0 -923 -1,259

Reported PAT 9,595 10,324 10,448 9,277 -7% -8% 3%

EPS (Rs) 37.3 35.7 32.9 27.7 5% 13% 35%

Gross Margin 30.7% 31.0% 31.6% 32.2% -34 bps -98 bps -155 bps

EBITDA Margin 19.4% 19.0% 19.3% 18.5% 42 bps 8 bps 92 bps

EBIT Margin 18.1% 17.8% 18.2% 17.0% 30 bps -4 bps 117 bps

PBT Margin 23.5% 22.1% 21.7% 22.9% 146 bps 181 bps 59 bps

PAT Margin 14.2% 15.4% 16.4% 18.9% -128 bps -224 bps -478 bps

Tax Rate 32.2% 30.0% 31.1% 28.6% 224 bps 109 bps 360 bps



Rs Mn 4QFY18 4QFY18E 3QFY18 4QFY17 % Change

Comments 3QFY18E 2QFY18 3QFY17

2W Volumes 856,389 856,389 818,510 701,017 0.0% 4.6% 22.2%

Domestic 2W 497,587 497,587 466,431 413,539 0.0% 6.7% 20.3%

Export 2W 358,802 358,802 352,079 287,478 0.0% 1.9% 24.8%

3W Volumes 188,989 188,989 182,959 86,610 0.0% 3.3% 118.2%

Domestic 3W 122,229 122,229 110,123 50,037 0.0% 11.0% 144.3%

Export 3W 66,760 66,760 72,836 36,573 0.0% -8.3% 82.5%

Domestic Volumes 619,816 619,816 576,554 463,576 0.0% 7.5% 33.7%

Export Volumes 425,562 425,562 424,915 324,051 0.0% 0.2% 31.3%

Domestic Sales (Rs mn) 43,703 42,654 39,683 31,183 2.5% 10.1% 40.1%

Export Sales (Rs mn) 24,030 24,178 24,010 17,790 -0.6% 0.1% 35.1%

ASP (Rs/unit) 64,793 63,931 63,600 62,178 1.3% 1.9% 4.2%

Domestic ASP (Rs/unit) 70,510 68,818 68,829 67,267 2.5% 2.4% 4.8%

Export ASP (Rs/unit) 56,467 56,814 56,505 54,899 -0.6% -0.1% 2.9%

EBITDA/Vehicle (Rs/unit) 12,581 12,147 12,296 11,503 3.6% 2.3% 9.4%

Cost items as % of Sales

RM 69.3% 69.0% 68.4% 67.8% 34 bps 98 bps 155 bps

Employee Cost 3.9% 4.0% 4.2% 4.6% -6 bps -22 bps -70 bps

Other Expenses 7.3% 8.0% 8.1% 9.1% -70 bps -84 bps -177 bps

Adj Other Expenses 7.3% 7.6% 7.1% 7.8% -30 bps 18 bps -52 bps



Company Snapshot

How we differ from Consensus

- Equirus Consensus % Diff Comment

EPS FY19E 163.5 168.2 -3 % below consensus due to lower margin

assumptions FY20E 182.9 186.8 -2 %

Sales FY19E 279,336 283,129 -1 %

FY20E 307,806 313,208 -2 %

PAT FY19E 47,310 48,650 -3 %

FY20E 52,925 54,050 -2 %

Key Assumptions:

FY18A FY19E FY20E FY21E

2W Domestic Sales 1,974,577 2,182,583 2,357,190 2,545,765

yoy change -1.3% 10.5% 8.0% 8.0%

2W Export Sales 1,394,757 1,558,385 1,714,223 1,885,646

yoy change 14.5% 11.7% 10.0% 10.0%

Total 2W Sales 3,369,334 3,740,968 4,071,413 4,431,411

yoy change 4.6% 11.0% 8.8% 8.8%

3W Domestic Sales 369,637 380,471 375,974 394,773

yoy change 46.0% 2.9% -1.2% 5.0%

3W Export Sales 267,820 295,437 319,072 344,598

yoy change 38.9% 10.3% 8.0% 8.0%

Total 3W Sales 637,457 675,909 695,046 739,371

yoy change 42.9% 6.0% 2.8% 6.4%

ASP 62,806 63,243 64,577 66,272

yoy change 5.8% 0.7% 2.1% 2.6%

EBITDA Margin 19.0% 18.9% 18.9% 18.9%

Tax Rate 29.5% 30.0% 30.0% 30.0%

NCW Days -21 -14 -15 -15 Risk to our view: A sharp recovery in domestic volumes would be an upside risk to our

volume estimates.

Key triggers

Margin decline & volume pressure

Sensitivity to Key Variables % Change % Impact on EPS

EBITDA Margin 1 % 5 %

Volume 1 % 1 %

- - -

DCF Valuations & Assumptions

Rf Beta Ke Term. Growth Debt/IC in Term. Yr

7.7 % 0.9 12.8 % 3.0 % 0.0 %

- FY19E FY20E FY21-23E FY24-28E FY29-33E

Sales Growth 11 % 10 % 7 % 7 % 6 %

NOPAT Margin 12 % 12 % 12 % 12 % 12 %

IC Turnover 6.79 7.13 7.91 7.91 7.91

RoIC 84.2 % 90.1 % 101.3 % 101.8 % 101.5 %

Years of strong growth 1 2 5 10 15

Valuation as on date (Rs) 1,651 1,727 1,973 2,208 2,378

Valuation as of 30thSep'18 1,887 1,974 2,255 2,524 2,718

On P/E basis, our Jun’19 TP stands at Rs3,038 set at 18x EPS. Our DCF-based Mar’19 fair

value is Rs 2,718.

Company Description:

Bajaj Auto is the flagship company of Bajaj group, one among the Top 10 business houses

in India. Company is also India’s largest 2W & 3W exporter, accounting for 2/3rd of India’s

2W export. Company came into existence as M/s Bachraj Trading Corporation Private

Limited in 1945. In 1972 company launched their 1st scooter by the name ‘Chetak’. The

Rear Engine Auto rickshaw was introduced in 1977 &Bajaj achieved production and sales

of 100,000 vehicles in a single financial year. Company entered into the motorcycle

segment in 1986 with launch of Bajaj M-80 and the Kawasaki Bajaj KB100.

Comparable valuation Mkt Cap

Rs. Mn.

Price

Target

Target

Date

EPS P/E BPS P/B RoE Div Yield

Company Reco. CMP FY18A FY19E FY20E FY18A FY19E FY20E FY18A FY19E FY18A FY19E FY20E FY18A FY19E

Bajaj Auto ADD 2,722 787,657 3,038 30th Jun'19 146.9 163.5 182.9 18.5 16.6 14.9 705.9 3.4 22 % 22 % 22 % 2.2 % 2.4 %

Hero Motocorp REDUCE 3,656 730,059 3,754 30th Jun'19 185.1 193.0 211.7 19.8 19.0 17.3 579.0 5.6 34 % 31 % 30 % 2.0 % 3.0 %

TVSMOTOR NA 658 312,607 NA NA 15.0 20.6 26.7 37.6 27.3 21.1 16.0 30.8 859 % 1,946 % 2,616 % 0.2 % 0.2 %



Standalone Quarterly Earnings Forecast and Key Drivers Rs in Mn 1Q18A 2Q18A 3Q18A 4Q18A 1Q19E 2Q19E 3Q19E 4Q19E 1Q20E 2Q20E 3Q20E 4Q20E FY18A FY19E FY20E FY21E

Revenue 54,424 65,799 63,693 67,733 70,229 71,818 67,536 69,751 75,705 78,674 75,176 78,250 251,649 279,335 307,805 342,679

EBITDA 9,384 12,984 12,315 13,152 13,063 13,912 12,294 13,436 14,081 15,240 13,685 15,073 47,834 52,704 58,078 64,658

Depreciation 753 770 747 879 853 865 877 896 915 934 953 971 3,148 3,491 3,772 4,075

EBIT 8,631 12,214 11,568 12,274 12,209 13,046 11,417 12,540 13,166 14,306 12,732 14,102 44,686 49,213 54,306 60,583

Interest 2 5 3 3 0 0 0 0 0 0 0 0 13 0 0 0

Other Income 4,573 2,964 2,269 3,667 3,002 3,497 3,664 3,853 4,114 3,972 4,165 4,388 13,473 14,016 16,638 18,981

PBT 13,201 15,174 13,833 15,937 15,212 16,544 15,081 16,393 17,280 18,278 16,897 18,490 58,146 63,229 70,944 79,564

Tax 3,642 4,055 4,309 5,138 4,563 4,963 4,524 4,918 5,184 5,483 5,069 5,547 17,145 18,969 21,283 23,869

Recurring PAT 9,559 11,119 9,524 10,799 10,648 11,581 10,557 11,475 12,096 12,794 11,828 12,943 41,001 44,260 49,661 55,695

Extraordinary 324 819 -923 1,204 0 0 0 0 0 0 0 0 1,424 0 0 0

Reported PAT 9,235 10,300 10,448 9,595 10,648 11,581 10,557 11,475 12,096 12,794 11,828 12,943 39,578 44,260 49,661 55,695

EPS (Rs) 33.03 38.42 32.91 37.32 36.80 40.02 36.48 39.66 41.80 44.21 40.87 44.73 141.69 152.95 171.62 192.47

Key Drivers

2W Domestic Volumes 426,562 583,997 466,431 497,587 520,406 607,357 522,403 532,418 562,038 655,945 564,195 575,012 1,974,577 2,182,583 2,357,190 2,545,765

2W Export Volumes 349,152 334,724 352,079 358,802 401,525 374,891 387,287 394,682 441,677 412,380 426,016 434,150 1,394,757 1,558,385 1,714,223 1,885,646

3W Domestic Volumes 52,347 84,938 110,123 122,229 99,459 95,131 88,098 97,783 85,535 90,374 92,503 107,562 369,637 380,471 375,974 394,773

3W Export Volumes 60,373 67,851 72,836 66,760 84,522 71,244 69,574 70,098 91,284 76,943 75,140 75,706 267,820 295,437 319,072 344,598

- - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - -

Sequential Growth (%)

Revenue 11 % 21 % -3 % 6 % 4 % 2 % -6 % 3 % 9 % 4 % -4 % 4 % - - - -

EBITDA 4 % 38 % -5 % 7 % -1 % 6 % -12 % 9 % 5 % 8 % -10 % 10 % - - - -

EBIT 4 % 42 % -5 % 6 % -1 % 7 % -12 % 10 % 5 % 9 % -11 % 11 % - - - -

Recurring PAT 19 % 16 % -14 % 13 % -1 % 9 % -9 % 9 % 5 % 6 % -8 % 9 % - - - -

EPS 19 % 16 % -14 % 13 % -1 % 9 % -9 % 9 % 5 % 6 % -8 % 9 % - - - -

Yearly Growth (%)

Revenue -5 % 9 % 26 % 38 % 29 % 9 % 6 % 3 % 8 % 10 % 11 % 12 % 11 % 11 % 10 % 11 %

EBITDA -20 % 0 % 18 % 45 % 39 % 7 % 0 % 2 % 8 % 10 % 11 % 12 % 0 % 10 % 10 % 11 %

EBIT -21 % 0 % 20 % 48 % 41 % 7 % -1 % 2 % 8 % 10 % 12 % 12 % 0 % 10 % 10 % 12 %

Recurring PAT -2 % -1 % 3 % 35 % 11 % 4 % 11 % 6 % 14 % 10 % 12 % 13 % 4 % 8 % 12 % 12 %

EPS -2 % -1 % 3 % 35 % 11 % 4 % 11 % 6 % 14 % 10 % 12 % 13 % 4 % 8 % 12 % 12 %

Margin (%)

EBITDA 17 % 20 % 19 % 19 % 19 % 19 % 18 % 19 % 19 % 19 % 18 % 19 % 19 % 19 % 19 % 19 %

EBIT 16 % 19 % 18 % 18 % 17 % 18 % 17 % 18 % 17 % 18 % 17 % 18 % 18 % 18 % 18 % 18 %

PBT 24 % 23 % 22 % 24 % 22 % 23 % 22 % 24 % 23 % 23 % 22 % 24 % 23 % 23 % 23 % 23 %

PAT 18 % 17 % 15 % 16 % 15 % 16 % 16 % 16 % 16 % 16 % 16 % 17 % 16 % 16 % 16 % 16 %



Consolidated Financials

P&L (Rs Mn) FY18A FY19E FY20E FY21E

Balance Sheet (Rs Mn) FY18A FY19E FY20E FY21E

Cash Flow (Rs Mn) FY18A FY19E FY20E FY21E

Revenue 251,649 279,336 307,806 342,680 Equity Capital 2,894 2,894 2,894 2,894 PBT 56,778 63,202 70,916 79,535

Op. Expenditure 203,833 226,662 249,759 278,054 Reserve 201,359 226,030 254,576 289,385 Depreciation 3,148 3,491 3,772 4,075

EBITDA 47,816 52,674 58,047 64,626 Networth 204,252 228,924 257,469 292,278 Others 320 0 0 0

Depreciation 3,148 3,491 3,772 4,075 Long Term Debt 0 0 0 0 Taxes Paid 17,145 18,969 21,283 23,869

EBIT 44,668 49,182 54,275 60,551 Def Tax Liability 6,043 6,043 6,043 6,043 Change in WC 13,229 -3,266 1,396 1,448

Interest Expense 13 0 0 0 Minority Interest 0 0 0 0 Operating C/F 56,330 44,459 54,801 61,189

Other Income 12,123 14,019 16,641 18,984 Account Payables 32,444 10,872 14,580 18,426 Capex 11,008 1,707 -4,800 -4,800

PBT 56,778 63,202 70,916 79,535 Other Curr Liabi 8,670 28,489 29,577 30,705 Change in Invest -5,607 -3,077 -3,293 -3,523

Tax 17,145 18,969 21,283 23,869 Total Liabilities & Equity 251,410 274,328 307,669 347,452 Others 0 0 0 0

PAT bef. MI & Assoc. 39,633 44,233 49,633 55,666 Net Fixed Assets 18,783 19,777 20,805 21,530 Investing C/F 5,400 -1,370 -8,093 -8,323

Minority Interest 0 0 0 0 Capital WIP 565 565 565 565 Change in Debt -1,692 0 0 0

Profit from Assoc. 2,876 3,077 3,293 3,523 Others 33,552 30,437 33,730 37,253 Change in Equity 3,754 0 0 0

Recurring PAT 42,509 47,310 52,925 59,189

Inventory 7,426 7,647 8,579 9,545 Others -15,968 -19,562 -21,087 -20,857

Extraordinaires -320 0 0 0 Account Receivables 14,919 15,363 17,235 19,177 Financing C/F -13,905 -19,562 -21,087 -20,857

Reported PAT 42,829 47,310 52,925 59,189 Other Current Assets 4,583 5,430 6,026 6,644 Net change in cash 47,826 23,527 25,621 32,009

FDEPS (Rs) 146.9 163.5 182.9 204.5 Cash 171,582 195,109 220,730 252,739 RoE (%) 22 % 22 % 22 % 22 %

DPS (Rs) 60.0 65.0 70.0 70.0 Total Assets 251,410 274,328 307,669 347,452

RoIC (%) 22 % 21 % 21 % 21 %

CEPS (Rs) 157.8 175.6 195.9 218.6 Non-cash Working Capital -14,186 -10,921 -12,317 -13,765

Core RoIC (%) 59 % 84 % 90 % 98 %

FCFPS (Rs) 213.4 148.9 161.4 182.7 Cash Conv Cycle -20.6 -14.3 -14.6 -14.7 Div Payout (%) 49 % 48 % 46 % 41 %

BVPS (Rs) 705.9 791.1 889.8 1,010.1 WC Turnover -17.7 -25.6 -25.0 -24.9 P/E 18.5 16.6 14.9 13.3

EBITDAM (%) 19 % 19 % 19 % 19 % FA Turnover 13.0 13.7 14.4 15.5 P/B 3.9 3.4 3.1 2.7

PATM (%) 17 % 17 % 17 % 17 % Net D/E -0.8 -0.9 -0.9 -0.9 P/FCFF 12.8 18.3 16.9 14.9

Tax Rate (%) 30 % 30 % 30 % 30 % Revenue/Capital Employed 1.6 1.4 1.4 1.4 EV/EBITDA 13.0 11.4 9.9 8.4

Sales Growth (%) 16 % 11 % 10 % 11 %

Capital Employed/Equity 1.0 1.0 1.0 1.0

EV/Sales 2.5 2.1 1.9 1.6

FDEPS Growth (%) 4 % 11 % 12 % 12 %

Dividend Yield (%) 2.2 % 2.4 % 2.6 % 2.6 %

TTM P/E vs. 2 yr forward EPS growth TTM EV/EBITDA vs. 2 yr forward EBITDA growth TTM P/B vs. 2 yr forward RoE

4x

8x

12x

16x

20x

-40%

-20%

0%

20%

40%

60%

0

1000

2000

3000

4000

Ma

y/0

8

Jan

/09

Se

p/0

9

Ma

y/1

0

Jan

/11

Se

p/1

1

Ma

y/1

2

Jan

/13

Se

p/1

3

Ma

y/1

4

Jan

/15

Se

p/1

5

Ma

y/1

6

Jan

/17

Se

p/1

7

Ma

y/1

8

Jan

/19

EPS Growth

-40%

-20%

0%

20%

40%

60%

80%

0100000200000300000400000500000600000700000800000

May

/08

Nov

/08

May

/09

Nov

/09

May

/10

Nov

/10

May

/11

Nov

/11

May

/12

Nov

/12

May

/13

Nov

/13

May

/14

Nov

/14

May

/15

Nov

/15

May

/16

Nov

/16

May

/17

Nov

/17

May

/18

Nov

/18

8x

10x

12x

14x

16x

EBITDA Growth

0%

20%

40%

60%

80%

100%

0

1000

2000

3000

4000

Ma

y/0

8

Jan

/09

Se

p/0

9

Ma

y/1

0

Jan

/11

Se

p/1

1

Ma

y/1

2

Jan

/13

Se

p/1

3

Ma

y/1

4

Jan

/15

Se

p/1

5

Ma

y/1

6

Jan

/17

Se

p/1

7

Ma

y/1

8

Jan

/19

RoE

4x

5x

6x

7x

8x



Historical Consolidated Financials

P&L (Rs Mn) FY15A FY16A FY17A FY18A

Balance Sheet (Rs Mn) FY15A FY16A FY17A FY18A

Cash Flow (Rs Mn) FY15A FY16A FY17A FY18A

Revenue 216,143 225,865 217,667 251,649 Equity Capital 2,894 2,894 2,894 2,894 PBT 44,232 54,575 53,329 56,778

Op. Expenditure 175,010 178,054 173,473 203,833 Reserve 108,060 127,561 175,672 201,359 Depreciation 2,675 3,072 3,073 3,148

EBITDA 41,132 47,811 44,194 47,816 Networth 110,953 130,454 178,566 204,252 Others -6,460 0 0 320

Depreciation 2,675 3,072 3,073 3,148 Long Term Debt 1,118 1,625 1,692 0 Taxes Paid 12,853 16,177 15,081 17,145

EBIT 38,458 44,739 41,121 44,668 Def Tax Liability 2,816 2,656 3,990 6,043 Change in WC -6,457 -8,908 -3,168 13,229

Interest Expense 65 11 14 13 Minority Interest 0 0 0 0 Operating C/F 21,138 32,562 38,154 56,330

Other Income 5,840 9,846 12,222 12,123 Account Payables 17,998 20,271 2,799 32,444 Capex -2,949 -4,489 -11,281 11,008

PBT 44,232 54,575 53,329 56,778 Other Curr Liabi 26,770 9,260 29,329 8,670 Change in Invest -4,185 20,685 -8,521 -5,607

Tax 13,492 16,177 15,081 17,145 Total Liabilities & Equity 159,656 164,266 216,376 251,410 Others 2,994 0 0 0

PAT bef. MI & Assoc. 30,740 38,398 38,249 39,633 Net Fixed Assets 19,172 20,257 20,018 18,783 Investing C/F -4,140 16,197 -19,802 5,400

Minority Interest 0 0 0 0 Capital WIP 2,549 522 422 565 Change in Debt 0 507 67 -1,692

Profit from Assoc. 2,137 2,214 2,546 2,876 Others 42,266 23,941 41,009 33,552 Change in Equity 467 -1,956 26,472 3,754

Recurring PAT 32,877 40,613 40,795 42,509 Inventory 8,142 7,191 7,284 7,426 Others -16,909 -17,101 -15,275 -15,968

Extraordinaires 0 0 0 -320 Account Receivables 7,170 7,179 9,533 14,919 Financing C/F -16,442 -18,550 11,264 -13,905

Reported PAT 32,877 40,613 40,795 42,829 Other Current Assets 16,424 11,036 14,354 4,583 Net change in cash 556 30,208 29,616 47,826

EPS (Rs) 113.6 140.3 141.0 146.9 Cash 63,933 94,141 123,757 171,582

RoE (%) 31 % 34 % 26 % 22 %

DPS (Rs) 50.0 55.0 55.0 60.0

Total Assets 159,656 164,266 216,376 251,410

RoIC (%) 30 % 33 % 26 % 22 %

CEPS (Rs) 122.9 151.0 151.6 157.8 Non-cash Working Capital -13,033 -4,125 -958 -14,186 Core RoIC (%) 67 % 66 % 49 % 59 %

FCFPS (Rs) 58.9 168.5 63.5 213.4 Cash Conv Cycle -22.0 -6.7 -1.6 -20.6 Div Payout (%) 52 % 47 % 47 % 49 %

BVPS (Rs) 383.4 450.8 617.1 705.9 WC Turnover -16.6 -54.8 -227.3 -17.7

P/E 24.0 19.4 19.3 0.0

EBITDAM (%) 19 % 21 % 20 % 19 % FA Turnover 10.0 10.9 10.6 13.0 P/B 7.1 6.0 4.4 0.0

PATM (%) 15 % 18 % 19 % 17 % Net D/E -0.6 -0.7 -0.7 -0.8 P/FCFF 46.2 16.2 42.9 12.8

Tax Rate (%) 31 % 30 % 28 % 30 % Revenue/Capital Employed 2.3 2.0 1.7 1.6 EV/EBITDA 17.8 14.7 15.2 0.0

Sales growth (%) 7 % 4 % -4 % 16 %

Capital Employed/Equity 1.0 1.0 1.0 1.0

EV/Sales 3.4 3.1 3.1 0.0

FDEPS growth (%) -4 % 24 % 0 % 4 %

Dividend Yield (%) 1.8 % 2.0 % 2.0 % 2.2 %



Equirus Securities

Research Analysts Sector/Industry Email

Equity Sales E-mail

AbhishekShindadkar IT Services [email protected] 91-22-43320643 VishadTurakhia [email protected] 91-22-43320633

Ashutosh Tiwari Auto, Metals & Mining [email protected] 91-79-61909517 SubhamSinha [email protected] 91-22-43320631

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Vikas Jain [email protected] 91-79-61909531

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