Hero MotoCorp (HERHON) - ICICI...

ICIC

I S

ecurit

ies –

Retail E

quit

y R

esearch

Result

Update

April 30, 2019

CMP: | 2510 Target: | 2700 ( 8%) Target Period: 12 months

Hero MotoCorp (HERHON)

HOLD

Margins disappoint; subdued commentary…

Hero MotoCorp (HMCL) reported a subdued Q4FY19 performance,

particularly on operating margins, which were down 37 bps QoQ to 13.6%.

A spike in raw material & employee costs, in particular, drove the weak

margin performance. Revenues declined 7.9% YoY to | 7,885 crore. Total 2-

W sales volume for the quarter came in at 17.8 lakh units, down 11.5% YoY.

Consequent PAT for Q4FY19 came in at | 730.0 crore, down 24.5% YoY.

HMCL announced a final dividend of | 32/share for FY19.

Volume growth benign, market leadership maintained!

FY18 was a robust year for domestic 2-W industry and HMCL, in particular,

with the company seeing a volume growth of 14% YoY. FY19, however, was

challenging, with mere 3% volume growth primarily tracking an increase in

cost of ownership due to increase in fuel, insurance and financing costs,

which coincided with the high sales festive period i.e. Dussehra-Diwali.

Going forward, with system inventory still higher than the normal range and

muted demand prospects, we expect HMCL to clock volume growth of 6%

in FY20E. It is expected to be supported by pre-buying ahead of BS-VI launch

from April 2020. Post this, we expect uncertainly to prevail and pencil in

conservative 3% volume growth in FY21E. On the market share front, HMCL

is expected to maintain its market leadership in the 2-W segment at ~35%+.

HMCL’s domestic scooter: motorcycle mix was at 10:90 for FY19.

Margins to inch lower vs. 14.5%+ clocked in FY16-19!

The Q4FY19 margin of 13.6% was the lowest in several quarters,

highlighting cost challenges being faced by the company. With prices of key

metal inputs on the uptrend again in recent months and channel inventory

still higher than normal in a highly competitive landscape, the outlook on

operating margins appears cloudy. The management has guided for

margins to hover in the present range of 13.5-14% in the near term. Thus,

we revise our earlier estimates, expecting HMCL to clock 13.8% and 14.0%

EBITDA margins in FY20E and FY21E, respectively.

Valuation & Outlook

At HMCL we expect volumes, sales, PAT to grow at a CAGR of 4.4%, 11.5%

and 7.0% in FY19-21E, with EBITDA margins seen recovering at a slower

pace than earlier anticipated. Single digit volume growth coupled with a

decline in margin trajectory will keep PAT growth under check. Hence, we

downgrade the stock from BUY to HOLD. We now value HMCL at | 2700 i.e.

14x FY21E EPS of | 194/share. We retain our constructive view on the

company courtesy its inexpensive valuations but await signs of volume and

margin revival, before any meaningful stance in our stance, going forward.

On the B/S front, HMCL remains a cash surplus company clocking 25% RoEs

and offers a dividend yield of ~3.5%.

Key Financials FY17 FY18 FY19 FY20E FY21E CAGR (FY19-21E)

Net Sales 28,475.0 32,230.5 33,650.2 36,977.1 41,810.8 11.5%

EBITDA 4,634.8 5,280.2 4,929.8 5,117.8 5,848.0 8.9%

EBITDA Margins (%) 16.3 16.4 14.7 13.8 14.0

Net Profit 3,377.1 3,697.4 3,384.6 3,419.8 3,872.5 7.0%

EPS (|) 169.1 185.1 169.5 171.2 193.9

P/E 14.8 13.6 14.8 14.7 12.9

RoNW (%) 33.4 31.4 26.5 27.1 27.1

RoCE (%) 44.0 42.4 37.5 38.6 38.6

Key Financial Summary

Source: ICICI Direct Research, Company

Particulars

Particular Amount

Market Capitalization | 50124.7 Crore

Total Debt (FY19) | 0 Crore

Cash & Investments (FY19) | 4834.2 Crore

EV | 45290.5 Crore

52 week H/L (|) 3819 / 2517

Equity capital (| crore) 39.9

Face value | 2

Key Highlights

Company disappoints on the

margins front, clocking 13.6% as

against usual 14.5-15.0% trajectory

Muted management commentary

on industry volume growth

prospects (5-7% YoY) and company

margins

Subdued outlook reflects in

relatively inexpensive

valuations

Assign HOLD rating with target

price of | 2,700c

Research Analyst

Shashank Kanodia, CFA

[email protected]

Jaimin Desai

[email protected]

ICICI Securities | Retail Research 2

ICICI Direct Research Result Update | Hero MotoCorp (HERHON)

Exhibit 1: Variance Analysis

Source: Company, ICICI Direct Research

Exhibit 2: Change in estimates


Exhibit 3: Assumptions


Q4FY19 Q4FY19E Q4FY18 YoY (%) Q3FY19 QoQ (%) Comments

Total Operating Income 7,885 7,788 8,564 -7.9 7,865 0.3Net sales came in higher primarily tracking higher ASPs as volume de-

growth for the quarter was 11% on a YoY basis

Raw Material Expenses 5,439 5,335 5,793 -6.1 5,415 0.4 RM costs came in higher than our estimates

Employee Expenses 447 389 381 17.4 436 2.7

Other expenses 930 911 1,020 -8.8 910 2.2Other expenses came in higher primarily tracking higher incentives for

retail sales

Operating Profit (EBITDA) 1,069 1,153 1,371 -22.0 1,105 -3.2

EBITDA Margins (%) 13.6 14.8 16.0 -62 bps 14.0 -37 bpsMargins for the quarter were the lowest in the last 16 quarters. All

expenses came in higher than our estimates

Other Income 164 143 167 -1.4 188 -12.5

Interest 2.2 1.5 1.5 42.2 2.2 1.4

Depreciation 150.2 152.2 148.3 1.3 151.8 -1.1 Depreciation came in on expected lines

PBT after Exceptional Items 1,080.8 1,141.7 1,387.2 -22.1 1,138.4 -5.1

Total Tax 350.8 372.2 419.8 -16.4 369.3 -5.0 Tax rate came in steady at 32.5%

PAT 730.0 769.5 967.4 -24.5 769.1 -5.1

EPS (Adjusted) 36.6 38.5 48.4 -24.5 38.5 -5.1 PAT for the quarter came in lower by 25% YoY

Key Metrics

Motorcycle volumes ('000s) 1,623.4 1,623.4 1,767.4 -8.1 1,619.2 0.3

Scooter volumes ('000s) 157.8 157.8 234.2 -32.6 179.7 -12.2 Scooter segment volumes continue to be under pressure

Export volumes('000s) 57.4 57.4 72.0 -20.3 45.2 26.9

Net Blended ASP (|/unit) 44,265 43,720 42,787 3.5 43,720 1.2 Blended ASPs came in higher than our estimates by ~| 550/unit

RM/Vehicle (|/unit) 30,532 29,949 28,942 5.5 30,099 1.4

EBITDA/Vehicle (|/unit) 6,043 6,470 7,235 -16.5 6,499 -7.0 EBITDA/vehicle came in lower tracking higher expenses on all fronts

FY21E

(| Crore) Old New % Change Introduced Comments

Revenue 37,989 36,977 -2.7 41,811Introduce FY21 numbers. Lower volume estimates for FY20E primarily tracking

weak demand sentiments

EBITDA 5,871 5,118 -12.8 5,848

EBITDA Margin (%) 15.5 13.8 -161 bps 14.0

Lower margin estimates following management commentary over limited

scope of margin improvement from current levels given muted demand

prospects and stable commodity prices

PAT 3,991 3,420 -14.3 3,872

EPS (|) 199.9 171.2 -14.3 193.9Lower margin estimates lead to sharp 14% decline in PAT estimates for

FY20E. Introduce FY21E numbers

FY20E

Current Earlier Introduced Comments

FY18 FY19P FY20E FY20E FY21E

Motorcycle volumes ('000s) 6,677 7,081 7,525 7,772 7,744

Scooter volumes ('000s) 910 740 762 831 774

Total volumes ('000s) 7,587 7,821 8,287 8,603 8,519

Lower volume estimates for FY20E. Introduce FY21E numbers,

volume growth is expected to be muted in FY21E given sharp price

increase expected in the BS-VI compliant vehicles

Growth (%, YoY) 3% 6% 3%

Export volumes('000s) 180 204 208 242 221

Gross Blended ASP (|/unit) 43,276 43,026 44,619 44,157 49,081 Expect realisations to increase 10% in FY21E (BS-VI compliance)

RM/Vehicle (|/unit) 28,742 29,815 30,837 30,398 33,921

EBITDA/Vehicle (|/unit) 7,325 6,326 6,175 6,825 6,865 Lower margin estimates and consequent decline in EBITDA/vehicle



Conference Call Highlights

Management guidance/outlook and demand

The management expects FY20E to be a tale of two halves. H1FY20E is

expected to be flat for the industry while in H2FY20E it is expected to

grow 8-10% YoY on account of BS-VI related pre-buying and onset of

the festive season. Overall industry volume growth for FY20E is seen at

5-7% YoY

Channel inventory situation has improved post sustained industry wide

correction efforts. For HMCL, inventory levels have come down to 45-50

days of retail sales, with further scope of 5-10 days correction

Rural demand continues to suffer from lack of liquidity support but the

situation could improve post Kharif sowing season

On the scooterisation front, the management commentary suggests

scooter segment growth will lag the motorcycle growth in the 2-W

segment due to high penetration of scooters in the urban markets, which

were key drivers of growth in the past. Hence, scooterisation as a trend

seems to have got arrested as of now

Two new products will be launched in May – Maestro Edge (125 cc

scooter segment) and X Pulse (200 cc motorcycle segment)

Sales, costs and margins

The management believes margins may hover around current levels in

the short term

Revenue from parts was at | 791 crore for Q4FY19 and | 2,836 crore for

FY19, up 13% YoY

The company took a price hike of | 100-150/unit during Q4FY19 and then

a further hike of | 300-350/unit in April 2019

Other

HMCL undertook | 800 crore worth of capex in FY19 with | 1,500 crore

earmarked for FY20E, which includes capex related to the Andhra

Pradesh plant, BS-VI production lines and others

A spike in inventory levels adversely impacted the working capital cycle

Financing level increased to 40% in FY19 against 37% in the year ago

period, with Hero Fincorp’s share of financing at 40% for FY19



Financial story in charts

Exhibit 4: Growth in revenues

27,585

28,443

28,475

32,230

33,650

36,977

41,811

9.1

3.1

0.1

13.2

4.4

9.9

13.1

(2)

-

2

4

6

8

10

12

14

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

FY15 FY16 FY17 FY18 FY19P FY20E FY21E

(%

)

(| crore)

Net Sales Growth


Exhibit 5: Product mix

1,401

1,523

1,498

1,410

1,369

1,477

1,402

1,416

1,441

1,527

1,573

1,291

1,444

1,638

1,783

1,489

1,767

1,911

1,927

1,619

1,623

189

192195 238

207169

173 274 281

219 251

183

177

216

240

220

234196 207

180 158

-300

200

700

1,200

1,700

2,200

Q4FY14

Q1FY15

Q2FY15

Q3FY15

Q4FY15

Q1FY16

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18

Q2FY18

Q3FY18

Q4FY18

Q1FY19

Q2FY19

Q3FY19

Q4FY19

('0

00s)

Motorcycles Scooters


Exhibit 6: Margins trend

3,542

4,455

4,635

5,280

4,930

5,118

5,848

12.8

15.7 16.3 16.4

14.7

13.8 14.0

-

2

4

6

8

10

12

14

16

18

0

1000

2000

3000

4000

5000

6000

7000


(%

)

(| crore)

EBITDA EBITDA Margins (%)


We expect HMCL’s volumes and revenue to register

CAGR 4.4% and 11.5% respectively over FY19-21E

Scooters formed 10% of HMCL’s domestic volumes

in FY19

On account of cost challenges and muted volume

growth expectations, the recovery from recent

margin dip is expected to be more prolonged than

earlier imagined



Exhibit 7: Cost profile breakup

28787

28449

28425

28014

29206

29099

28169

28799

28942

29265

29520

30099

30532

5063

4803

4837

5680

6372

5283

4547

4659

4706

4642

4260

4700

5179

15.7

16.6 17.6

17.0

13.8

16.3

17.4

15.9 16.0

15.6

15.2

14.0 13.6

10

11

12

13

14

15

16

17

18

20000

24000

28000

32000

36000

40000

Q

4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18

Q2FY18

Q3FY18

Q4FY18

Q1FY19

Q2FY19

Q3FY19

Q4FY19

(%

)

(|)

Raw material costs /unit Other expenses /unit EBITDA Margins (%)


Exhibit 8: Trend in profitability

2,386

3,160

3,377

3,697

3,385

3,420

3,872

13.1

32.5

6.9

9.5

(8.5)

1.0

13.2

(15)

(10)

(5)

-

5

10

15

20

25

30

35

0

500

1000

1500

2000

2500

3000

3500

4000

4500


(%

)

(| crore)

PAT Growth


Exhibit 9: Negative working capital cycle

2153.5

674.8 2

381.7

3132.5

3501.2

1335.3

3155.2

1,071.7

1,067.9

1,002.2

1,163.6

667.9

750.5

1,500.0

(10.1)

(8.4) (8.9)

(13.2)

(11.0)

5.8

1.5

(15)

(10)

(5)

0

5

100

400

800

1200

1600

2000

2400

2800

3200

3600

4000


(days)

(| crore)

FCF Capex Working Capital Cycle


EBITDA margins are expected to hover around the

current levels in the next few quarters

We expect HMCL to clock 7.0% CAGR in PAT over

FY19-21E

The company’s working capital cycle has

deteriorated in FY19 on account of spike in inventory

levels however the same is expected to recover

going forward



Exhibit 10: Return ratios to remain high

53.2

48.7

44.0

42.4

37.1

34.2 35.2

38.8

35.8

33.4

31.4

26.3

24.1 24.7

4.2

3.1

2.7 2.6

2.5 2.5 2.6

2.2

2.7

3.2

3.7

4.2

4.7

20

25

30

35

40

45

50

55


(%

)

RoCE RoE Asset turnover


Exhibit 11: Net debt negative

2,449.6

3,600.5

5,150.9

6,645.6

4,834.2

5,645.6

6,594.7

43.6

54.8 56.5

62.7

39.0

41.8

44.4

20

25

30

35

40

45

50

55

60

65

0

1000

2000

3000

4000

5000

6000

7000


(%

)

(| crore)

Cash & Cash Equivalents As % of total assets


Exhibit 12: Decent dividend payout

65

60 7

2

85 95

87

87 100

61.6

47.2 45.5

50.3 51.3 51.3 50.8

51.6

-

10

20

30

40

50

60

70

30

50

70

90

110

FY14 FY15 FY16 FY17 FY18 FY19P FY20E FY21E

(|)

(|)

DPS Dividend Payout

`


Return ratios at HMCL have come off their highs in

recent years however they are expected to remain

north of 25% levels going forward

HMCL remains a debt free, cash rich company

The company has a history of consistent dividend

pay-outs which provides an element of margin of

safety



Exhibit 13: Valuation

Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE

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

FY18 32,230.5 13.2 185.1 9.5 13.6 8.2 31.4 42.4

FY19P 33,650.2 4.4 169.5 -8.5 14.8 9.2 26.3 37.1

FY20E 36,977.1 9.9 171.2 1.0 14.7 8.7 24.1 34.2

FY21E 41,810.8 13.1 193.9 13.2 12.9 7.4 24.7 35.2


Exhibit 14: HMCL currently trading at 12.9x FY21E EPS of | 193.9

0

500

1000

1500

2000

2500

3000

3500

4000

4500

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

Oct-11

Jan-12

Apr-12

Jul-12

Oct-12

Jan-13

Apr-13

Jul-13

Oct-13

Jan-14

Apr-14

Jul-14

Oct-14

Jan-15

Apr-15

Jul-15

Oct-15

Jan-16

Apr-16

Jul-16

Oct-16

Jan-17

Apr-17

Jul-17

Oct-17

Jan-18

Apr-18

Jul-18

Oct-18

Jan-19

Apr-19

(|)

Price 22x 21x 19x 18x 17x 15x 14x

Source: Bloomberg, ICICI Direct Research



Exhibit 15: Recommendation history vs. consensus

0.0

20.0

40.0

60.0

80.0

100.0

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Apr-19Jan-19Nov-18Aug-18May-18Feb-18Nov-17Aug-17May-17Feb-17Nov-16Aug-16Jun-16Mar-16

(%

)(|)

Price Idirect target Consensus Target Mean % Consensus with BUY

Source: Reuters, ICICI Direct Research

Exhibit 16: Top 10 shareholders

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

1 Hero Group 31-Dec-18 20.4 40.8 0.0

2 Brijmohan Lall Om Prakash Partnership Firm 31-Dec-18 14.0 27.9 0.0

3 LIC Mutual Fund Asset Management Company Ltd. 31-Dec-18 5.2 10.5 -2.4

4 Life Insurance Corporation of India 31-Dec-18 5.2 10.5 2.0

5 OppenheimerFunds, Inc. 28-Feb-19 3.3 6.7 -1.2

6 Templeton Investment Counsel, L.L.C. 31-Mar-19 2.3 4.6 0.3

7 Lazard Asset Management, L.L.C. 31-Mar-19 2.2 4.3 -0.1

8 The Vanguard Group, Inc. 31-Mar-19 1.7 3.4 0.0

9 Aberdeen Standard Investments (Asia) Limited 31-Mar-19 1.6 3.3 -0.1

10 SBI Funds Management Pvt. Ltd. 31-Dec-17 1.6 3.2 0.5


Exhibit 17: Recent activity

Investor name Value Shares Investor name Value Shares

Westwood Global Investments, L.L.C. +108.1M +2.4M LIC Mutual Fund Asset Management Company Ltd. -107.6M -2.4M

Life Insurance Corporation of India +88.2M +2.0M OppenheimerFunds, Inc. -43.1M -1.2M

Carmignac Gestion +11.4M +0.3M HDFC Asset Management Co., Ltd. -8.6M -0.2M

Templeton Investment Counsel, L.L.C. +9.3M +0.3M Carnegie Fonder AB -6.4M -0.2M

Columbia Threadneedle Investments (US) +8.2M +0.2M ICICI Prudential Life Insurance Company Ltd. -7.7M -0.2M

Buys Sells


Exhibit 18: Shareholding pattern

(in %) Mar-18 Jun-18 Sep-18 Dec-18 Mar-19

Promoter 34.6 34.6 34.6 34.6 34.6

FII 42.3 41.9 38.9 40.0 38.2

DII 11.5 12.0 14.8 15.4 16.1

Others 11.5 11.4 11.7 10.1 11.1




Financial Summary

Exhibit 19: Profit and loss statement | crore

(Year-end March) FY18 FY19P FY20E FY21E

Total operating Income 32,230.5 33,650.2 36,977.1 41,810.8

Growth (%) 13.2 4.4 9.9 13.1

Raw Material Expenses 21,834.7 23,317.7 25,556.0 28,896.7

Employee Expenses 1,540.1 1,730.2 1,934.6 2,190.4

Other expenses 3,575.5 3,672.5 4,368.7 4,875.6

Total Operating Expenditure 26,950.3 28,720.5 31,859.3 35,962.7

EBITDA 5,280.2 4,929.8 5,117.8 5,848.0

Growth (%) 13.3 -6.6 3.8 14.3

Depreciation 555.6 602.0 610.1 731.7

Interest 6.3 8.6 9.0 9.5

Other Income 525.8 691.3 564.6 626.5

PBT 5,244.2 5,010.4 5,063.2 5,733.4

Total Tax 1,546.8 1,625.9 1,643.4 1,860.9

PAT 3,697.4 3,384.6 3,419.8 3,872.5

Growth (%) 9.5 -8.5 1.0 13.2

EPS (|) 185.1 169.5 171.2 193.9


Exhibit 20: Cash flow statement | crore


Profit after Tax 3,697.4 3,384.6 3,419.8 3,872.5

Add: Depreciation 555.6 602.0 610.1 731.7

(Inc)/dec in Current Assets -340.1 -1,696.4 104.8 -615.3

Inc/(dec) in CL and Provisions 250.0 -213.0 511.5 606.8

CF from operating activities 4,162.8 2,077.2 4,646.2 4,595.6

(Inc)/dec in Investments -1,490.2 1,806.6 -800.0 -920.0

(Inc)/dec in Fixed Assets -667.9 -789.5 -1,500.0 -1,000.0

Others 39.6 -802.8 -250.0 -250.0

CF from investing activities -2,118.5 214.3 -2,550.0 -2,170.0

Inc/(dec) in loan funds 0.0 0.0 0.0 0.0

Dividend paid & dividend tax -2,276.6 -2,084.9 -2,084.9 -2,396.4

Inc/(dec) in Sec. premium & Others -6.3 -8.6 -9.0 -9.5

CF from financing activities -2,046.0 -2,304.9 -2,093.9 -2,405.9

Net Cash flow 4.5 -4.8 11.3 29.2

Opening Cash 136.8 141.3 136.5 147.8

Closing Cash 141.3 136.5 147.8 177.0


Exhibit 21: Balance Sheet | crore


Liabilities

Equity Capital 39.9 39.9 39.9 39.9

Reserve and Surplus 11,728.9 12,817.2 14,152.2 15,628.2

Total Shareholders funds 11,768.9 12,857.1 14,192.1 15,668.1

Total Debt 0.0 0.0 0.0 0.0

Deferred Tax Liability 511.7 536.5 536.5 536.5

Others 114.9 117.2 117.2 117.2

Total Liabilities 12,395.5 13,510.8 14,845.8 16,322.0

Assets

Gross Block 7,405.1 7,998.8 8,748.8 10,498.8

Less: Acc Depreciation 2,919.3 3,521.3 4,131.4 4,863.1

Net Block 4,485.9 4,477.5 4,617.4 5,635.7

Capital WIP 203.8 360.7 1,110.7 360.7

Total Fixed Assets 4,689.7 4,838.2 5,728.0 5,996.3

Investments 7,525.2 5,968.6 7,018.6 8,188.6

Inventory 823.6 1,072.4 1,165.0 1,317.3

Debtors 1,520.2 2,821.6 2,532.7 2,863.8

Loans and Advances 27.6 25.0 28.2 31.9

Cash 141.3 136.5 147.8 177.0

Total Current Assets 2,912.4 3,257.0 4,948.6 4,855.2

Creditors 3,318.8 3,355.3 3,545.7 4,009.3

Provisions 59.8 59.0 62.4 70.5

Total Current Liabilities 4,093.3 4,343.3 4,130.4 4,641.8

Net Current Assets -1,181.0 -1,086.3 818.3 213.4

Application of Funds 12,395.5 13,510.8 14,845.8 16,322.0


Exhibit 22: Key ratios


Per share data (|)

EPS 185.1 169.5 171.2 193.9

Cash EPS 213.0 199.6 201.8 230.6

BV 589.3 643.8 710.7 784.6

DPS 85.0 95.0 87.0 87.0

Cash Per Share 7.1 6.8 7.4 8.9

Operating Ratios (%)

EBITDA Margin 16.4 14.7 13.8 14.0

PBT / Net sales 14.7 12.9 12.2 12.2

PAT Margin 8.3 8.6 11.1 11.9

Inventory days 9.3 11.6 11.5 11.5

Debtor days 17.2 30.6 25.0 25.0

Creditor days 37.6 36.4 35.0 35.0

Return Ratios (%)

RoE 31.4 26.3 24.1 24.7

RoCE 42.4 37.1 34.2 35.2

RoIC 93.7 62.5 66.4 62.8

Valuation Ratios (x)

P/E 13.6 14.8 14.7 12.9

EV / EBITDA 8.2 9.2 8.7 7.4

Market Cap / Sales 1.6 1.5 1.4 1.2

Price to Book Value 4.3 3.9 3.5 3.2

Solvency Ratios

Current Ratio 0.9 1.3 1.2 1.2

Quick Ratio 0.6 1.0 0.9 0.9




Exhibit 23: ICICI Direct Research coverage universe (Auto & Auto Ancillary)

Sector / Company CMP M Cap

(|) TP(|) Rating (| Cr) FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E

Amara Raja (AMARAJ) 665 630 Hold 11356 27.6 29.8 34.8 24.3 22.5 19.2 12.8 11.5 10.0 23.3 22.1 22.4 16.0 15.2 15.5

Apollo Tyre (APOTYR) 207 225 Buy 11844 12.7 14.2 22.5 15.8 14.1 8.9 6.7 6.7 5.7 7.8 9.1 11.0 7.4 9.1 11.1

Ashok Leyland (ASHLEY) 87 85 Hold 25480 5.3 6.4 7.8 16.3 13.6 11.2 7.3 6.6 5.0 28.1 28.2 31.9 21.9 23.2 24.3

Bajaj Auto (BAAUTO) 2987 2380 Hold 86438 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) 921 820 Hold 17804 38.2 42.5 49.8 21.1 18.9 16.2 14.2 11.6 9.5 22.4 21.0 22.4 18.1 21.0 22.4

Bharat Forge (BHAFOR) 700 535 Buy 32590 16.2 23.5 27.6 29.0 20.0 17.0 13.9 11.5 9.9 18.2 21.1 23.3 17.3 20.8 21.4

Bosch (MICO) 18000 17565 Hold 54938 449.1 545.6 622.9 40.4 33.2 29.1 25.1 22.4 18.9 14.4 14.9 15.2 21.4 22.2 22.6

Eicher Motors (EICMOT) 30000 21250 Hold 55539 718.9 848.4 1112.9 27.2 24.6 18.9 19.0 16.7 12.3 39.1 34.6 35.3 29.9 26.0 26.4

Escorts (ESCORT) 732 700 Hold 8967 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) 214 235 Hold 18211 8.2 8.5 9.6 28.4 24.0 23.4 15.2 13.8 12.3 19.1 18.0 18.7 13.0 12.4 12.9

Hero Moto (HERHON) 2510 2700 Hold 50125 185.1 169.5 171.2 13.6 14.8 14.7 8.2 9.2 8.7 42.4 37.1 34.2 31.4 26.3 24.1

JK Tyre & Ind (JKIND) 87 82 Hold 1973 2.9 10.0 22.0 3.9 8.6 3.9 9.2 5.8 4.1 7.7 12.2 16.1 3.6 12.9 19.2

Mahindra CIE (MAHAUT) 228 275 Buy 8623 14.5 17.0 19.1 16.6 14.1 12.6 9.4 7.5 6.5 12.8 13.2 13.0 13.2 15.5 16.2

Maruti Suzuki (MARUTI) 6900 5815 Sell 202394 255.6 248.3 256.3 27.0 27.8 26.9 14.5 15.8 14.4 21.1 16.3 15.9 18.5 16.3 15.2

Motherson (MOTSUM) 142 125 Hold 44858 5.1 5.3 7.0 25.7 24.5 18.6 9.3 8.5 6.8 16.3 15.2 18.0 17.4 15.7 18.0

Tata Motors (TELCO) 215 145 Hold 63973 26.8 -83.4 16.6 5.6 NA 9.1 2.4 3.3 2.6 9.1 5.1 9.9 10.3 5.9 12.6

Wabco India (WABTVS) 6257 7000 Hold 11868 143.8 172.2 212.3 46.9 39.2 31.8 30.4 26.2 20.8 17.9 17.8 18.2 25.1 25.7 26.0

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




RATING RATIONALE

ICICI Direct endeavors 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 categorizes them as Buy, Hold,

Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined

as the analysts' valuation for a stock

Buy: >15%

Hold: -5% to 15%;

Reduce: -15% to -5%;

Sell: <-15%

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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