Mahindra CIE Automotive (MAHAUT) |...
Transcript of Mahindra CIE Automotive (MAHAUT) |...
February 22, 2018
ICICI Securities Ltd | Retail Equity Research
Result Update
European business drives performance!
Mahindra CIE’s Q4CY17 consolidated revenues were at | 1,618 crore
(up 22% YoY). The sales growth is organic & was across divisions in
the quarter. Revenues from India [standalone + Bill Forge (BFL) +
gears business] grew 17.9% YoY to | 666 crore. Growth without BFL in
India was up 16% YoY, mainly due to higher production volumes of its
top three clients (account >50% of revenue). Revenue from Europe
increased 24.3% YoY to | 959 crore as 1) MCI had a positive exchange
rate impact of 5%; 2) the execution of new orders - Metalcastello
(caterpillar order) & forging business (started supplying crankshafts)
The EBITDA margin came in at 14.3%, up 540 bps YoY & 110 bps QoQ
(vs. our estimate of 13%). The European margin increased 850 bps
YoY & 320 bps QoQ to 15.5% as cost rationalization has started to yield
results and after MCI revising raw material price agreement. The
standalone margin was at 12.4% (up 60 bps YoY & down 200 bps
QoQ), after the improvement in profitability of the casting division was
offset by higher VRS provision in forging (| 6.4 crore) & other one-offs.
MCI reported EBT of | 133 crore vs. our estimated PAT of | 101 crore
On the standalone front, revenues grew 25.5% YoY to | 562 crore.
Higher depreciation, tax rate & exceptional expense impacted the
standalone PAT, which was at | 15 crore for the quarter
Phase II growth strategy focuses on profitability
Mahindra CIE (MCI) embarked on its Phase 2 (2017-20) strategy that focuses
on growth & profitability. The strategy can be broadly divided into two with
a) focus on business development & growth (including organic growth, new
acquisitions (like Bill Forge – BFL), entry into new products & customer
development in India & optimising its utilisation & b) focus on profitability
(through transfer of technology, better efficiency & increase exports). MCI
has started to execute orders that were bagged in the past thereby driving
revenues. In Europe, MCI has started executing Caterpillar order and has
also started to supply crankshaft from Europe's forging division. Thus,
growth in Europe will be supported by new orders while higher production
of key clients and BFL will drive revenue of its Indian operations.
Multiple levers for margins expansion
MCI reported a strong operational performance in Q4CY17, with margins up
540 bps YoY & 110 bps QoQ. Several initiatives taken by MCI in the past,
which includes cost rationalization of Mahindra Forging Europe (where
margins improved from low single digit to double digit) & Metalcastello
business (shifting machinery & labour rationalisation) have yielded fruit. The
integration of BFL business (margins of >20%) is also helping MCI. Further,
in Q4CY17, the key margin accretive was 1) improvement in profitability of
its casting segment in India & 2) revision of the raw material price
agreement with retroactive effect from January 2017 is expected to lift
margins, going forward. The management focus on cost cutting exercise
and operating leverage may drive profitability, going forward.
Turnaround story intact; reiterate BUY!
MCI has a global footprint with global promoters and is a unique case of
valuation considering its massive turnaround possibilities. It is also planning
an inorganic expansion via partners/acquisitions and wishes to cater to
Japanese OEMs. Its consistent focus on cost rationalisation would improve
EBIT margins >10% & RoCE to ~14% in CY19E. Thus, we value MCI at 10x
CY19E EV/EBITDA multiple & maintain our target price of | 280 with BUY
rating. Key risk will be the pace of electric vehicle (EV) adoption; as 19% of
its revenue is derived from products related to ICE & are exposed to EV risk.
Rating matrix
Rating : Buy
Target : | 280
Target Period : 12 months
Potential Upside : 22%
What’s Changed?
Target Unchanged
EPS CY18E Changed from | 11.9 to | 12.3
EPS CY19E Chnaged from |13.9 to |15
Rating Unchanged
Standalone Quarterly Performance
(| Crore) Q4CY17 Q4CY16 YoY Q3CY17 QoQ
Revenues 561.5 447.3 25.5 484.2 16.0
EBITDA 58.3 31.6 84.3 48.4 20.6
EBITDA (%) 10.4 7.1 331 bps 10.0 40 bps
Reported PAT 14.6 11.0 33.6 20.4 -28.1
Key Financials
| Crore CY16 CY17E CY18E CY19E
Revenue 5,525 6,663 7,044 7,487
EBITDA 531.1 822.1 943.9 1,078.2
Net Profit 169.0 358.4 466.4 566.5
EPS (|) 4.5 9.5 12.3 15.0
All financial numbers incorporate merger assumption completed
Valuation summary
CY16 CY17E CY18E CY19E
P/E (x) 51.5 24.3 18.7 15.4
EV/EBITDA (x) 18.7 11.9 9.9 8.2
P/BV (x) 2.7 2.3 2.1 1.9
RoNW (%) 5.4 9.8 11.2 12.1
RoCE (%) 6.9 11.2 13.0 14.9
All financial numbers incorporate merger assumption completed
Stock data
Particular Amount
Market Capitalization (| Crore) | 8702.4
Total Debt (CY17) | 1196.87 Crore
Cash & Investments (CY17) | 126.7 Crore
EV | 9772.6 Crore
52 week H/L (|) 267/174
Equity capital (| crore) | 378.4 Crore
Face value (|) | 10
All financial numbers incorporate merger assumption completed
Price performance (%)
1M 3M 6M 12M
Mahindra CIE Automotive Ltd -4.8 -2.6 -2.1 9.4
Motherson Sumi Systems Ltd -17.8 -10.9 -2.0 34.4
Bharat Forge Ltd 3.0 6.7 33.4 40.2
Mahindra CIE Automotive (MAHAUT) | 230
Research Analyst
Nishit Zota
Vidrum Mehta
ICICI Securities Ltd | Retail Equity Research Page 2
Variance analysis- Standalone
Q4CY17 Q4CY17E Q4CY16 YoY(%) Q3CY17 QoQ(%) Comments
Total Operating Income 561.5 510.0 447.3 25.5 484.2 16.0
Standalone revenue growth was largely driven by higher production
volumes of its top three customers, which account for >50% of its
revenue
Raw Material Expenses 281.9 270.3 207.7 35.7 258.9 8.9 Higher raw material resulted into gross margin contraction of 377 bps YoY
Employee Expenses 75.6 60.2 53.3 41.8 57.1 32.3
Other expenses 145.7 126.0 154.7 -5.8 119.8 21.6 Other expense declined 862 bps YoY, thereby lifting margins
Operating Profit (EBITDA) 58.3 53.5 31.6 84.3 48.4 20.6
EBITDA Margin (%) 10.4 10.5 7.1 331 bps 10.0 40 bps
Margins exapnded on YoY & QoQ basis
Other Income 3.8 1.0 1.0 276.6 1.0 276.6
Depreciation 22.8 17.8 17.8 28.3 17.8 28.6
Interest 3.3 1.2 3.0 9.1 1.2 165.8
PAT 14.6 25.1 11.0 33.6 20.4 -28.1
The exceptional expense of | 6.9 crore related to VRS impacted the
profitability for the quarter
EPS 0.3 0.7 0.3 17.0 0.5 -37.1
Key Metrics (| crore)*
MCIE India 666.1 564.9 17.9 682.1 -2.3
India business was driven by higher production volumes of the top three
clients. The growth without Bill Forge in India was at 16% YoY
EBITDA Margins % 12.4 11.8 60 bps 14.4 -200 bps
EBITDA margin declined QoQ after the improvement in profitability of the
casting division was largely offset higher VRS provision in forgings (| 6.4
crore) and other one-offs during the quarter
MCIE Europe 958.8 771.3 24.3 915.4 4.7
The quarter had a positive exchange rate impact of 5% in sales. Further,
higher revenue from Metalcastello (as MCI started catering the caterpillar
order) & Europe’s forging business (supplied crankshafts from the new
installed capacity) lifted the European topline
EBITDA Margins % 15.5 7.0 850 bps 12.3 320 bps
The clean off completed last year is yielding positive results in terms of
margin expansion on a YoY basis. Also, raw material price increase
agreement was closed in Q4CY17 with retroactive effect from January
2017 supporting margins
MCIE Consolidated 1,618.4 1,330.0 21.7 1,590.3 1.8
Strong growth in India and Europe lifted the overall consolidated
performance
EBITDA Margins % 14.3 8.9 540 bps 13.2 110 bps
Higher margins on YoY basis from both (India + Europe) led consolidated
margins to move upwards
Source: Company, ICICIdirect.com Research; *As reported in company presentation
Change in estimates
(| Crore) Old New % change Old New % change Comments
Revenue 6,597.2 7,044.3 6.8 7,390.5 7,487.3 1.3 With the commencement of new orders (caterpillar and crankshaft project in Lithuania), we
have revised our revenue estimate upwards for CY18E
EBITDA 934.3 943.9 1.0 1,034.7 1,078.2 4.2
EBITDA Margin (%) 14.2 13.4 -76 bps 14.0 14.4 40 bps We expect a gradual expansion in margin over the next two years
PAT 486.5 466.4 -4.1 523.9 566.5 8.1 Lower margin estimate; resulted into lower PAT for CY18E
EPS (|) 12.9 12.3 -4.1 13.8 15.0 8.2
CY18E CY19E
Source: Company, ICICIdirect.com Research All financial numbers incorporate merger assumption completed.
ICICI Securities Ltd | Retail Equity Research Page 3
Company Analysis
MCI’s standalone business consists of Mahindra Forging India, casting &
magnet business, composites & stamping division while at the consolidated
level, it includes Mahindra Forging Europe, CIE’s forging business and
Mahindra’s gears & Bill Forge business. The standalone business accounts
for ~32% of overall revenue for CY16 while the remaining 68% is from its
subsidiary. The newly acquired BFL is also its subsidiary and comes under
the consolidated performance of the company.
Exhibit 1: Mahindra CIE – Legal Structure
Source: Company, ICICIdirect.com Research.
MCI’s phase 1 (2014-17) strategy of consolidation made good progress in
areas of optimising operations, turnaround of various segments, controlling
capex and reducing debt, among others. It first targeted Mahindra Forging
Europe (MFE) as its potential turnaround candidate where its margins
significantly improved from low single digits to double digits. MCI also
discontinued its unprofitable production, impacting Q4CY16 revenue.
However, the same will be margin accretive, going forward. A turnaround
will further lift its Metalcastello business while CIE’s European business
continues its stable operations. Also, with the Phase 1 strategy largely
complete, the group has decided that Mr Pedro will again be moving back
to Spain (CIE representative earlier in India) taking up a new responsibility.
MCI has embarked on its Phase 2 (2017-20) strategy, which focuses on
growth & profitability. The strategy can be broadly divided into two with a)
focusing on business development & growth [that includes organic growth,
new acquisitions (like Bill Forge – BFL)], entry into new products &
customer’s development in India and optimise its utilisation and b) focusing
on profitability (through transfer of technology, improvement in efficiency
and increase exports. The first step of the second phase has already been
taken with the acquisition of BFL and appointment of Ander Arenara Alvarez
as CEO, which will optimise the synergy within the company.
ICICI Securities Ltd | Retail Equity Research Page 4
Revenue growth to be modest (Europe + India faces growth challenges)
Mahindra CIE’s geography wise revenue mix is at 62:38 for outside/within
India. Segment wise, the forgings entity currently accounts for 66% of
revenue and would continue to dominate the overall pie of the consolidated
revenue. Other segments viz. stampings, gears, castings account for 13%,
9% and 7%, respectively, of revenue. Composite and magnetic products
account for a small portion of 2% and 3%, respectively, of revenue for the
company.
According to the management, the European market has decent demand
and growth is expected to recover gradually, going forward. However, we
believe Brexit may impact the company’s performance to some extent,
going forward. The execution of new orders will drive its demand from
European market. On a standalone business, apart from new launches by
its top two clients, its tie-up with other domestic OEMs (viz. Maruti Suzuki,
Ashok Leyland, Hyundai, Renault and Ford) would support growth. Thus,
we expect revenue CAGR of ~11% over CY16-19E (as BFL acquisition will
increase the overall revenue but a subdued demand environment and
discontinuance of unprofitable business will impact its performance).
Exhibit 2: Modest revenue growth
5,676
5,570
3,861
5,525
6,663
7,044
7,487
14.8
(1.9)
(30.7)
43.1
20.6
5.7
6.3
-40
-30
-20
-10
-
10
20
30
40
50
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
FY14 FY15 CY15 CY16 CY17E CY18E CY19E
(%
)
(| crore)
Revenue % increase
Source: Company, ICICIdirect.com Research. All financial numbers incorporate merger assumption completed &
company has changed its accounting year from FY to CY; hence CY15 is a nine months period
Exhibit 3: Consolidated segment mix (%) – CY2016
Composites
1.8%
Magnetics
Products
2.7%
Castings
7.3%
Gears
9.4%
Stampings
12.7% Forgings
66.2%
Source: Company, ICICIdirect.com Research.
ICICI Securities Ltd | Retail Equity Research Page 5
Exhibit 4: Revenue mix (segment, geography and product wise break up) | crore
Segment Geography Product Focus Area Customers
FY15
(12M)
CY15
(9M)
CY16
(12M)
Forging India Crankshafts, Stub Axles
PV, UV and
Tractors
M&M, MSIL and
TML
370 275 430
Stamping India
Sheet metal stamping,
Component & Assemblies
PV & UV M&M and TML 665 482 705
Casting India
Turbocharger Housing,
Axles & Transmission
Parts
PV, UV,
Construction
Equipment,
Earthmoving,
Tractors & export
M&M, Hyundai,
John Deere, JCB,
Cummins Turbo
411 285 406
Magnetic
Product
India
Soft & Hard Magnets,
Induction lighting
Tier 1 of PV, UV &
2-W and export
Denso, Varroc,
Lucas TVS,
Nippon Electric,
Bajaj Auto
121 98 149
Composite India Compound & Component
Elctrical,
Switchgear, Auto
Component
L&T switchgear,
M&M, Volvo
Eicher
75 64 98
1643 1204 1787
Mahindra
Forging
Europe
Europe
Forged & Machined parts,
Front Axles beams & Steel
Piston
HCV
Diamler AG,
Scania, Man,
DAF, KS, Mahle,
ZF, KION, Linde,
AGCO
1,951 1,271 1,584
CIE Forging Europe
Forged steel parts for
Industrial, Crankshafts,
Common rail, Stubs, Tulips
PV
VW, BMW,
Mercedes, Audi,
Reanult, Fiat
1,489 1,037 1,486
Mahindra
Gears
India
Gears (Engine, Timing,
Transmission)
PV & UV, Tractors
& Export
M&M, Turner,
Eaton, NHFI,
Truck Tractor
CNH
138 106 159
Metallcastell
o
Europe
Gears (Engine, Timing,
Transmission), Crown
wheel Pinion
Tractors,
Construction
Equipment,
Earthmoving,
Exports
John Deere,
Eaton CNH
349 249 364
Bill Forge* India
2-W : Steering races &
engine valve retainers. For
PV - constant velocity
joints, tulips, steering
shafts & yokes & wheel
hubs
2-W & PV
Hero, Bajaj,
HMSI, TVS, Ford,
GKN, NTN,
Nexteer,
RaneNSK
NA NA 175
3927 2662 3768
5570 3866 5555Consolidated Revenue
Total Standalone Revenue
Total Subsidiary Revenue
Standalone business
Subsidiaries
Source: Company, ICICIdirect.com Research; All financial numbers incorporate merger assumption completed; *Bill
Forge revenue is only for the period Oct- Dec 2016 (3M)
ICICI Securities Ltd | Retail Equity Research Page 6
Bill Forge acquisition = to diversify its segment + customers + reach
The BFL acquisition will help MCI diversify its segment, customer and reach
thus benefiting it. It acquired a 100% stake in BFL for | 1331 crore, through
a mix of equity (| 1,090 crore) & cash (| 241 crore). BFL has a presence
across segments with 4W (accounting ~50% of its revenue), 2W (~30% of
revenue) and exports & 3W account for ~20% of revenue. Export revenue
has grown >2.5x in the last two years and mainly supplies to Thailand,
China, Mexico, Europe and US. BFL has key customers viz. HMCL, BAL,
HMSI, TVS, MSIL, Hyundai, Honda, Ford, etc, with top 10 clients accounting
for 72% of its revenue. Thus, the acquisition not only helps MCI further
explore the 4W & 2W space but also diversifies its customer concentration.
Further, MCI will have a largely pan-India access vs. past exposure, which is
mainly to the western region of India (Pune cluster). BFPL has higher
machining content, thereby deriving higher value addition of its products.
EBITDA margins to rise as CIE philosophy takes over!
Looking at the history of CIE’s acquisitions, it is evident that CIE’s
management has a very strong focus on all kinds of costs ranging from
contribution of products to corporate overheads. CIE focuses on the
decentralised management of various plants, which are independently
given targets of RoCEs and EBIT margins. The overall group turnaround is
gradually progressing. The integration of the acquired higher margin BFL
business will drive the blended margins of Indian operations while the
clean-up made in the European operations [Mahindra Forging Europe (MFE)
and Metalcastello, Italy] will drive European margins, going forward. The
management’s EBIT margin target of ~10% are expected to be achieved
over the next couple of years. Thus, we estimate the progression of EBITDA
margins will be smooth on the way (13.4% in CY18E and 14.4% in CY19E).
Exhibit 5: EBITDA margin to grow strongly
453
440
378
531
822
944
1,078
8.0 7.9
9.8 9.6
12.3
13.4
14.4
-
2
4
6
8
10
12
14
16
-
200
400
600
800
1,000
1,200
FY14 FY15 CY15 CY16 CY17E CY18E CY19E
(%
)
(| crore)
EBITDA EBITDA Margin (%)
Source: Company, ICICIdirect.com Research. All financial numbers incorporate merger assumption completed &
company has changed its accounting year from FY to CY; hence CY15 is a nine months period
ICICI Securities Ltd | Retail Equity Research Page 7
Large room for non-linear profit growth!
The operating and financial revival of hotspots like MFE can have a
significant impact on the profitability of the overall business. We expect this
to happen, albeit at a pace slower than that targeted by CIE’s management.
We expect profits after MI (PE stake in Metalcastello) to gallop to ~| 567
crore in CY19E with PAT margins improving ~690 bps from FY14-CY19E to
7.6%. The path to this improvement has been followed since CY15. We
may see a significant improvement in CY18E & CY19E with PAT margins
likely to come in at 6.6% & 7.6% respectively.
Exhibit 6: Profit to start getting pumped up as operational improvement kicks in!!!
40
39.6
87
169
358
466
567
0.7
(1.4)
2.3
3.1
5.4
6.6
7.6
-2
-1
-
1
2
3
4
5
6
7
8
9
-200
-100
-
100
200
300
400
500
600
FY14 FY15 CY15 CY16 CY17E CY18E CY19E
(%
)
(| crore)
PAT PAT Margin (%)
Source: Company, ICICIdirect.com Research. All financial numbers incorporate merger assumption completed &
company has changed its accounting year from FY to CY; hence CY15 is a nine months period
ICICI Securities Ltd | Retail Equity Research Page 8
Outlook and valuation
We feel MCI provides a rare, unique Indian auto component play, which has
a global footprint with global promoters. The company is a unique case of
valuation considering the massive turnaround possibilities. Hence, we are
factoring in the same. We expect the turnaround to be significant, as,
according to our estimates, there will be non-linear profit growth from
~| 40 crore in FY14 to | 567 core in CY19E. MCI would find a way to
increase efficient and profitable utilisation with no major capex (only
maintenance capex of | 300-| 400 crore) over the next two or three years.
We expect strong business prospects to fructify into a turnaround, further
resulting into net debt ~| 193 crore till CY19E (CY19E-debt/EBITDA: 0.6x,
debt/equity: 0.1x vs. FY13- debt/EBITDA: ~3.7x, debt/equity: 0.7). We also
expect MCI to pay dividends, going forward. We value the stock on
EV/EBITDA multiple of 10x its CY19E, considering it is a turnaround
company. Hence, we maintain BUY rating with a target price of | 280/share.
Exhibit 7: Valuation
Pariculars
CY19E EBITDA (| crore) 1078
Implied target EV/EBITDA (x) 10.0
EV (| crore) 10782
CY19E Net Debt (| crore) 193
Mcap (| crore) 10588
No. of shares (crore) 37.8
Target Price (| per share) 280
Source: Company, ICICIdirect.com Research
Exhibit 8: Valuation
Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE
(| cr) (%) (|) (%) (x) (x) (%) (%)
CY15 3,677.5 12.0 2.3 NA 99.7 25.5 7.5 7.4
CY16 5,286.7 43.8 4.5 93.7 51.5 18.7 5.4 6.9
CY17E 6,663.0 26.0 9.5 112.1 24.3 11.9 9.8 11.2
CY18E 7,044.3 5.7 12.3 30.1 18.7 9.9 11.2 13.0
CY19E 7,487.3 6.3 15.0 21.5 15.4 8.2 12.1 14.9
Source: Company, ICICIdirect.com Research. All financial numbers incorporate merger assumption completed &
company has changed its accounting year from FY to CY; hence CY15 is a nine months period
ICICI Securities Ltd | Retail Equity Research Page 9
Recommended history vs. consensus estimates
0.0
20.0
40.0
60.0
80.0
100.0
0
100
200
300
400
Feb-18Nov-17Aug-17Jun-17Mar-17Dec-16Sep-16Jun-16Mar-16Dec-15Sep-15Jun-15Mar-15
(%
)(|)
Price Idirect target Consensus Target Mean % Consensus with BUY
Source: Bloomberg, Company, ICICIdirect.com Research
Key events
Date Event
Jun-08 Mahindra Forging's acquisitions in Europe, including Schöneweiss, start to integrate into the business
Apr-09 The company reports annual losses on the back of sudden downturn in the European business
Oct-09 Domestic business also suffers on the back of Lehmann crisis
Nov-09 Mahindra Forgings invests in doubling installed capacity in the forgings entity in India to 80,000 MT
Mar-10 Receives best supplier awards from Volvo Eicher, Kirloskar Oil Engines
Jul-10 Company starts to report better financials compared to previous years
Sep-11 Third crankshaft machining line installed, new makino installed for tool room in die production
Sep-13 CIE Automotive Spain and M&M agree to a merger between Mahindra Systech and CIE Forgings Europe. M&M acquires 13.5% stake in CIE SPA for €6 while
retaining 20% direct ownership in new company Mahindra CIE automotive. CIE post merger will have ~51% stake in the company
Jan-14 CIE's efforts in turning around Mahindra Forgings Europe start to reflect fruitfully as MFE starts to clock ~6-8% EBITDA
Jun-14 All parties ranging from shareholders to creditors give approval to the merger. Final court approval pending
Oct-14 Management indicates completion of the merger process likely by early December
Dec-14 Merger of Mahindra CIE companies formally completed on December 10, 2014
Jul-16 To optimise the synergy within companies, the board of directors have appointed Ander Arenara Alvarez as Chief Executive Officer of MCI
Sep-16 MCI acquires Bill Forge (which is into forging capabilities) which is into 4-W, 2-W and exports markets thereby diversifying its segment, customer & geography
mix going forward. It will acquire 100% stake for | 1331 crore, through a mix of equity (value | 1,090 crore) & cash (| 241 crore).
Oct-16 The Board of Directors appoints K Jayaprakash as Chief Financial Officer of the company
Source: Company, ICICIdirect.com Research
Top 10 Shareholders Shareholding Pattern
Rank Name Latest Filing Date % O/S Position (m) Change (m)
1 Participaciones Internacionales Autometal DOS, S. L. 31-Dec-17 0.51 194.3 0.00
2 Mahindra Group 31-Dec-17 0.17 65.3 0.00
3 Sundaram Asset Management Company Limited 31-Jan-18 0.02 8.2 0.00
4 Ainos Holdings Ltd. 31-Dec-17 0.02 8.0 -5.81
5 Haridass (Anjali Powar) 31-Dec-17 0.02 5.7 0.00
6 Haridass (Anil) 31-Dec-17 0.01 5.6 0.00
7 GIC Private Limited 31-Dec-17 0.01 5.2 -1.31
8 Prudential Management & Services Pvt. Ltd. 31-Dec-17 0.01 4.8 0.00
9 Haridass (Sunil) 31-Dec-17 0.01 4.6 0.00
10 UTI Asset Management Co. Ltd. 31-Jan-18 0.01 4.6 0.09
(in %) Dec-16 Mar-17 Jun-17 Sep-17 Dec-17
Promoter 69.9 69.9 69.9 69.9 69.9
FII 5.6 5.7 5.5 5.5 6.3
DII 11.5 11.3 11.5 6.4 10.4
Others 13.0 13.1 13.2 18.3 13.5
Source: Reuters, ICICIdirect.com Research
Recent Activity
Investor name Value Shares Investor name Value Shares
First State Investments (Singapore) 3.13 0.77 Ainos Holdings Ltd. -23.51 -5.81
Stewart Investors 2.58 0.64 GIC Private Limited -5.30 -1.31
UTI Asset Management Co. Ltd. 0.30 0.09 L&T Investment Management Limited -4.35 -1.19
IDFC Asset Management Company Private Limited 0.24 0.07 ICICI Prudential Asset Management Co. Ltd. -0.75 -0.22
First State Investments (HK) Ltd. 0.20 0.05 BlackRock Asset Management North Asia Limited -0.44 -0.11
Buys Sells
Source: Reuters, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 10
.
Financial summary
Profit and loss statement | Crore
(Year-end March) CY16 CY17E CY18E CY19E
Total operating Income 5,524.6 6,663.0 7,044.3 7,487.3
Growth (%) 43.1 20.6 5.7 6.3
Raw Material Expenses 2,144.4 2,854.9 3,205.2 3,391.7
Employee Expenses 1,102.5 1,176.0 1,239.8 1,257.9
Other Expenses 1,746.6 1,810.0 1,655.4 1,759.5
Total Operating Expenditure 4,993.5 5,840.9 6,100.4 6,409.1
EBITDA 531.1 822.1 943.9 1,078.2
Growth (%) 54.8 14.8 14.2
Other Income 31.4 26.9 35.2 37.4
Interest 59.4 54.5 42.5 25.5
Depreciation 232.5 280.8 288.8 303.2
PBT 261.5 506.7 647.8 786.8
Total Tax 92.6 148.3 181.4 220.3
PAT before Minority Interest 169.0 358.4 466.4 566.5
Minority Interest 0.0 0.0 0.0 0.0
PAT after Minority Interest 169.0 358.4 466.4 566.5
EPS (|) 4.5 9.5 12.3 15.0
Source: Company, ICICIdirect.com Research. All financial numbers incorporate merger
assumption completed
Cash flow statement | Crore
(Year-end March) CY16 CY17E CY18E CY19E
Profit after Tax 169.0 358.4 466.4 566.5
Add: Depreciation 232.5 280.8 288.8 303.2
(Inc)/dec in Current Assets -495.6 -445.2 -127.5 -127.6
Inc/(dec) in CL and Provisions 2.3 360.3 96.2 138.0
CF from operating activities -32.4 608.9 766.5 905.7
(Inc)/dec in Investments -90.1 -42.1 -16.2 -18.8
(Inc)/dec in Fixed Assets -250.0 -373.6 -300.0 -300.0
Others -914.3 -89.6 8.4 9.8
CF from investing activities -1,254.3 -505.3 -307.8 -309.0
Interest Paid -59.4 -54.5 -42.5 -25.5
Inc/(dec) in loan funds 306.4 -165.2 -200.0 -400.0
Dividend paid & dividend tax 0.0 0.0 -22.1 -33.2
Others 1,087.7 89.7 0.0 0.0
CF from financing activities 1,334.8 -130.0 -264.7 -458.7
Net Cash flow 48.0 -26.4 194.0 137.9
Opening Cash 50.1 98.1 71.7 265.7
Closing Cash 98.1 71.7 265.7 403.6
Source: Company, ICICIdirect.com Research. All financial numbers incorporate merger
assumption completed
Balance sheet | Crore
(Year-end March) CY16 CY17E CY18E CY19E
Liabilities
Equity Capital 378.1 378.4 378.4 378.4
Reserve and Surplus 2,888.1 3,337.2 3,781.5 4,314.8
Total Shareholders funds 3,266.2 3,715.6 4,159.9 4,693.2
Total Debt 1,362.1 1,196.9 996.9 596.9
Minority Interest 0.0 0.0 0.0 0.0
Total Liabilities 5,056.3 5,422.7 5,686.7 5,843.0
Assets
Gross Block 5,628.6 6,179.7 6,509.9 6,809.9
Less: Acc Depreciation 3,985.0 4,265.8 4,554.6 4,857.8
Net Block 1,783.5 1,913.9 1,955.3 1,952.1
Capital WIP 96.6 60.2 30.0 30.0
Total Fixed Assets 1,880.1 1,974.1 1,985.3 1,982.1
Investments 38.9 55.0 58.2 61.8
Goodwill 2,690.1 2,836.4 2,836 2,836
Inventory 835.2 989.8 1,042.2 1,107.7
Debtors 521.9 598.4 636.9 656.4
Other current assets 183.9 401.6 424.6 451.3
Cash 98.1 71.7 265.7 403.6
Total Current Assets 1,639.0 2,061.5 2,369.4 2,619.1
Creditors 1,526.0 1,574.3 1,640.5 1,743.6
Provisions 19.3 19.6 20.7 22.0
Other Current Liabilities 241.6 505.2 534.1 567.7
Total Current Liabilities 1,786.9 2,099.1 2,195.3 2,333.3
Net Current Assets -147.9 -37.6 174.1 285.8
Application of Funds 5,056.3 5,422.7 5,686.7 5,843.0
Source: Company, ICICIdirect.com Research. All financial numbers incorporate merger
assumption completed
Key ratios
(Year-end March) CY16 CY17E CY18E CY19E
Per share data (|)
EPS 4.5 9.5 12.3 15.0
Cash EPS 10.6 16.9 20.0 23.0
BV 86.3 98.2 109.9 124.0
DPS 0.0 0.0 0.5 0.8
Cash Per Share 2.6 1.9 7.0 10.7
Operating Ratios (%)
EBITDA Margin 9.6 12.3 13.4 14.4
PAT Margin 3.2 5.5 6.6 7.6
Inventory days 55.2 54.2 54.0 54.0
Debtor days 34.5 32.8 33.0 32.0
Creditor days 100.8 86.2 85.0 85.0
Return Ratios (%)
RoE 5.4 9.8 11.2 12.1
RoCE 6.9 11.2 13.0 14.9
RoIC 17.8 25.8 30.1 35.8
Valuation Ratios (x)
P/E 51.5 24.3 18.7 15.4
EV / EBITDA 18.7 11.9 9.9 8.2
EV / Net Sales 1.8 1.5 1.3 1.2
Market Cap / Sales 1.6 1.3 1.2 1.2
Price to Book Value 2.7 2.3 2.1 1.9
Solvency Ratios
Debt/Equity 0.4 0.3 0.2 0.1
Current Ratio 1.0 1.1 1.1 1.1
Quick Ratio 0.5 0.6 0.6 0.6
Source: Company, ICICIdirect.com Research. All financial numbers incorporate merger
assumption completed
ICICI Securities Ltd | Retail Equity Research Page 11
ICICIdirect.com coverage universe (Auto & Auto Ancillary)
CMP M Cap
(|) TP(|) Rating (| Cr) FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E
Amara Raja (AMARAJ) 801 875 Hold 13676 29.0 35.5 41.6 27.6 22.5 19.2 15.6 13.1 11.3 23.8 24.9 25.0 16.5 17.3 17.3
Apollo Tyre (APOTYR) 262 300 Buy 15005 12.5 21.2 25.0 21.0 12.4 10.5 7.6 7.6 6.5 8.9 12.8 13.8 7.7 11.7 12.4
Ashok Leyland (ASHLEY) 132 150 Buy 37219 5.3 7.1 8.6 24.8 18.6 15.3 12.6 10.0 8.1 29.9 33.4 34.9 22.6 25.2 25.6
Bajaj Auto (BAAUTO) 2994 3400 Hold 86645 143.4 172.5 204.1 22.2 18.4 15.6 17.3 13.9 11.6 29.9 31.8 32.6 21.9 22.8 23.3
Balkrishna Ind. (BALIND) 1082 1150 Hold 20907 39.8 51.5 63.9 28.6 22.1 17.8 18.8 14.0 11.2 23.6 26.7 27.9 18.3 26.7 27.9
Bharat Forge (BHAFOR) 763 860 Buy 35523 15.0 19.3 27.3 50.9 39.5 27.9 28.5 19.1 14.3 16.7 23.2 29.5 15.4 19.0 23.1
Bosch (MICO) 18814 21500 Hold 59075 455.8 562.0 632.1 43.2 35.0 31.1 28.1 23.0 20.2 14.7 16.6 16.8 22.0 24.7 25.1
Eicher Motors (EICMOT) 27890 32300 Buy 73124 655.9 839.0 1102.4 41.3 32.3 24.6 25.7 19.6 15.2 39.2 39.8 38.4 36.0 33.8 32.6
Exide Industries (EXIIND) 209 250 Buy 17774 8.0 9.8 11.9 26.2 21.3 17.5 14.9 12.3 10.1 17.6 19.7 21.7 12.6 14.1 15.4
Hero Moto (HERHON) 3474 4200 Buy 69369 187.4 221.4 247.3 18.5 15.7 14.0 12.6 11.0 9.5 45.5 44.8 44.1 32.7 33.4 31.8
JK Tyre & Ind (JKIND) 153 175 Hold 3469 -1.2 15.4 24.4 -126 9.9 6.3 12.8 6.7 5.1 5.2 11.8 15.0 -1.1 16.0 20.9
Mahindra CIE (MAHAUT) 230 280 Buy 8695 9.5 12.3 15.0 24.3 18.7 15.4 11.9 9.9 8.2 9.8 11.2 12.1 11.2 13.0 14.9
Maruti Suzuki (MARUTI) 8686 10850 Buy 227942 275.5 349.4 415.6 34.8 27.5 23.1 23.1 18.4 15.4 27.4 29.9 30.5 20.1 21.8 22.2
Motherson (MOTSUM) 309 375 Hold 65023 7.6 12.4 15.0 40.6 24.9 20.5 14.7 10.7 8.7 17.8 24.7 28.2 19.2 24.9 25.0
Tata Motors (TELCO) 360 475 Buy 108288 22.3 29.8 44.3 17.3 12.9 8.7 5.6 5.4 3.8 11.6 11.1 15.9 15.0 13.8 20.2
Wabco India (WABTVS) 7070 7700 Hold 13433 145.9 180.4 219.7 48.5 39.2 32.2 34.8 28.9 23.4 18.3 18.7 18.7 24.9 25.2 25.2
Sector / Company
RoE (%)EPS (|) P/E (x) EV/EBITDA (x) RoCE (%)
Source: Company, ICICIdirect.com Research * All financial numbers incorporate merger assumption completed
ICICI Securities Ltd | Retail Equity Research Page 12
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com 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]
ICICIdirect.com Research Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
ICICI Securities Ltd | Retail Equity Research Page 13
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