ashok leyland ashley) - icici...
TRANSCRIPT
ICIC
I S
ecurit
ies –
Retail E
quit
y R
esearch
Result
Update
February 17, 2020
CMP: | 80 Target: | 85 (6%) Target Period: 12 months HOLD
Ashok Leyland (ASHLEY)
Core demand weak, hopes rest on scrappage policy…
Ashok Leyland (ALL) reported a dismal Q3FY20 performance. Revenues
came in at | 4,016 crore, down 36.5% YoY courtesy lower than anticipated
ASPs (| 12.9 lakh/unit). Total CV sales volumes in Q3FY20 were at 31,200
units (down 29% YoY; M&HCV down 39%, LCV down 3.8%; LCV to MHCV
mix at 42:58 i.e. unchanged QoQ). Reported EBITDA margins were at 5.6%
(down 20 bps QoQ), with a decline led by disproportionate increase in raw
material costs (up 450 bps QoQ), which was partially compensated by a
decline in employee costs (down 420 bps QoQ). Consequently, reported
PAT came in at | 28 crore vs. | 162 crore in Q3FY19.
Demand, margin challenges in store
For 10MFY20, volumes of ALL’s core product i.e. truck (~41% of revenue
mix) are down 55.8% YoY (production basis) – with industry truck volumes
down 47.5% YoY in the same time frame. Being a barometer of overall
economic activity, the sharp downturn reflects the scale of challenges facing
the industry amid both demand (poor freight movement, tight financing) and
supply side (idle capacity, high installed base) issues. Upcoming switchover
to BS-VI emission norms from April 2020 and associated increase in product
prices are set to further strain existing weak pricing environment (average
discounts at | 5.25 lakh/unit). Encouragingly for ALL, it has gained market
share in LCV and bus segments thus far. However, with overall CV revival
still some time away and dependent upon improvement in economic activity
and settling of BS-VI regime, tough business conditions appear set to stay.
Accordingly, we build 6.3% volume CAGR in FY20E-22E with margins
expected to inch upwards to 10.8% by that time gradually.
Industry awaits firm scrappage policy
Historical global precedents show that scrappage policy success is often tied
to clear definition of end-of-life vehicles and attractive scrappage incentives.
Details of upcoming vehicular scrappage policy as regards these parameters
are as yet uncertain. However, the implementation of an affirmative,
mandatory nationwide scrappage policy along with development of
associated ecosystem (scrappage centres) holds the key to boost demand
prospects for the CV industry in particular over next few years.
Valuation & Outlook
Sales are seen growing at 13.7% CAGR over FY20E-22E, with operating
leverage benefits aiding profitability on a low base. Muted demand
prospects are a substantial overhang pending an affirmative scrappage
policy. Ongoing focus on costs, capex is key to navigating margin challenges
and remains a key monitorable. We maintain HOLD, valuing ALL at | 85
(SOTP; 7.2x FY22E CV EV/EBITDA, 2x P/B for long term investments).
Key Financials FY18 FY19 FY20E FY21E FY22E CAGR (FY20E-22E)
Net Sales 26,356.4 29,055.0 19,025.4 20,925.4 24,608.5 13.7%
EBITDA 2,963.5 3,135.7 1,371.6 1,970.4 2,658.1 39.2%
EBITDA Margins (%) 11.2 10.8 7.2 9.4 10.8
Net Profit 1,717.7 1,983.2 454.3 920.8 1,443.5 78.2%
EPS (|) 5.9 6.8 1.5 3.1 4.9
P/E 13.6 11.8 51.7 25.5 16.3
RoNW (%) 24.0 24.3 6.1 10.3 15.2
RoCE (%) 27.8 26.9 7.6 11.7 17.0
Key Financial Summary
Source: ICICI Direct Research, Company
Particulars
Particular Amount
Market Capitalization (| Crore) 23,416.8
Total Debt (FY19) (| Crore) 667.0
Cash & Investments (FY19) (| Crore) 1,479.4
EV (| Crore) 22,604.4
52 week H/L (|) 98 / 57
Equity capital (| crore) 293.6
Face value (|) | 1
Key Highlights
Q3FY20 revenues fell 37% YoY
tracking 29% decline in overall CV
volumes and lower ASPs
Margins at 5.6% were down 20 bps
QoQ on the back of 450 bps
sequential gross margin contraction
Demand on truck side a significant
overhang, with margin profile also
challenged. Affirmative scrappage
policy key to revive fortunes
Maintain HOLD with revised target
price of | 85
Research Analyst
Shashank Kanodia, CFA
Jaimin Desai
ICICI Securities | Retail Research 2
ICICI Direct Research
Result Update | Ashok Leyland
Exhibit 1: Variance Analysis
Q3FY20 Q3FY20E Q3FY19 YoY (%) Q2FY20 QoQ (%) Comments
Total Operating Income 4,015.7 4,120.0 6,325.2 -36.5 3,929.5 2.2Topline came in below our estimates primarily tracking lower
than anticipated ASPs
Raw Material Expenses 2,953.2 2,787.0 4,435.7 -33.4 2,713.3 8.8
Employee Expenses 272.8 432.6 500.1 -45.4 432.1 -36.9
Lower RM costs for the quarter partially attributable to write-
back of employee variable pay provisions given muted
financial performance at the company
Other expenses 564.5 556.2 739.8 -23.7 555.5 1.6
EBITDA 225.1 344.2 649.7 -65.3 228.6 -1.5
EBITDA Margin (%) 5.6 8.4 10.3 -480 bps 5.8 -360 bps
Margins came in lower tracking higher RM costs, which
came in elevated due to inventory rationalisation wherein all
other overheads get included under finished goods inventory
price
Other Income 22.3 58.6 20.8 7.4 45.5 -50.9
Depreciation 157.5 157.5 160.7 -2.0 160.0 -1.6
Interest 33.7 43.3 19.2 75.4 30.1 11.8
Tax 26.4 40.4 102.7 -74.3 -19.8 -233.7
Reported PAT 27.7 161.5 380.8 -92.7 38.9 -28.7Lower PAT primarily tracking lower ASPs and muted EBITDA
margin profile
EPS 0.1 0.6 1.3 -92.7 0.1 -28.7
Key Metrics
ASPs (| '000s) 1,287 1321 1,446 -11.0 1,362 -5.5
ASPs came in lower tracking high discounting in the
marketplace coupled with inventory rationalisation measured
undertaken by the company amid BS-6 transition
Average discount M&HCV (|) 525,000 325,000 380,000 38.2 525,000 0.0 Discount in marketplace still remains at elevated levels
Source: Company, ICICI Direct Research
Exhibit 2: Change in estimates
FY22E
(| Crore) Old New % Change Old New % Change Introduced Comments
Revenue 23,462 19025 -18.9 26114 20925 -19.9 24608
Given the prolonged slowdown in the domestic CV
space, we downward revise our sales estimates for
FY20-21E. Introduce FY22E numbers. Expect sales
CAGR of 14% over FY20-22E, post a decline of ~35%
in FY20E
EBITDA 2,261 1372 -39.3 2390 1970 -17.6 2658
EBITDA Margin (%) 9.6 7.2 -243 bps 9.2 9.4 26 bps 10.8
High discounting in the marketplace coupled with
inventory rationalisation at the company's end leads to
sharp reduction in EBITDA margin estimates for FY20E.
Broadly maintain FY21E numbers while introducing
FY22E EBITDA margins at 10.8%
PAT 1,157 454 -60.7 1190 921 -22.6 1444
EPS (|) 3.9 1.5 -60.7 4.1 3.1 -22.6 4.9 Introduce FY22E EPS at | 4.9/share
FY20E FY21E
Source: Company, ICICI Direct Research
Exhibit 3: Assumptions
Comments
FY19 FY20E FY21E FY22E FY20E FY21E
M&HCV Passenger volumes 19,871 25,709 26,371 29,436 20,928 21,116
M&HCV Goods volumes 122,987 62,210 62,738 70,005 85,991 87,516
MHCV:LCV mix is largely expected to be stable at
~64:36. Over FY20-22E M&HCV volumes are expected to
grow 6.4% over FY20-22E while LCV volumes are
expected to grow at a CAGR of 6.2% over FY20-22E
LCV volumes 54,508 50,513 51,209 57,018 53,680 55,027
Total Sales Volume 197366 138432 140318.2 156459.5 160599 163659
Going forward, we expect total sales volume to grow at a
CAGR of 6.3% over FY20-22E, albeit post declining ~30%
in FY20E. We expect volumes to grow 1.4% in FY21E
followed by meaningful recovery (up 11.5% YoY) in FY22E
ASPs (| '000s) 1,439.6 1,285.6 1,491.3 1,572.8 1,387.6 1,595.6
RMC/Unit (| '000s) 1,051.1 982.7 1,053.3 1,110.9 1,015.6 1,138.3
Current Earlier
Source: ICICI Direct Research
ICICI Securities | Retail Research 3
ICICI Direct Research
Result Update | Ashok Leyland
Conference Call Highlights
Demand and management guidance/outlook
The company said that demand sentiment remains at an all-time low with economic growth slowing for several
consecutive quarters. It expects Q1FY21E to be weak, followed by a flattish Q2FY21E after which H2FY21E is seen
registering some growth
ALL outlined the need for upcoming scrappage policy to have proper incentives and be mandatory in nature to
possess teeth. Network of scrapping centres would also be required for effective execution
Total industry volumes (TIV) for Q3FY20 were at 53,681 units, down 39% YoY. For QMFY20, TIV at 1.76 lakh units
represented 37% YoY decline. Against the industry, ALL’s Q3FY20 volumes at 16,260 units were down 42%
On YTD basis, ALL’s overall market share has dipped 0.6%. The company attributed this to a conscious decision
taken for clearing inventory
Additionally, ALL said it walked away from certain deals, which were EBITDA decretive. Its production shutdowns
during the year so far were partly on account of this
Total system inventory on M&HCV side (ALL plants plus dealers) was at 27,500 units as of June 2019. Currently,
it stands reduced to ~ 6,500 units (3,100 at ALL, 3,400 at dealers). LCV inventory is <10 days
Discounting levels remain very high at ~| 5.25 lakh/unit on average, and as high as ~| 7 lakh/unit in some cases
Longer term strategy
ALL’s thrust on traversing current sharp slowdown is centred around – (1) resizing operations to three year-ago
level to enhance sustainability, (2) aggressive internal targets on costs and capex front and (3) sharpened focus
on LCV, defence and exports to structurally reduce dependence on CVs
The LCV portfolio is expected to grow to 50% of overall volumes in the next six to seven years (1.8-2.0 lakh units
per annum) as part of the company’s vision to grow into top 10 manufacturers globally
Modular programme is expected to be a strategic advantage in the medium term and deliver enhanced efficiencies
through commonisation of parts, reduction in cost of production
Parts business is growing at 10%. The company aims to increase it to 15%, going forward. ALL is targeting 20%
growth in exports business for next year, with Africa, Bangladesh and Sri Lanka expected to lead the way
Growth in the defence business remains sluggish amid slow ordering at government level. The company has won
34 orders thus far, and is looking at broadening the portfolio of defence products, going forward
Sales, costs and margins
Q3FY20 revenue mix – 41% domestic trucks, 20% domestic bus, 14% LCV, 9% exports, 9% spares, 1% defence
Spike in material costs during Q3FY20 was attributable to – (1) inventory reduction resulting in release of absorbed
overheads into P&L (~| 260 crore) and (2) deterioration in product mix – higher sales of lower margin products
like ICVs and STU buses.
Cost savings programme is set to deliver | 500 crore of benefits this year and is targeting ~| 650 crore next year
The company has let go of ~250 people thus far to reduce employee overheads. Manpower costs are also lower
in Q3FY20 due to reversal of provision for bonus payouts
BS-VI transition
Testing of BS-VI products is under way but dispatching activity would be fairly limited till March. ALL’s BS-IV front
end structures will continue to be produced till end-February while complete structures including bus bodies will
remain in production till end-March
ALL has indirect exposure to Chinese supply chains for BS-IV and BS-VI products like fuel injection pumps
Others
The company has spent ~| 960 crore in capex thus far in FY20, with full year spending pegged at ~| 1,200-1,300
crore against earlier guidance of ~| 2,000 crore. In coming years, maintenance capex will be to the tune of
~| 500 crore annually
ICICI Securities | Retail Research 4
ICICI Direct Research
Result Update | Ashok Leyland
Debt was at ~| 1,900 crore as of Q3FY20 (down from | 2,736 crore in Q2FY20). Of this, long term debt amounted
to ~| 1,300 crore and short-term debt was at | 522 crore. The company has no major repayment obligations over
the next two years
Hinduja Leyland Finance (HLF) will need some cash infusion towards growing loan book (~ | 27,000 crore by end-
FY20E, up ~15% YoY). HLF is seeing increased instances of repossessions during ongoing CV downturn but
profitability strain is not alarming at present. HLF currently has 7% market share in ALL truck financing
The company is spending ~£10 million on subsidiary Optare every year for its turnaround efforts. While not
profitable still, it is getting orders
Investment spend for 9MFY20 was at | 58 crore, with further ~£7 million to be spent in Q4FY20E
ICICI Securities | Retail Research 5
ICICI Direct Research
Result Update | Ashok Leyland
Financial story in charts
Exhibit 4: Topline trend
20,019
26,356
29,055
19,025
20,925
24,608
5.7
31.7
10.2
(34.5)
10.0
17.6
(40)
(30)
(20)
(10)
-
10
20
30
40
0
3500
7000
10500
14000
17500
21000
24500
28000
31500
FY17 FY18 FY19 FY20E FY21E FY22E
(%
)
(| crore)
Net Sales Growth
Source: Company, ICICI Direct Research
Exhibit 5: EBITDA and EBITDA margin trend
2,203
2,964
3,136
167
1,970
2,658
11.0 11.2
10.8
7.2
9.4
10.8
-
2
4
6
8
10
12
0
500
1000
1500
2000
2500
3000
3500
FY17 FY18 FY19 FY20E FY21E FY22E
(%
)
(| crore)
EBITDA EBITDA Margin (%)
Source: Company, ICICI Direct Research
Exhibit 6: Profitability trend
1,223
1,718
1,983
454
921
1,444
6.1
6.5
6.8
2.4
4.4
5.9
0
1
2
3
4
5
6
7
8
0
200
400
600
800
1000
1200
1400
1600
1800
2000
2200
FY17 FY18 FY19 FY20E FY21E FY22E
(%
)
(| crore)
Reported PAT Adjusted PAT Margin (%)
Source: Company, ICICI Direct Research
Expect sales to grow at 13.7% CAGR over FY20E-
22E to | 24,608 crore amid 6.3% volume CAGR
Margins seen growing to 10.8% by FY22E on the
back of settling down of BS-VI pricing regime and
incremental operating leverage benefits
PAT expected to grow to | 1,444 crore by FY22E
ICICI Securities | Retail Research 6
ICICI Direct Research
Result Update | Ashok Leyland
Exhibit 7: Product mix and realisation trend
21.9
24.8
27.6 36.5 36.5
36.4
12.8
14.8
14.4 12.9
14.9
15.7
8
9
10
11
12
13
14
15
16
17
10
20
30
40
50
60
70
FY17 FY18 FY19 FY20E FY21E FY22E
(| in
la
khs)
(%
)
LCV/MHCV (%) Blended ASP (|)
Source: Company, ICICI Direct Research
Exhibit 8: Segment wise volume break-up
22602 20221 19871 25709 26371 29436
90690111212
122987
6221062738 70005
31774
43419
54508
50513 51209
57018
-
40,000
80,000
120,000
160,000
200,000
FY17 FY18 FY19 FY20E FY21E FY22E
(units)
M&HCV Passenger M&HCV Goods LCV
Source: Company, ICICI Direct Research
Exhibit 9: Return ratio profile
23.3
27.8 26.9
7.6
11.7
17.0
25.0
24.0
24.3
6.1
10.3
15.2
5
10
15
20
25
30
FY17 FY18 FY19 FY20E FY21E FY22E
(%
)
RoCE RoE
Source: Company, ICICI Direct Research
LCV share of overall CV volumes is seen staying
around the 36% mark in coming years given
increased strategic focus on the segment and efforts
to reduce dependence on M&HCV business
Despite gradual improvement in return ratios over
FY20E-22E, they are still seen to be some way of
historical highs
ICICI Securities | Retail Research 7
ICICI Direct Research
Result Update | Ashok Leyland
Exhibit 10: SOTP based target price calculation
SOTP
Target EV/EBITDA (x, ~10% discount to industry leader) 7.2
EBITDA (FY22E) 2,658.1
Net Debt 430.0
Enterprise Value (| Crore) 19,138.4
Target Market cap Core business (| crore) 18,708.4
Value/Share (A) 63
Strategic Investments FY22E (| crore) 3,286.5
P/BV(x) 2.0
Total Value/Share (B) 22
Price target (|, A+B) 85
Source: ICICI Direct Research
Exhibit 11: Key valuation metrics
Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE
(| cr) (%) (|) (%) (x) (x) (%) (%)
FY18 26,356 31.7 5.9 36.6 13.6 6.9 24.0 27.8
FY19 29,055 10.2 6.8 15.1 11.8 7.2 24.3 26.9
FY20E 19,025 (34.5) 1.5 (77.1) 51.7 17.5 6.1 7.6
FY21E 20,925 10.0 3.1 102.7 25.5 12.3 10.3 11.7
FY22E 24,608 17.6 4.9 56.8 16.3 9.0 15.2 17.0
Source: Bloomberg, ICICI Direct Research
ICICI Securities | Retail Research 8
ICICI Direct Research
Result Update | Ashok Leyland
Exhibit 12: Recommendation history vs. consensus
0.0
5.0
10.0
15.0
20.0
25.0
30.0
0
20
40
60
80
100
120
140
160
180
200
Feb-20
Jan-20
Dec-19
Nov-19
Oct-19
Sep-1
9
Aug-19
Jul-19
Jun-19
May-19
Apr-19
Mar-19
Feb-19
Jan-19
Dec-18
Nov-18
Oct-18
Sep-1
8
Aug-18
Jul-18
Jun-18
Jun-18
May-18
Apr-18
Mar-18
Feb-18
Jan-18
Dec-17
Nov-17
Oct-17
Sep-1
7
Aug-17
Jul-17
Jun-17
May-17
Apr-17
Mar-17
Feb-17
(%)
(|)
Price Idirect target Consensus Target Mean % Consensus with HOLD
Source: Bloomberg, ICICI Direct Research
Exhibit 13: Top 10 shareholders
Rank Name Latest Filing Date % O/S Position (m) Change (m)
1 HINDUJA AUTOMOTIVE L 30-06-2019 34.73 1,019.43M 0
2 HINDUJA BANK SWITZER 30-06-2019 4.94 144.90M 0
3 JPMORGAN CHASE & CO 30-06-2019 4.30 126.12M +84.93M
4 RELIANCE CAPITAL TRU 31-12-2019 4.12 120.82M +0.75M
5 ICICI PRUDENTIAL LIF 30-06-2019 1.72 50.55M +6.50M
6 STATE OF KUWAIT 30-06-2019 1.70 49.81M -0.56M
7 NORGES BANK 31-12-2018 1.63 47.71M 0
8 GOVERNMENT PENSION F 30-06-2019 1.47 43.25M -4.50M
9 BLACKROCK 06-02-2020 1.45 42.45M +0.10M
10 VANGUARD GROUP 31-12-2019 1.43 41.95M -0.92M
Source: Bloomberg, ICICI Direct Research
Exhibit 14: Shareholding pattern
(in %) Dec-18 Mar-19 Jun-19 Sep-19 Dec-19
Promoter 51.1 51.1 51.1 51.1 51.1
FII 21.9 19.1 18.8 17.1 19.2
DII 9.1 10.0 10.9 13.0 12.3
Others 17.9 19.8 19.2 18.9 17.3
Source: Bloomberg, ICICI Direct Research
ICICI Securities | Retail Research 9
ICICI Direct Research
Result Update | Ashok Leyland
Financial Summary
Exhibit 15: Profit and loss statement | crore
(Year-end March) FY19 FY20E FY21E FY22E
Total operating Income 29,055.0 19,025.4 20,925.4 24,608.5
Growth (%) 10.2 -34.5 10.0 17.6
Raw Material Expenses 20,679.6 13,603.4 14,780.1 17,381.5
Employee Expenses 2,098.8 1,610.1 1,669.0 1,750.9
Other Expenses 3,140.9 2,440.3 2,506.0 2,818.0
Total Operating Expenditure 25,919.3 17,653.8 18,955.0 21,950.4
EBITDA 3135.7 1371.6 1970.4 2658.1
Growth (%) 5.8 -56.3 43.7 34.9
Depreciation 621.0 637.4 680.1 701.3
Interest 70.4 116.7 170.0 134.2
Other Income 109.9 114.1 110.7 107.2
PBT 2554.2 731.7 1231.0 1929.8
Others 0.0 0.0 0.0 0.0
Total Tax 513.6 190.3 310.2 486.3
PAT 1983.2 454.3 920.8 1443.5
Growth (%) 15.5 -77.1 102.7 56.8
EPS (|) 6.8 1.5 3.1 4.9
Source: Company, ICICI Direct Research
Exhibit 16: Cash flow statement | crore
(Year-end March) FY19 FY20E FY21E FY22E
Profit after Tax 1,983.2 454.3 920.8 1,443.5
Add: Depreciation 621.0 637.4 680.1 701.3
(Inc)/dec in Current Assets -2,988.0 2,707.5 -1,274.1 -954.1
Inc/(dec) in CL and Provisions 354.1 -3,175.9 882.6 1,084.5
CF from operating activities 40.7 739.9 1379.4 2409.4
(Inc)/dec in Investments 3,155.2 0.0 0.0 0.0
(Inc)/dec in Fixed Assets -850.6 -1,200.0 -750.0 -750.0
Others -337.5 -314.1 -277.1 -279.0
CF from investing activities 1967.0 -1514.1 -1027.1 -1029.0
Issue/(Buy back) of Equity 0.0 0.0 0.0 0.0
Inc/(dec) in loan funds -560.7 1,350.0 250.0 -350.0
Dividend paid & dividend tax -1,095.6 -353.4 -440.3 -880.7
Others -20.0 -116.7 -170.0 -134.2
CF from financing activities -1676.4 879.9 -360.3 -1364.8
Net Cash flow 331.4 105.8 -8.0 15.6
Opening Cash 1,042.2 1,373.6 1,479.4 1,471.4
Closing Cash 1373.6 1479.4 1471.4 1487.0
Source: Company, ICICI Direct Research
Exhibit 17: Balance Sheet | crore
(Year-end March) FY19 FY20E FY21E FY22E
Liabilities
Equity Capital 293.6 293.6 293.6 293.6
Reserve and Surplus 8,039.0 8,139.9 8,620.3 9,183.2
Total Shareholders funds 8332.5 8433.4 8913.9 9476.7
Total Debt 667.0 2,017.0 2,267.0 1,917.0
Deferred Tax Liability 249.7 249.7 249.7 249.7
Other non-current liabilities 270.7 270.7 270.7 270.7
Total Liabilities 9769.5 11220.4 11950.9 12163.7
Assets
Gross Block 6,496.0 7,603.6 8,853.6 9,703.6
Less: Acc Depreciation 1,690.0 2,327.4 3,007.4 3,708.8
Net Block 4806.0 5276.3 5846.2 5994.9
Capital WIP 657.6 750.0 250.0 150.0
Total Fixed Assets 5,463.6 6,026.3 6,096.2 6,144.9
Investments 2,636.5 2,886.5 3,086.5 3,286.5
Inventory 2,684.7 1,563.7 2,293.2 2,696.8
Debtors 2,505.5 1,303.1 1,719.9 2,022.6
Loans and Advances 22.5 14.7 16.2 19.0
Other current assets 0.0 0.0 0.0 0.0
Cash 1373.6 1479.4 1471.4 1487.0
Total Current Assets 6,586.3 4,360.9 5,500.7 6,225.4
Creditors 5,018.9 2,866.8 3,439.8 4,045.2
Provisions 802.8 687.9 825.4 970.6
Other current Liabilties 1,266.9 829.6 912.4 1,073.0
Total Current Liabilities 5,821.7 3,554.7 4,265.2 5,015.9
Net Current Assets 764.6 806.2 1,235.5 1,209.5
Application of Funds 9769.5 11220.4 11950.9 12163.7
Source: Company, ICICI Direct Research
Exhibit 18: Key ratios
(Year-end March) FY19 FY20E FY21E FY22E
Per share data (|)
EPS 6.8 1.5 3.1 4.9
Cash EPS 8.9 3.7 5.5 7.3
BV 28.4 28.7 30.4 32.3
DPS 3.1 1.0 1.5 3.0
Cash Per Share 4.7 5.0 5.0 5.1
Operating Ratios (%)
EBITDA Margin 10.8 7.2 9.4 10.8
PBT / Net sales 8.8 3.8 5.9 7.8
PAT Margin 6.8 2.4 4.4 5.9
Inventory days 33.7 30.0 40.0 40.0
Debtor days 31.5 25.0 30.0 30.0
Creditor days 63.0 55.0 60.0 60.0
Return Ratios (%)
RoE 24.3 6.1 10.3 15.2
RoCE 26.9 7.6 11.7 17.0
RoIC 34.9 9.3 14.1 20.5
Valuation Ratios (x)
P/E 11.6 45.5 25.5 16.3
EV / EBITDA 7.2 17.5 12.3 9.0
EV / Net Sales 0.8 1.3 1.2 1.0
Market Cap / Sales 0.8 1.2 1.1 1.0
Price to Book Value 2.8 2.8 2.6 2.5
Solvency Ratios
Debt/Equity 0.1 0.2 0.3 0.2
Current Ratio 1.0 0.9 1.0 1.0
Quick Ratio 0.6 0.6 0.6 0.6
Source: Company, ICICI Direct Research
ICICI Securities | Retail Research 10
ICICI Direct Research
Result Update | Ashok Leyland
Exhibit 19: ICICI Direct coverage universe (Auto & Auto Ancillary)
Sector / Company CMP M Cap
(|) TP(|) Rating (| Cr) FY19 FY20E FY21E FY19 FY20E FY21E FY19 FY20E FY21E FY19 FY20E FY21E FY19 FY20E FY21E
Apollo Tyre (APOTYR) 166 165 Hold 9725 11.9 8.0 10.2 14.0 20.8 16.3 8.1 8.1 6.6 8.0 4.7 6.4 8.3 4.4 5.5
Ashok Leyland (ASHLEY) 80 85 Hold 23417 6.8 1.5 3.1 11.8 51.7 25.5 7.2 17.5 12.3 26.9 7.6 11.7 24.3 6.1 10.3
Bajaj Auto (BAAUTO) 3144 3300 Hold 91528 161.6 171.3 175.0 19.5 18.4 18.0 14.9 13.8 12.8 21.0 19.7 24.4 19.9 20.3 18.7
Bharat Forge (BHAFOR) 485 465 Hold 22580 22.2 17.9 17.4 21.9 27.2 27.9 12.7 16.3 15.8 17.9 12.8 12.7 19.1 14.0 13.3
Eicher Motors (EICMOT) 19000 19750 Hold 55665 808.1 756.0 798.2 23.5 25.1 23.8 18.1 21.6 19.3 32.5 23.4 22.2 24.8 19.6 17.7
Escorts (ESCORT) 888 810 Hold 10481 39.6 39.5 43.3 22.5 22.5 20.5 12.6 12.8 11.5 21.7 18.1 17.4 15.6 14.2 13.4
Exide Industries (EXIIND) 179 220 Buy 15725 9.9 9.6 10.3 18.6 19.3 17.9 10.9 10.8 9.9 18.4 16.3 16.2 12.9 12.8 12.3
Hero Moto (HERHON) 2350 2800 Buy 48427 169.5 191.4 176.7 13.9 12.3 13.3 8.9 9.8 8.8 37.1 29.1 28.8 26.3 23.7 22.3
M&M (MAHMAH) 530 680 Buy 65268 38.6 38.8 32.7 13.7 13.7 16.2 9.2 9.7 9.6 16.7 13.7 12.4 14.1 11.3 10.0
Maruti Suzuki (MARUTI) 6913 5850 Sell 212604 248.3 201.4 227.7 27.8 34.3 30.4 16.0 21.8 19.0 16.3 8.7 9.7 16.3 12.3 12.9
Tata Motors (TATMOT) 170 200 Hold 65790 -84.6 4.0 21.3 -2.0 42.4 8.0 4.4 4.1 3.2 5.4 8.1 12.0 7.1 6.1 14.7
RoE (%)EPS (|) P/E (x) EV/EBITDA (x) RoCE (%)
Source: Bloomberg, ICICI Direct Research
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Result Update | Ashok Leyland
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
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Result Update | Ashok Leyland
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