jk tyres and industries (jktyre - icici...

February 16, 2017

ICICI Securities Ltd | Retail Equity Research

Result Update

Radialisation to drive growth! • On a consolidated basis, JK Tyres’ (JKTIL) revenues came in at

| 1,838 crore (up 14.6% YoY), which we believe would largely be volume driven. Gross revenues from India increased 25% YoY to | 1,903 crore (accounting for ~87% of consolidated revenue) while revenue from Mexican operation grew 12% YoY to | 279 crore

• EBITDA margins contracted 242 bps YoY & 570 bps QoQ to 14.4% below our estimate of 17%. Higher input cost (average natural rubber prices were up 14.2% YoY to | 124/kg) impacted the gross margins of the company, down 104 bps YoY & 440 bps QoQ

• JKTIL posted an exceptional gain of | 47.7 crore (mainly attributable to gain on sale of asset worth | 60.4 crore, partly offset by unfavourable foreign exchange movement of | 12.7 crore). Reported PAT declined 22.3% YoY to | 86 crore vs. our estimate of | 78 crore

• Demonetisation impacted 2W & 3W tyre sales in Q3FY17. According to the management, the unabated increase in natural rubber and other raw material price in the past continues to be an area of great concern and is likely to pass it on to consumers

• The resolution of GST, phasing out of the demonetisation effect, government’s focus on infrastructure & cheaper financing option are likely to revive CV sales in the coming months, thus benefiting JKTIL

Radialisation story intact…to benefit market leader! The CV tyre space is clearly witnessing a secular radialisation trend with the share of radial tyres in the CV segment rising from 4% in FY07 to 44% in FY16. Penetration in truck & bus radial tyres in the OEM space is 72% while in the replacement segment it is 33%. It enjoys leadership position in M&HCV truck bus radial (TBR) segment with market share >30% while in the passenger car radial (PCR) segment its share is >12%. The management is focusing on the radial segment and has expanded its TBR capacity from 4 lakh tyres to 12 lakh per annum (pa) and PCR capacity from 30 lakh pa to 45 lakh tyres pa. Its existing truck bus bias (TBB) segment (~40% of capacity) would be shifting to other segments and exports market. JKTIL’s overall product mix in terms of radial: bias tyre has changed significantly from ~33:66 in FY13 to ~66:33 in H2FY17. Thus, the radialisation story remains intact for JKTIL. Higher input cost + other expense = results into lower margins! EBITDA margins of Q3FY17 contracted 242 bps YoY & 570 bps QoQ to 14.4%. This was mainly due to higher input cost (gross margins down 104 bps YoY & 440 bps QoQ) & higher other expense (up 188 bps YoY & 146 bps QoQ). We believe the volatility in NR prices will have a negative impact on margins. However, JKTIL is likely to pass on most of the rise in input cost to consumers going forward. Further, a better product mix (higher share of radial tyres) will also support margins. Thus, we expect margins to be 16.5% & 16.3% for FY18E & FY19E respectively. Growth to revive; maintain BUY! The expectation of a revival in the capex cycle makes us optimistic about the revenue/earnings growth possibilities. Its plans to explore the 2-W space and the new radial capacity would drive incremental growth, going forward. The domestic tyre industry indirectly benefited from demonetisation, as dealing in Chinese tyres was largely cash based in nature & was impacted. Any positive development on part of the government in terms of restricting import of Chinese tyres, going forward, will benefit JKTIL. Thus, we value JKTIL at 4x FY19E EV/EBITDA. We maintain our target price of | 145 with a BUY rating on the stock.

JK Tyres and Industries (JKTYRE) | 116 Rating matrix Rating : BuyTarget : | 145

Target Period : 12 monthsPotential Upside : 25%

What’s changed?

Target UnchangedEPS FY17E Changed from | 17.7 to | 15.5EPS FY18E Changed from | 26.9 to | 22.5EPS FY19E Introduced at |29.1Rating Unchanged

Quarterly performance (| Crore) Q3FY17 Q3FY16 YoY Q2FY17 QoQRevenues 1,837.7 1,603.9 14.6 1,918.5 -4.2EBITDA 265.4 270.4 -1.9 386.3 -31.3EBITDA (%) 14.4 16.9 -242 bps 20.1 -570 bpsReported PAT 86.2 111.0 -22.3 100.2 -13.9

Key financials

| Crore FY16 FY17E FY18E FY19ENet Sales 6,953 7,458 8,280 9,318 EBITDA 1,141.5 1,271.8 1,364.1 1,514.9 Net Profit 476.2 352.1 509.4 659.9 FDEPS (|) 21.0 15.5 22.5 29.1

Valuation summary

FY16 FY17E FY18E FY19EP/E (Dil.) (x) 5.2 6.7 5.2 4.0 EV/EBITDA (x) 4.5 4.9 4.3 3.6 Tar. EV/EBITDA (x) 5.1 5.4 4.8 4.0 P/B (x) 1.5 1.3 1.1 0.9 RoNW (%) 29.1 19.3 20.7 21.9 RoCE (%) 20.1 14.5 15.9 17.5

Stock data Particular AmountMarket Capitalization (| Crore) | 2630.9 CroreTotal Debt (FY16) (| Crore) 2,669.7Cash & Investments (FY16) (| Crore) 154.4EV (| Crore) 5,146.252 week H/L (|) 162/74Equity capital (| crore) | 45.4 CroreFace value (|) | 2

Price performance

1M 3M 6M 12MJK Tyres -11.7 -17.6 7.0 41.2Apollo Tyres Ltd -6.6 -9.0 3.0 18.5CEAT Ltd -7.9 -13.2 26.2 23.2MRF Ltd -5.9 -4.5 38.9 57.8Balkrishna Industries Ltd 10.3 19.3 62.8 108.0

Research Analyst

Nishit Zota

[email protected]

Vidrum Mehta

[email protected]


Variance analysis Q3FY17 Q3FY17E Q3FY16 YoY (%) Q2FY17 QoQ (%) Comments

Total Operating Income 1,838 1,687 1,604 14.6 1,918 -4.2 Above our expectations largely supported by volume growth Raw Material Expenses 1,036 922 887 16.7 997 3.9 Higher input cost impacted the gross margin of the company, down 104

bps YoY & 440 bps QoQ. Average natural rubber prices were up 14.2% YoY to | 124/kg. Prices of other crude derivatives were also higher during the quarter

Employee Expenses 209 196 191 9.8 222 -5.6Other expenses 327 282 255 28.1 314 4.3 Other expense also increased sharply in Q3FY17Operating Profit (EBITDA) 265 287 270 -1.9 386 -31.3EBITDA Margin (%) 14.4 17.0 16.9 -242 bps 20.1 -570 bps Lower gross margins & higher other expense impacted the operational

performanceInterest 115 110 61 88.6 111 4.1 Post the CIL acquistion, interest outgo looks higher on a YoY basisDepreciation 74.7 70.8 55.5 34.4 70 6.6 Assets of CIL have been clubbed with JKTIL's assets resulting in higher

depreciation on YoY basis PBT before Exceptional Items 80.7 110.2 160.7 -49.8 212.9 -62.1Less: Exceptional Items -47.7 0.0 10.5 -555.1 64 -174.0 Exceptional gain includes gain on sale of asset worth | 60.4 crore partly

offset by unfavourable foreign exchange movement of | 12.7 crore

PBT after Exceptional Items 128.4 110.2 150.2 -14.5 148.4 -13.5Total Tax 42.2 34.2 44.6 -5.3 47.0 -10.3Profit from Associates 0.3 1.7 5.3 -94.9 3.3 -91.7PAT 86.2 77.7 111.0 -22.3 100.2 -13.9 Decline in margins impacted the profitabilityEPS 3.8 3.4 4.9 -22.3 4.4 -13.9Key MetricsGorss Sales (| crore)India 1902.8 1522.1 25.0 1905.9 -0.2 Strong revenue growth would have been largely supported by volumes. We

believe JKTIL indirectly benefited from demonetisation, as dealing in Chinese tyres were largely cash based in nature & were impacted

Mexico 279.0 249.1 12.0 309.0 -9.7 Reported decent growth on YoY basisLess : Inter segment 196.1 4.9 3885.6 145.0 35.3Net Sales 1986.7 1767.2 12.4 2069.9EBIT - India 169.5 200.0 -15.2 295.9 -42.7EBIT - Mexico 25.8 20.8 23.8 28.0 -8.0EBIT Margins (%) - India 8.9 13.1 -423 bps 15.5 -662 bps Higher raw material cost impacted the company's marginsEBIT Margins (%) - Mexico 9.2 8.4 88 bps 9.1 17 bps

Source: Company, ICICIdirect.com Research

Change in estimates FY19E

(| Crore) Old New % Change Old New % Change Introduced CommentsRevenue 7,510 7,458 -0.7 8,696 8,280 -4.8 9,318

EBITDA 1,397 1,272 -9.0 1,528 1,364 -10.7 1,515EBITDA Margin (%) 18.6 17.1 -155 bps 17.6 16.5 -110 bps 16.3 Post a sharp decline in Q3FY17, margins are expected to moderate, going

forward, mainly due to a rise in input cost (NR)

PAT 402 352 -12.4 611 509 -16.6 660 Lower topline growth & margin moderations led to lower earningsFDEPS (|) 17.7 15.5 -12.4 26.9 22.5 -16.6 29.1

FY17E FY18E

Source: Company, ICICIdirect.com Research; *We have considered acquisition of CIL & its impact in our estimate

Assumptions Current Earlier Introduced Comments

FY15 FY16 FY17E FY18E FY17E FY18E FY19EIndiaTonnage Sales (MT) 304,471 306,165 335,954 366,190 336,017 376,339 402,809 Capacity addition of TBR & PCR will improve volume growthAverage realizations (|/kg) 222 212 194 198 199 206 204 Any delay in passing of prices may impact realisations

Mexico

Tonnage Sales (MT) 49,150 47,446 53,756 58,057 53,204 58,524 63,282 Capacity expansion of PCR to lead higher growth

Average realizations (|/kg) 256 226 231 248 219 228 253



Company Analysis Demand revival to drive revenue growth

JKTIL’s revenues largely comprise the domestic (Indian) operation, which accounts for ~86% of revenue while the remaining 14% comes from its Mexican subsidiary Tornel. Further, the customer wise revenue mix is OEM: replacement: export at 33%: 57%: 10%, respectively. Segment wise, CV & PV tyres account for 74% & 21% of its overall revenue, respectively, while 5% is contributed by other segments. Product wise radial: bias mix is at 66:33, respectively. The company faced headwinds in terms of revenue growth in the past two years (FY15 & FY16), mainly on account of a slowdown in demand environment and stiff competition from Chinese tyres. The capacity constraint on the radial side of the truck and bus segment, to some extent, had restricted growth in the rising trend of radialisation in India. However, the company has completed the expansion of its new capacity at its Chennai plant in addition to its leadership position in the TBR segment that is likely to drive its growth, going forward. The company has also created a slightly lower quality brand, which competes well against imported cheaper Chinese tyres. Apart from its regular quality tyres, JKTIL has launched the Challenger brand in the TBB segment. The company is soon going to launch in the TBR segment, which marginally compromises the quality and easily competes against Chinese tyres on the pricing front. The acquisition of Cavendish Industries (CIL) has taken the overall capacity (including Mexico) to ~35 million tyres per annum, with nine plants in India and three in Mexico and is all set to cater to the rising industry demand. Thus, we believe JKTIL will be witnessing volume driven revenue CAGR of ~10% CAGR in FY16-19E. Exhibit 1: Revenue growth likely to recover!

6985 76

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Exhibit 2: JKTIL combined capacity (JKTIL + CIL + Tornel)

Sr no Particulars JKTIL CIL Total IndiaTornel

MexicoTotal India +

Mexico1 Truck Bias 23.18 17.57 40.75 6.38 47.132 Truck Radial 22.65 11.99 34.64 0.00 34.64

Total Truck 45.83 29.56 75.39 6.38 81.773 Passanger Radial 98.85 0.00 98.85 52.00 150.854 2-W & 3-W 0.00 63.02 63.02 0.00 63.02

5Others (LCV, Farm, OTR) 22.27 7.48 29.75 24.85 54.60

Total (Lacs no pa) 166.95 100.06 267.01 83.23 350.24

7

Total Tonnes per day (TPD) 1143.0 627.0 1770.0 340.0 2110.0

Combined Capacity (Lacs. No .pa)


Exhibit 3: Sales remain largely flat in domestic business

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EBITDA margins to remain >16%! Natural rubber (NR) prices declined to <| 100/kg in Q4FY16 from highs of ~| 250/kg. NR accounts for ~40% of total raw material costs, thus swinging gross, operating margins. Crude prices have also fallen significantly, resulting in lower prices of its derivatives (carbon black, synthetic rubber, fabric) that are key materials for companies. This has led to an increase in profitability for the overall industry. Tyre manufacturers in India have passed on bare minimum of these benefits to consumers in the past, thus resulting in elevated margins for companies. JKTIL posted highest ever margins for Q2FY17, which was at 20.1% mainly attributable to lower input cost, better product mix and due to favourable impact of operating leverage as radial capacity utilisation levels are >90%. However, NR prices have been volatile in the last year and are largely inching northwards (currently at ~| 160/kg). The impact of higher NR prices impacted Q3FY17 EBITDA margins, which declined 242 bps YoY & 570 bps QoQ to 14.4%. Apart from NR prices, crude prices have also moved up in the recent past. This would further create pressure on tyre manufacturers. However, JKTIL is likely to pass on most of the rise in input cost to consumers, going forward. Further, a better product mix (higher share of radial tyres) will also support margins. Thus, we expect margins to be 16.5% & 16.3% for FY18E & FY19E respectively.


Exhibit 4: Margins to moderate, going forward

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Exhibit 5: Natural rubber price has increased sharply over last year

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Exhibit 6: Net raw material expense trend of domestic business

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77.376.175.374.373.071.871.170.367.367.468.1

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Moderation in margins to impact profitability JKTIL’s FY17 profits look muted mainly due to higher depreciation charges of the newly acquired CIL. A gradual improvement in the demand environment was further offset by modest de-growth in margins that will impact the overall profitability. We expect profits to increase at ~11% CAGR in FY16-19E to | 660 crore. Subsequently, PAT margins are likely to touch ~7%, going forward. Exhibit 7: Lower margins likely to offset higher revenue impacting profitability

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CIL acquisition perks up debt levels! JKTIL has completed the acquisition of CIL wherein it has a 64% stake while the remaining 36% has been acquired by JK group’s associates/group companies. The deal size for the same was at | 2,170 crore, with a mix of equity & debt of | 700 crore & | 1,470 crore, respectively. This has increased overall gross debt to | 3,624 crore in FY17E. In the past, the management has guided that debt levels have peaked out and no major capex would be done over the next year or two. Exhibit 8: CIL acquisition perks up debt!

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Exhibit 9: CIL assets temporary drag asset turnover; to recover in FY18E…

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Exhibit 10: Strong CFO/EBITDA indicates good working capital management

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Outlook & valuation The CV tyre segment is clearly witnessing a secular radialisation trend with the share of radial tyres in the CV segment increasing from 4% in FY07 to 44% in FY16. Penetration of truck & bus radial tyres in the OEM segment is 72% while the replacement segment radialisation was at 33% in FY16. JK Tyres’ market share in India in the M&HCV TBR segment is >30% while it is >12% in the passenger car radial segment. Going forward, as radialisation in the truck and bus segment increases rapidly, we believe JK Tyres would be a major beneficiary leading to higher capacity utilisation levels in the TBR space. With the expectation of a revival in capex cycle, we are optimistic about the revenue/earnings growth possibilities for JKTIL – the leader and pioneer in the TBR segment. The capacity constraint in the TBR segment is largely over as the new capacity is already in place and the new CIL acquisition has further provided additional capacity of 1.2 million tyres/per annum. Any positive development on part of the government in terms of restricting imports of Chinese tyres, going forward, will benefit JKTIL. Thus, we value JKTIL at 4x FY19E EV/EBITDA to arrive at a target of | 145. We maintain our BUY recommendation on the stock. Exhibit 11: Valuations

Sales Growth EPS

(Diluted) Growth PE EV/EBITDA RoNW RoCE(| cr) (%) (|) (%) (x) (x) (%) (%)

FY16 6,953.1 (5.8) 21.0 44.5 5.5 4.5 29.1 20.1FY17E 7,458.1 7.3 15.5 -26.1 7.5 4.9 19.3 14.5 FY18E 8,280.3 11.0 22.5 44.7 5.2 4.3 20.7 15.9FY19E 9,317.9 12.5 29.1 29.6 4.0 3.6 21.9 17.5



Recommended history vs. consensus

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Price Idirect target Consensus Target Mean % Consensus with BUY

Source: Bloomberg, Company, ICICIdirect.com Research

Key events Date EventApr-08 Acquisition of 100% shareholding in Tornel for | 270 croreJun-08 Rights issue at | 85 per share in the ratio 1:3Oct-08 Stock falls after reporting loss in Q4Jan-09 Major tyre makers cut prices as natural rubber prices fall sharplyApr-09 Reiterates capex plan of | 270 crore for Mysore plant despite poor demand scenarioJul-09 Labour troubles at MRF lead Maruti to increase sourcing from JK TyresOct-09 Announces setting up of new plant in South India by investing ~| 1200 crore over three to four yearsOct-10 Rubber prices start moving up on production concerns in Thailand on excessive rainsFeb-11 Rubber prices hit a high of ~| 250/kg before falling graduallyJun-12 CCI starts investigation on tyre cartelisationOct-13 JK Tyres to invest additional | 1400 crore in Chennai plantNov-13 Rubber prices start cooling off after the tapping season starts leading to sector re-ratingMay-14 Muted results but strong management guidance for growthJan-15 The increased Chennai capacity addition of TBR and PCR coming on streamFeb-15 May finish its expansion plan at Chennai by mid-2015, taking total PCR and TBR capacity to 98 lakh tyre and 1.5 million tyre per annumSep-15 Signs binding term sheet with Kesoram Industries to acquire 100% stake Cavendish Industries for ~| 2200 crore


Top 10 Shareholders Shareholding Pattern Name Latest Filing Date % O/S Position (m) Change (m)JK Organisation 30-Sep-16 0.50 113.5 0.00Edgefield Securities, Ltd. 30-Sep-16 0.08 17.4 0.00Dimensional Fund Advisors, L.P. 30-Nov-16 0.02 4.2 0.00Tasha Investment Advisors Pvt. Ltd. 30-Sep-16 0.01 3.4 3.36LSV Asset Management 30-Sep-16 0.01 2.5 0.00Acadian Asset Management LLC 31-Dec-16 0.00 1.0 0.00Schroder Investment Management Ltd. (SIM) 30-Sep-16 0.00 0.9 0.89Van Eck Associates Corporation 31-Dec-16 0.00 0.5 -0.03Mellon Capital Management Corporation 31-Jan-17 0.00 0.5 0.02APG Asset Management 31-Dec-15 0.00 0.3 -0.04

(in %) Dec-15 Mar-16 Jun-16 Sep-16 Dec-16Promoter 52.3 52.3 52.3 52.3 52.3FII 19.4 18.6 17.8 20.7 21.2DII 10.4 9.9 9.9 11.4 10.0Others 18.0 19.3 20.0 15.6 16.5

Source: Reuters, ICICIdirect.com Research

Recent Activity

Investor name Value Shares Investor name Value SharesTasha Investment Advisors Pvt. Ltd. 7.51 3.36 Fidelity Management & Research (Hong Kong) Limited -3.60 -1.69Schroder Investment Management Ltd. (SIM) 1.98 0.89 LIC Mutual Fund Asset Management Company Ltd. -0.07 -0.04UTI International (Singapore) Pvt. Ltd. 0.30 0.18 Van Eck Associates Corporation -0.04 -0.03Mellon Capital Management Corporation 0.04 0.02 Goldman Sachs Asset Management (India) Private Ltd. 0.00 0.00BlackRock Advisors (UK) Limited 0.03 0.02

Buys Sells

Source: Reuters, ICICIdirect.com Research


.

Financial summary Profit and loss statement | Crore (Year-end March) FY16 FY17E FY18E FY19E

Total operating Income 6,953.1 7,458.1 8,280.3 9,317.9

Growth (%) 7.3 11.0 12.5

Raw Material Expenses 3,869.4 4,015.5 4,650.6 5,322.9

Employee Expenses 780.7 878.4 965.5 1,044.6

Other Expenses 1,161.5 1,292.3 1,300.1 1,435.6

Total Operating Expenditure 5,811.6 6,186.2 6,916.2 7,803.0

EBITDA 1,141.5 1,271.8 1,364.1 1,514.9

Growth (%) 11.4 7.3 11.1

Depreciation 183.7 291.2 265.0 260.9

Interest 245.4 439.7 387.5 326.7

Other Income 16.7 26.1 32.0 36.1

Exceptional Items 47.76 57.12 0.0 0

PBT 729.1 567.0 743.6 963.4

Total Tax 215.7 163.3 234.2 303.5

PAT 476.2 352.1 509.4 659.9

Growth (%) 44.5 -26.1 44.7 29.6FDEPS (|) 21.0 15.5 22.5 29.1


Cash flow statement | Crore (Year-end March) FY16 FY17E FY18E FY19E

Profit after Tax 476.2 352.1 509.4 659.9

Add: Depreciation 183.7 291.2 265.0 260.9

(Inc)/dec in Current Assets -141.2 -182.1 -363.7 -433.2

Inc/(dec) in CL and Provisions 42.8 148.5 248.5 277.2

CF from operating activities 561.5 609.8 659.2 764.9

(Inc)/dec in Investments -8.6 0.0 0.0 0.0

(Inc)/dec in Fixed Assets -510.8 -2,470.0 -300.0 -300.0

Others 75.2 825.2 63.9 80.6

CF from investing activities -444.2 -1,644.8 -236.1 -219.4

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

Inc/(dec) in loan funds -39.7 1,000.0 -300.0 -400.0

Dividend paid & dividend tax -68.3 -73.7 -79.2 -98.3

Others -305.8 -439.7 -387.5 -326.7

CF from financing activities -413.8 486.6 -766.7 -825.0

Net Cash flow -51.2 -108.7 43.9 47.2

Opening Cash 190.6 139.4 30.6 74.5Closing Cash 139.4 30.6 74.5 121.7


Balance sheet | Crore (Year-end March) FY16 FY17E FY18E FY19E

Liabilities

Equity Capital 45.4 45.4 45.4 45.4

Reserve and Surplus 1,703.1 1,981.4 2,411.6 2,973.2

Total Shareholders funds 1,748.5 2,026.8 2,457.0 3,018.6

Total Debt 2,669.7 3,669.7 3,369.7 2,969.7

Deferred Tax Liability 435.5 467.1 518.6 583.6

Other non-current liabilities 385.2 413.2 458.8 516.2

Minority Interest 0.0 786.0 786.0 786.0

Total Liabilities 5,238.9 7,362.8 7,590.1 7,874.2

Assets

Gross Block 6,051.4 8,527.1 8,827.1 9,177.1

Less: Acc Depreciation 2,298.4 2,589.6 2,854.6 3,115.5

Net Block 3,753.0 5,937.5 5,972.5 6,061.6

Capital WIP 105.7 100.0 100.0 50.0

Total Fixed Assets 3,858.7 6,037.5 6,072.5 6,111.6

Investments 154.8 154.8 154.8 154.8

Inventory 872.5 919.5 1,043.5 1,199.8

Debtors 1,402.7 1,491.6 1,656.1 1,838.1

Loans and Advances 625.8 671.2 745.3 838.6

Other current assets 10.2 10.9 12.1 13.6

Cash 139.4 30.6 74.5 121.7

Total Current Assets 3,050.6 3,123.9 3,531.5 4,011.8

Creditors 955.4 1,021.7 1,134.3 1,250.9

Provisions 406.0 434.2 482.0 531.6

Other current liabilities 744.3 798.3 886.3 997.4

Total Current Liabilities 2,105.6 2,254.1 2,502.7 2,779.9Net Current Assets 945.0 869.7 1,028.8 1,232.0Others 280.4 300.8 333.9 375.8Application of Funds 5,238.9 7,362.8 7,590.1 7,874.2


Key ratios (Year-end March) FY16 FY17E FY18E FY19E

Per share data (|)

EPS 21.0 15.5 22.5 29.1

Cash EPS 29.1 28.4 34.1 40.6

BV 77.1 89.4 108.3 133.1

DPS 2.5 2.7 2.9 3.6

Cash Per Share 6.1 1.4 3.3 5.4

Operating Ratios (%)

EBITDA Margin 16.4 17.1 16.5 16.3

PBIT / Net sales 13.8 13.1 13.3 13.5

PAT Margin 7.3 5.2 6.2 7.1

Inventory days 45.8 45.0 46.0 47.0

Debtor days 73.6 73.0 73.0 72.0

Creditor days 50.2 50.0 50.0 49.0

Return Ratios (%)

RoE 29.1 19.3 20.7 21.9

RoCE 20.1 14.5 15.9 17.5

RoIC 17.6 12.7 13.8 15.1

Valuation Ratios (x)

P/E 5.2 6.7 5.2 4.0

EV / EBITDA 4.5 4.9 4.3 3.6

EV / Net Sales 0.7 0.8 0.7 0.6

Market Cap / Sales 0.4 0.4 0.3 0.3

Price to Book Value 1.5 1.3 1.1 0.9

Solvency Ratios

Debt/Equity 1.5 1.8 1.4 1.0

Current Ratio 2.1 2.1 2.1 2.2Quick Ratio 1.5 1.5 1.5 1.5



ICICIdirect.com coverage universe (Auto & Auto Ancillary) CMP M Cap(|) TP(|) Rating (| Cr) FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E

Amara Raja (AMARAJ) 847 930 Hold 14472 28.5 29.4 37.3 29.7 28.8 22.7 18.1 17.1 13.7 31.2 26.2 27.9 23.2 20.1 21.2Apollo Tyre (APOTYR) 174 225 Buy 8789 21.7 22.1 22.9 8.0 7.9 7.6 5.0 5.9 5.8 19.9 15.1 13.5 17.1 15.6 14.2Ashok Leyland (ASHLEY) 93 105 Buy 26329 2.5 5.9 6.7 36.7 15.8 13.9 10.8 8.3 6.9 23.0 27.4 28.2 13.1 24.8 23.2Bajaj Auto (BAAUTO) 2790 3000 Hold 80740 126.8 142.2 156.3 22.2 19.8 18.0 16.6 16.8 14.7 42.2 38.9 38.1 29.9 28.9 27.9Balkrishna Ind. (BALIND) 1162 1400 Buy 11236 58.7 77.0 83.8 20.1 15.3 14.1 11.2 9.6 7.6 20.4 22.5 24.7 20.3 22.5 24.7Bharat Forge (BHAFOR) 1017 1150 Buy 23691 28.0 30.5 44.6 36.3 33.4 22.8 17.6 17.9 13.4 16.5 14.8 19.5 18.3 17.4 21.5Bosch (MICO) 22150 25250 Buy 69551 410.2 567.0 566.2 55.2 40.0 40.0 36.0 37.5 26.1 15.1 15.8 15.8 22.5 21.4 25.3Eicher Motors (EICMOT) 24769 28970 Buy 66900 633.4 772.3 927.4 39.1 32.1 26.7 21.8 16.8 13.5 40.2 40.5 38.6 36.4 33.5 30.6Escorts (ESCORT) 403 405 Hold 4807 7.5 14.1 26.0 52.2 27.8 15.1 29.7 14.6 9.7 4.6 12.0 16.0 4.8 8.5 13.7Exide Industries (EXIIND) 208 240 Buy 17714 7.3 8.4 9.3 28.4 24.9 22.4 16.0 14.3 12.4 19.4 19.9 20.2 14.0 14.6 14.8Hero Mototcorp (HERHON) 3099 3330 Buy 61877 156.9 170.9 181.6 19.8 18.1 17.1 13.4 12.4 11.6 53.6 49.6 46.8 39.4 36.4 34.0JK Tyre & Ind (JKIND) 116 145 Buy 2633 21.0 15.5 22.5 5.5 7.5 5.2 4.5 4.9 4.3 20.1 14.5 15.9 29.1 19.3 20.7Mahindra CIE (MAHAUT) 195 225 Buy 6284 6.2 10.6 13.1 31.5 18.3 14.8 12.5 9.1 7.3 7.3 11.0 12.1 8.5 12.3 14.1Maruti Suzuki (MARUTI) 5851 6765 Buy 176826 151.3 260.7 307.5 38.7 22.4 19.0 19.8 15.9 13.0 22.7 25.1 24.9 16.9 23.6 22.8Motherson (MOTSUM) 344 370 Hold 48267 9.1 10.4 14.0 37.9 33.0 24.5 15.4 12.0 9.7 19.9 17.8 19.6 30.0 18.8 21.7Tata Motors (TELCO) 435 595 Buy 132075 37.2 35.5 61.3 12.7 13.3 7.7 3.9 4.1 2.9 17.0 12.9 18.3 15.3 11.7 16.8Wabco India (WABTVS) 5384 6350 Buy 10230 107.7 124.7 156.6 50.0 43.2 34.4 35.0 28.6 23.0 19.4 18.5 19.1 25.5 25.5 26.3

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



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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

[email protected]


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