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February 22, 2019
Page | 1
February 22, 2019
ICICI Securities Ltd | Retail Equity Research
Result Update
Outperformance over industry continues…
Mahindra CIE (MCI) reported a robust Q4CY18 performance led by
healthy 220 bps QoQ margin improvement in European operations
On a consolidated basis, MCI reported sales of | 1873.3 crore, up
15.8% YoY. It included MCI India sales of | 762.7 crore, up 14.5% YoY
& MCI Europe sales of | 1119.9 crore, up 16.8% YoY
EBITDA margins at the consolidated level were at 14.7% (up 116 bps
QoQ) with MCI India reporting EBITDA margins of 14.9% (down 34 bps
QoQ) while the same at MCI Europe was at 14.4% (up 225 bps QoQ)
On a standalone basis, MCI reported a muted Q4CY18 performance.
Net sales came in at | 615 crore, up 9.5% YoY. MCI witnessed a 100
bps deterioration of EBITDA margins on a QoQ basis to 11.3%. This
coupled with impairment charge on investment led to a loss at the PAT
level (| 89.5 crore). MCI reported an exceptional loss to the tune of
| 128.6 crore towards write-offs with respect to its investment in
subsidiaries Stokes Group (| 116.1 crore, closure of business) and
Mahindra Forgings Europe AG (| 12.5 crore, sale to another subsidiary)
MCI India: exceeding growth at key clients; new launches, clients bode well
MCI India is a leading forging player in India with its contribution to MCI’s
consolidated topline at ~40%. As of CY18, forging constituted 43% of its
sales, followed by stamping (~27%), casting (~16%), gears (~7%),
magnetics (~4%) as well as composites (~3%). Top three clients at MCI
India constitute ~47% of sales. Its top clients include M&M, Maruti and Tata
Motors India (ex-MH&CV). The company has grown (21% YoY in CY18) in
excess of volume growth at its clients (weighted average 10.3% YoY),
thereby implying gain in wallet share. MCI India will also stand to gain from
the incremental model launches at its key clients. It includes Marazzo, XUV
300 as well as Alturas at M&M and Harrier at Tata Motors. Moreover, the
company will be doing forging for upcoming KIA Motors (Hyundai sister
concern) in India as well. In the EV space, it is currently supplying
composite to M&M for its EV vehicles and being considered by KIA Motors
for supplying composite for its EV vehicle slate as well. We believe this
continuous outperformance at its key clients as well as new client addition
amid adoption of new technologies bodes well for MCI. This is expected to
lead to above average industry growth for MCI India, going forward.
MCI Europe: Focus on margin improvement, steady growth prospects!
MCI Europe is a leading forging player in Europe with its contribution to
MCI’s consolidated topline at ~60%. As of CY18, CV forging constituted
45% of its sales, followed by PV forging (~43%) and gears (~12%). Top
three clients at MCI Europe constitute ~33% of sales. Its top clients include
Daimler, Renault and VW. The company witnessed volume growth of 16%
YoY in CY18 vs. PV car sales volume declining 2% in CY18 and CV sales
volume being largely flat. MCI Europe is largely operating at ~90-95% of its
capacity utilisation levels in this geography and largely focusing on
improvement in margin profile through internal efficiencies. It is likely to
witness steady growth prospects, going forward.
Healthy return ratios, ~15% earnings CAGR in CY18-20E, reiterate BUY!
MCI has successfully turned around its operations with margins in CY18 at
13.1% vs. 8% in FY15. It has also grown in excess of industry growth rates
through increasing its wallet share at its key clients. We expect this
outperformance to continue, going forward. We expect sales, PAT to grow
at a CAGR of 8.6% & 14.7%, respectively, in CY18-20E. We value MCI at
| 275 i.e. 8.5x EV/EBITDA on CY19E numbers. We have a BUY rating on the
stock. We also draw comfort from ~15% RoCE & >5% FCF yield at MCI.
Rating matrix
Rating : Buy
Target : | 275
Target Period : 12 months
Potential Upside : 22%
What’s Changed?
Target Changed from | 290 to | 275
EPS CY19E Changed from | 17.7 to | 17.0
EPS CY20E Introduced at | 19.1
Rating Unchanged
Standalone Quarterly Performance
(| Crore) Q4CY18 Q4CY17 YoY Q3CY18 QoQ
Revenues 614.9 561.5 9.5 652.4 -5.8
EBITDA 69.4 58.3 19.0 80.3 -13.5
EBITDA (%) 11.3 10.4 90 bps 12.3 -101 bps
Reported PAT -89.5 14.6 -711.0 42.5 -310.4
Key Financials
| Crore CY17 CY18P CY19E CY20E
Revenue 6,520 8,032 8,846 9,473
EBITDA 814.6 1,051.1 1,257.3 1,369.4
Net Profit 369.0 548.5 642.9 721.7
EPS (|) 9.7 14.5 17.0 19.1
Valuation summary
CY17 CY18P CY19E CY20E
P/E (x) 23.1 15.5 13.2 11.8
EV/EBITDA (x) 11.8 8.9 7.0 6.1
P/BV (x) 2.3 2.0 1.7 1.5
RoNW (%) 10.1 12.8 13.2 13.0
RoCE (%) 11.4 13.2 15.5 16.2
Stock data
Particular Amount
Market Capitalization (| Crore) | 8517.3
Total Debt (CY18) | 1613.38 Crore
Cash & Investments (CY18) | 793.9 Crore
EV | 9336.8 Crore
52 week H/L (|) 302 / 204
Equity capital (| crore) | 378.8 Crore
Face value (|) | 10
Price performance (%)
1M 3M 6M 12M
Mahindra CIE Automotive Ltd -6.1 -15.4 -11.9 2.6
Motherson Sumi Systems -18.6 -8.9 -34.2 -42.5
Bharat Forge Ltd -3.6 -20.5 -24.2 -37.6
Research Analyst
Shashank Kanodia, CFA
Jaimin Desai
jaimin.desai @icicisecurities.com
Mahindra CIE Automotive (MAHAUT) | 225
ICICI Securities Ltd | Retail Equity Research Page 2
Variance analysis- Standalone
Q4CY18 Q4CY18E Q4CY17 YoY(%) Q3CY18 QoQ(%) Comments
Total Operating Income 614.9 645.7 561.5 9.5 652.4 -5.8
Topline came in lower than our estimates primarily tracking inventory
correction at its key clients in India
Raw Material Expenses 340.6 351.9 281.9 20.8 362.5 -6.1
Employee Expenses 72.7 72.3 75.6 -3.8 72.7 0.0
Other expenses 132.2 135.6 145.7 -9.2 137.0 -3.5 Other expenses came in higher at 21.5% of sales
Operating Profit (EBITDA) 69.4 85.9 58.3 19.0 80.3 -13.5
EBITDA Margin (%) 11.3 13.3 10.4 90 bps 12.3 -101 bps
Margins came in lower than our estimates primarily tracking higher raw
material costs as well as other overheads
Other Income 11.0 4.2 1.0 997.4 1.0 997.4
Depreciation 18.1 18.6 22.8 -20.8 18.6 -2.5
Interest 2.5 1.0 3.3 -23.1 1.0 154.9
PAT -89.5 46.2 14.6 -711.0 42.5 -310.4
PAT came in at negative | 90 crore primarily incorporating provisions for
impairment on investments made in Strokes Group, which it plans to shut
down amid a declining profitability scenario
EPS -2.4 1.2 0.4 -711.0 1.1 -310.4
Key Metrics (| crore)*
MCIE India 762.7 815.3 666.1 14.5 815.3 -6.5
MCIE India revenues came in higher due to robust performance at Bill
Forge
EBITDA Margins % 14.9 15.2 12.4 242 bps 15.2 -34 bps Margins, however, came in muted
MCIE Europe 1,119.9 1,126.3 958.8 16.8 1,126.3 -0.6
MCIE Europe reported a robust performance primarily tracking CIE's
increasing wallet share at key clients despite muted volume growth
EBITDA Margins % 14.4 12.2 15.5 -110 bps 12.2 225 bps
European operations reported a positive surprise on EBITDA margins with
EBITDA margins for the quarter coming in at 14.4%
MCIE Consolidated 1,873.3 1,932.6 1,618.4 15.8 1,932.6 -3.1
EBITDA Margins % 14.7 13.5 14.3 35 bps 13.5 116 bps
Consolidated margins outperformance was led by better-than-expected
margins in European operations
Source: Company, ICICI Direct Research; *As reported in company presentation
Change in estimates
(| Crore) Old New % change Introduced Comments
Revenue 8,359.0 8,845.6 5.8 9,472.9 Marginally upgraded CY19E numbers tracking continuous outperformance by the company in
its key Indian as well as European markets
EBITDA 1,247.9 1,257.3 0.8 1,369.4
EBITDA Margin (%) 14.9 14.2 -72 bps 14.5 Rationalised CY19E numbers and introduced CY20E numbers
PAT 668.3 642.9 -3.8 721.7
EPS (|) 17.7 17.0 -3.8 19.1 Downward revision in margins leads to downward revision in EPS estimates for CY19E.
Introduced CY20E EPS at | 19.1/share
CY19E CY20E
Source: Company, ICICI Direct Research
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. The Board of directors approved a restructuring plan in
September 2018 and merged its subsidiary i.e. Bill Forge with itself, which
earlier was a part of consolidated performance. However, it is now a part of
standalone performance. The standalone business accounts for ~33% of
overall revenue for CY18 while the remaining ~67% is from its subsidiary.
Exhibit 1: Mahindra CIE – Legal Structure
Source: Company, ICICI Direct 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. However, the same will be margin
accretive, going forward. A turnaround further lifted its Metalcastello
business while CIE’s European business continues its stable operations.
MCI has embarked on its Phase 2 (2017-20) strategy, which focuses on
growth & profitability. The strategy can be broadly divided into two by 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 Bill Forge (BFL).
ICICI Securities Ltd | Retail Equity Research Page 4
Revenue growth to revive gradually
Mahindra CIE’s geography wise revenue mix is at 60:40 for outside/within
India. Segment wise, the forgings entity currently accounts for 70% of
revenue and would continue to dominate the overall pie of the consolidated
revenue. Other segments viz. stampings, gears, castings account for 11%,
10% and 7%, respectively, of revenue. The European market has decent
demand and is expected to recover gradually. The regular execution of new
orders (specifically of Caterpillar) and pick-up in sales of crankshaft from its
forging division will drive its demand from European market. Further MCI’s
growth in Europe will be higher than the overall industry, after MCI
increases its content per vehicle and will benefit from the consolidation of
vendors in Europe. MCI is well placed to cater to the global OEM against
relatively smaller regional players in Europe. However, Brexit may impact
MCI’s performance, to some extent, going forward. 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, Renault and Ford)
would support growth. Further, with growth in the domestic market
expected to remain buoyant, going forward, the revenue mix will gradually
shift as 60:40 for within/outside India. MCI will also start supplying products
to Kia Motors from 2019 onwards. Thus, we expect revenue CAGR of 8.6%
over CY18-20E to | 9,473 crore in CY20E (| 8,032 crore in CY18)
Exhibit 2: Modest revenue growth
5,570
3,861
5,320
6,520
8,032
8,846
9,473
(1.9)
(30.7)
37.8
22.6
23.2
10.1
7.1
-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
9,000
10,000
FY15 CY15 CY16 CY17 CY18P CY19E CY20E
(%
)
(| crore)
Revenue % increase
Source: Company, ICICI Direct 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 (%) – CY18
Forgings, 70.0%
Stampings, 11.0%
Gears, 10.0%
Castings, 7.0% Magnetics
Products, 1.0%
Composites, 1.0%
Source: Company, ICICI Direct 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)
CY17
(12M)
Forging IndiaCrankshafts, Stub
Axles
PV, UV and
Tractors
M&M, MSIL
and TML
370 275 430 459
Stamping India
Sheet metal
stamping, Component
& Assemblies
PV & UVM&M and
TML
665 482 705 844
Casting India
Turbocharger Housing,
Axles & Transmission
Parts
PV, UV,
Construction
Equipment,
Earthmoving,
Tractors &
export
M&M,
Hyundai, John
Deere, JCB,
Cummins
Turbo
411 285 406 440
Magnetic
Product
IndiaSoft & Hard Magnets,
Induction lighting
Tier 1 of PV,
UV & 2-W and
export
Denso,
Varroc, Lucas
TVS, Nippon
Electric, Bajaj
Auto
121 98 149 136
Composite IndiaCompound &
Component
Elctrical,
Switchgear,
Auto
Component
L&T
switchgear,
M&M, Volvo
Eicher
75 64 98 96
1643 1204 1787 1974
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 1,720
CIE
ForgingEurope
Forged steel parts for
Industrial,
Crankshafts, Common
rail, Stubs, Tulips
PV
VW, BMW,
Mercedes,
Audi, Reanult,
Fiat
1,489 1,037 1,486 1,708
Mahindra
Gears
IndiaGears (Engine, Timing,
Transmission)
PV & UV,
Tractors &
Export
M&M, Turner,
Eaton, NHFI,
Truck Tractor
CNH
138 106 159 192
Metallcast
elloEurope
Gears (Engine, Timing,
Transmission), Crown
wheel Pinion
Tractors,
Construction
Equipment,
Earthmoving,
Exports
John Deere,
Eaton CNH349 249 364 390
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 175 739
3927 2662 3768 4748
5570 3866 5555 6722Consolidated Revenue
Total Standalone Revenue
Total Subsidiary Revenue
Standalone business
Subsidiaries
Source: Company, ICICI Direct 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 is helping MCI to diversify its segment, customer and
reach, thus benefiting it. MCI 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. It
exports mainly 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
is not only helping MCI to 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 western India. BFL 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 done in the European operations [Mahindra Forging Europe (MFE)
and Metalcastello, Italy] will drive European margins, going forward. The
EBIT margin target of ~10% of the management is now achievable. Thus,
we estimate the progression of EBITDA margins will be smooth on the way
(14.2% in CY19E and 14.5% in CY20E vs. 13.1% in CY18).
Exhibit 5: EBITDA margin to grow strongly
440
378
531 815
1,051
1,257
1,369
7.9
9.8 10.0
12.5 13.1
14.2 14.5
-
2
4
6
8
10
12
14
16
-
200
400
600
800
1,000
1,200
1,400
1,600
FY15 CY15 CY16 CY17 CY18P CY19E CY20E
(%
)
(| crore)
EBITDA EBITDA Margin (%)
Source: Company, ICICI Direct 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 to gallop to | 722 crore in CY20E with PAT margins
improving to 7.6%. The company has followed this path to improvement
since CY15. We may see a significant improvement in CY19E & CY20E with
PAT margins likely to come in at 7.3% & 7.6%, respectively.
Exhibit 6: Profit to start getting pumped up as operational improvement kicks in!
(78)
39.6
169
369 549
643
722
(1.4)
2.3
3.2
5.7
6.8 7.3
7.6
-2
-1
-
1
2
3
4
5
6
7
8
9
-200
-100
-
100
200
300
400
500
600
700
800
FY15 CY15 CY16 CY17 CY18P CY19E CY20E
(%
)
(| crore)
PAT PAT Margin (%)
Source: Company, ICICI Direct 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
MCI has successfully turned around its operations with EBITDA margins in
CY18 at 13.1% vs. 8% in FY15. It has also grown in excess of the industry
growth rates through increasing its wallet share at its key clients. We expect
this outperformance to continue, going forward. We expect sales, PAT to
grow at a CAGR of 8.6% & 14.7%, respectively, in CY18-20E. We value MCI
at | 275 i.e. 8.5x EV/EBITDA on CY19E numbers. We assign a BUY rating to
the stock. We also draw comfort from ~15% RoCE & >5% FCF yield at MCI.
Exhibit 7: Valuation
Pariculars
CY19E EBITDA (| crore) 1257
Implied target EV/EBITDA (x) 8.5
EV (| crore) 10687
CY19E Net Debt (| crore) 299
Mcap (| crore) 10388
No. of shares (crore) 37.9
Target Price (| per share) 275
Source: Company, ICICI Direct Research
Exhibit 8: Valuation
Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE
(| cr) (%) (|) (%) (x) (x) (%) (%)
CY16 5,121.3 39.3 4.5 96.0 50.4 18.3 5.4 6.9
CY17 6,254.7 22.1 9.7 118.4 23.1 11.8 10.1 11.4
CY18P 7,648.5 22.3 14.5 48.6 15.5 8.9 12.8 13.2
CY19E 8,454.9 10.5 17.0 17.2 13.2 7.0 13.2 15.5
CY20E 9,074.4 7.3 19.1 12.3 11.8 6.1 13.0 16.2
Source: Company, ICICI Direct 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-19Nov-18Aug-18May-18Mar-18Dec-17Sep-17Jun-17Mar-17Dec-16Sep-16Jun-16Mar-16
(%
)(|)
Price Idirect target Consensus Target Mean % Consensus with BUY
Source: Bloomberg, Company, ICICI Direct 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, ICICI Direct 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-18 56.3 213.2 0.00
2 Mahindra Group 31-Dec-18 11.4 43.3 0.00
3 Ruane, Cunniff & Goldfarb, Inc. 31-Dec-18 3.8 14.4 14.40
4 Sundaram Asset Management Company Limited 31-Dec-18 2.2 8.2 -1.49
5 Ainos Holdings Ltd. 31-Dec-18 2.1 8.0 0.00
6 Haridass (Anil) 31-Dec-18 1.5 5.6 0.00
7 UTI Asset Management Co. Ltd. 31-Dec-18 1.4 5.2 0.19
8 Haridass (Anjali Powar) 31-Dec-18 1.4 5.1 -0.60
9 Franklin Templeton Asset Management (India) Pvt. Ltd. 31-Dec-18 1.2 4.4 1.24
10 Life Insurance Corporation of India 31-Dec-18 1.2 4.4 0.00
(in %) Dec-17 Mar-18 Jun-18 Sep-18 Dec-18
Promoter 69.9 69.8 69.8 67.8 67.7
FII 5.7 5.6 5.0 7.7 9.7
DII 7.1 7.8 8.4 4.9 7.3
Others 17.2 16.8 16.9 19.7 15.3
Source: Reuters, ICICI Direct Research
Recent Activity
Investor name Value(m$) Shares(m) Investor name Value(m$) Shares(m)
Ruane, Cunniff & Goldfarb, Inc. 53.20 14.40 Prudential Management & Services Pvt. Ltd. -18.00 -4.78
Franklin Templeton Asset Management (India) Pvt. Ltd. 4.59 1.24 IDFC Asset Management Company Private Limited -7.55 -2.11
APG Asset Management 0.93 0.25 Sundaram Asset Management Company Limited -5.51 -1.49
UTI Asset Management Co. Ltd. 0.70 0.19 Aditya Birla Sun Life AMC Limited -2.80 -0.76
Taurus Asset Management Co. Ltd. 0.08 0.02 Haridass (Anjali Powar) -2.22 -0.60
Buys Sells
Source: Reuters, ICICI Direct Research
ICICI Securities Ltd | Retail Equity Research Page 10
.
Financial summary
Profit and loss statement | Crore
(Year-end March) CY17 CY18P CY19E CY20E
Total operating Income 6,520.0 8,031.5 8,845.6 9,472.9
Growth (%) 22.6 23.2 10.1 7.1
Raw Material Expenses 2,854.9 3,631.5 3,994.9 4,265.0
Employee Expenses 1,176.0 1,329.7 1,437.3 1,524.5
Other Expenses 1,674.5 2,019.2 2,156.0 2,314.0
Total Operating Expenditure 5,705.4 6,980.5 7,588.3 8,103.5
EBITDA 814.6 1,051.1 1,257.3 1,369.4
Growth (%) 53.4 29.0 19.6 8.9
Other Income 26.9 38.7 42.6 45.4
Interest 54.5 50.2 65.7 45.7
Depreciation 262.8 286.7 315.8 338.2
PBT 517.3 752.8 918.4 1,031.0
Total Tax 148.3 204.3 275.5 309.3
PAT before Minority Interest 369.0 548.5 642.9 721.7
Minority Interest 0.0 0.0 0.0 0.0
PAT after Minority Interest 369.0 548.5 642.9 721.7
EPS (|) 9.7 14.5 17.0 19.1
Source: Company, ICICI Direct Research.
Cash flow statement | Crore
(Year-end March) CY17 CY18P CY19E CY20E
Profit after Tax 369.0 548.5 642.9 721.7
Add: Depreciation 262.8 286.7 315.8 338.2
(Inc)/dec in Current Assets -445.2 -73.7 -208.4 -178.1
Inc/(dec) in CL and Provisions 360.3 -54.0 176.6 154.0
CF from operating activities 601.5 757.8 992.5 1,081.4
(Inc)/dec in Investments -42.1 -5.6 -29.2 -22.5
(Inc)/dec in Fixed Assets -366.2 -402.6 -442.3 -473.6
Others -89.6 -699.6 -70.2 -77.8
CF from investing activities -497.9 -1,107.8 -541.7 -573.9
Interest Paid -54.5 -50.2 -65.7 -45.7
Inc/(dec) in loan funds -165.2 416.5 -300.0 -400.0
Dividend paid & dividend tax 0.0 0.0 -44.3 -44.3
Others 89.7 25.0 0.0 1.0
CF from financing activities -130.0 391.4 -410.0 -489.0
Net Cash flow -26.4 41.4 40.9 18.5
Opening Cash 98.1 71.7 113.1 153.9
Closing Cash 71.7 113.1 153.9 172.5
Source: Company, ICICI Direct Research.
Balance sheet | Crore
(Year-end March) CY17 CY18P CY19E CY20E
Liabilities
Equity Capital 378.4 378.8 378.8 378.8
Reserve and Surplus 3,337.2 3,910.3 4,508.9 5,187.3
Total Shareholders funds 3,715.6 4,289.1 4,887.7 5,566.1
Total Debt 1,196.9 1,613.4 1,313.4 913.4
Minority Interest 0.0 0.0 0.0 0.0
Total Liabilities 5,422.7 6,416.0 6,839.0 7,151.0
Assets
Gross Block 6,172.2 6,539.1 7,017.3 7,491.0
Less: Acc Depreciation 4,258.4 4,545.1 4,860.8 5,199.0
Net Block 1,913.9 1,994.0 2,156.5 2,292.0
Capital WIP 60.2 96.0 60.0 60.0
Total Fixed Assets 1,974.1 2,090.0 2,216.5 2,352.0
Investments 55.0 680.8 860.8 960.8
Goodwill 2,836.4 2,911 2,911 2,911
Inventory 989.8 1,228.6 1,332.9 1,427.4
Debtors 598.4 741.4 811.9 869.4
Other current assets 401.6 193.7 213.3 228.5
Cash 71.7 113.1 153.9 172.5
Total Current Assets 2,061.6 2,276.8 2,512.0 2,697.8
Creditors 1,574.3 1,683.9 1,817.6 1,946.5
Provisions 19.6 44.9 60.9 65.2
Other Current Liabilities 505.2 265.4 292.3 313.0
Total Current Liabilities 2,099.1 1,994.2 2,170.8 2,324.8
Net Current Assets -37.6 282.6 341.2 373.0
Application of Funds 5,422.7 6,416.0 6,839.0 7,151.0
Source: Company, ICICI Direct Research.
Key ratios
(Year-end March) CY17 CY18P CY19E CY20E
Per share data (|)
EPS 9.7 14.5 17.0 19.1
Cash EPS 16.7 22.1 25.3 28.0
BV 98.2 113.3 129.1 147.0
DPS 0.0 0.0 1.0 1.0
Cash Per Share 1.9 3.0 4.1 4.6
Operating Ratios (%)
EBITDA Margin 12.5 13.1 14.2 14.5
PAT Margin 5.7 6.8 7.3 7.6
Inventory days 55.4 55.8 55.0 55.0
Debtor days 33.5 33.7 33.5 33.5
Creditor days 88.1 76.5 75.0 75.0
Return Ratios (%)
RoE 10.1 12.8 13.2 13.0
RoCE 11.4 13.2 15.5 16.2
RoIC 26.3 25.6 28.0 28.5
Valuation Ratios (x)
P/E 23.1 15.5 13.2 11.8
EV / EBITDA 11.8 8.9 7.0 6.1
EV / Net Sales 1.5 1.2 1.0 0.9
Market Cap / Sales 1.3 1.1 1.0 0.9
Price to Book Value 2.3 2.0 1.7 1.5
Solvency Ratios
Debt/Equity 0.3 0.4 0.3 0.2
Current Ratio 1.1 1.2 1.2 1.2
Quick Ratio 0.6 0.5 0.5 0.5
Source: Company, ICICI Direct Research.
ICICI Securities Ltd | Retail Equity Research Page 11
ICICI Direct coverage universe (Auto & Auto Ancillary)
CMP M Cap
(|) TP(|) Rating (| Cr) FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E
Amara Raja (AMARAJ) 738 700 Hold 12610 27.6 30.2 39.8 26.8 24.4 18.6 14.8 13.1 10.2 23.3 22.0 24.7 16.0 15.2 17.1
Apollo Tyre (APOTYR) 200 225 Buy 11950 12.7 14.2 22.5 16.5 14.7 9.3 6.7 6.7 5.7 7.8 9.1 11.0 7.4 9.1 11.1
Ashok Leyland (ASHLEY) 80 85 Hold 22600 5.3 6.4 7.8 15.0 12.5 10.3 7.3 6.6 5.0 28.1 28.2 31.9 21.9 23.2 24.3
Bajaj Auto (BAAUTO) 2767 2380 Hold 80074 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) 828 820 Hold 15825 38.2 42.5 49.8 21.4 19.3 16.4 14.2 11.6 9.5 22.4 21.0 22.4 18.1 21.0 22.4
Bharat Forge (BHAFOR) 472 535 Buy 21994 16.2 23.5 27.6 29.2 20.1 17.1 13.9 11.5 9.9 18.2 21.1 23.3 17.3 20.8 21.4
Bosch (MICO) 18066 17565 Hold 56728 449.1 545.6 622.9 40.2 33.1 29.0 25.1 22.4 18.9 14.4 14.9 15.2 21.4 22.2 22.6
Eicher Motors (EICMOT) 20488 21250 Hold 55851 718.9 848.4 1112.9 28.5 24.1 18.4 19.0 16.7 12.3 39.1 34.6 35.3 29.9 26.0 26.4
Escorts (ESCORT) 656 700 Hold 8040 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) 206 235 Hold 17497 8.2 8.4 9.8 25.0 24.6 21.0 15.2 14.1 12.0 19.1 17.6 19.1 13.0 12.2 13.1
Hero Moto (HERHON) 2615 3000 Buy 52220 185.1 174.5 199.9 14.1 15.0 13.1 8.7 9.0 7.7 42.4 38.0 39.0 31.4 26.9 27.4
JK Tyre & Ind (JKIND) 85 82 Hold 1933 2.9 10.0 22.0 29.3 8.5 3.9 9.2 5.8 4.1 7.7 12.2 16.1 3.6 12.9 19.2
Mahindra CIE (MAHAUT) 225 275 Buy 8528 14.5 17.0 19.1 15.5 13.2 11.8 8.9 7.0 6.1 12.8 13.2 13.0 13.2 15.5 16.2
Maruti Suzuki (MARUTI) 6842 6000 Hold 205792 255.6 250.3 284.4 25.5 26.0 22.9 13.5 13.8 11.8 21.1 17.8 18.8 18.5 16.3 16.6
Motherson (MOTSUM) 134 125 Hold 42316 5.1 5.3 7.0 26.5 25.3 19.2 9.3 8.5 6.8 16.3 15.2 18.0 17.4 15.7 18.0
Tata Motors (TELCO) 165 145 Hold 49228 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) 6020 6800 Hold 11438 143.8 172.2 212.3 41.9 35.0 28.4 28.0 24.1 19.1 17.9 17.8 18.2 25.1 25.7 26.0
Sector / Company
RoE (%)EPS (|) P/E (x) EV/EBITDA (x) RoCE (%)
Source: Company, ICICI Direct Research
ICICI Securities Ltd | Retail Equity Research Page 12
RATING RATIONALE
ICICI Direct endeavours 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 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]
ICICI Direct 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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