mahindra & mahindra august 08, 2019 - icici...

ICIC

I S

ecurit

ies –

Retail E

quit

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esearch

Result

Update

August 8, 2019

CMP: | 520 Target: | 570 ( 10%) Target Period: 12 months

Mahindra & Mahindra (MAHMAH)

HOLD

Reasonable valuations factor in benign outlook…

M&M reported a stable Q1FY20 performance. Standalone net sales at

| 12,923 crore were down 4.4% YoY tracking 6% YoY & 14.3% YoY decline

in automotive volumes & tractor volumes, respectively. Standalone EBITDA

margins at 12.6% (up 83 bps sequentially) were aided by lower input costs

& other expenses as a percentage of sales. However, a jump in employee

costs contained the benefits. Automotive EBIT margins were down 200 bps

QoQ to 4.8% while tractor EBIT margins rose 300 bps QoQ to 19.3%.

Consequent standalone PAT at | 2,314 crore was aided by exceptional

investment-related gains of | 1,367 crore. Adjusted PAT was at ~| 950 crore.

Leadership in UV, tractor segment to be maintained!

M&M’s 4-W portfolio is concentrated in the faster-growing UV segment. The

company’s new product launches here (XUV300, Marazzo and Alturas G4)

have received an enthusiastic customer response, helping the company

relatively outperform peers during a sharper slowdown in the broader PV

space, with M&M increasing UV market share by ~115 bps YoY to 25% as

of June 2019. In the domestic tractor segment, the company has largely held

on to its dominant position (market share in excess of 40%) amid strong

competitive intensity. Similarly, in other automotive segments (3-W, LCV),

the company has largely managed to withstand competition and maintain

its market share. We anticipate M&M will continue to hold fort in its dominant

competencies even as the industry landscape continues to undergo

disruption in addition to a challenging demand scenario.

Muted volume growth limits room for margin expansion

While we expect the company to not lose meaningful ground to competition,

the prospects for its core automotive and FES businesses remain subdued

in the near to medium term, given a high base (particularly tractors) and

poor demand sentiment. Negative operating leverage is seen pinching

margins as the focus shifts to cost control, with the upcoming BS-VI

changeover complicating matters further. Consequently, we expect M&M to

clock EBITDA margins of 12.6% in FY20E & 11.2% in FY21E.

Valuation & Outlook

We expect sales & EBITDA to grow at 7.1% and 1.8% CAGR, respectively,

for M&M in FY19-21E (with PAT seen declining to ~| 3,950 crore), amid

muted outlook for core tractor and PV businesses accompanied by attendant

pressure on margins. In our SOTP methodology, we value the standalone

business at 6x EV/EBITDA (FY21E basis) and arrive at a target price of | 570

for the company, downgrading it to HOLD. We feel current valuations,

however, offer relative comfort against the rest of the OEM pack given the

company’s strong financials, R&D focus and ongoing efforts on the EV front.

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

Net Sales 44,053.5 48,685.6 53,614.0 55,380.3 61,459.9 7.1%

EBITDA 4,514.7 6,224.1 6,639.6 6,966.0 6,883.9 1.8%

EBITDA Margins (%) 10.2 12.8 12.4 12.6 11.2

Net Profit 3,643.4 4,356.0 4,796.1 5,524.9 3,947.9 -9.3%

EPS (|) 29.3 35.0 38.6 44.4 31.8

P/E 17.7 14.8 13.5 11.7 16.4

RoNW (%) 12.0 13.4 14.1 11.7 9.6

RoCE (%) 14.7 17.3 17.3 14.7 13.2

Key Financial Summary

Source: ICICI Direct Research, Company

Particulars

Particular Amount

Market Capitalization (| crore) 64,646.4

Total Debt (FY19, | crore) 2,480.3

Cash and Investments (FY19, | crore) 6,733.9

EV (FY19, | crore) 60,392.8

52 week H/L (|) 992 / 515

Equity capital (| crore) (FY19) 595.8

Face value (|) | 5

Key Highlights

Standalone sales dip 4.4% in

Q1FY20 tracking 6% auto volume

decline and 14.3% tractor volume

drop

Standalone margins of 12.6% up 83

bps QoQ, aided by lower raw

material costs

Growth outlook remains benign for

both core businesses, with limited

scope for margin improvement

amid negative operating leverage as

well as cost increase due to BS-VI

transition

Downgrade from BUY to HOLD with

revised target price of | 570; valuing

M&M on SOTP basis

Research Analyst

Shashank Kanodia, CFA

[email protected]

Jaimin Desai

[email protected]

ICICI Securities | Retail Research 2

ICICI Direct Research

Result Update | Mahindra & Mahindra

Exhibit 1: Variance Analysis

Q1FY20 Q1FY20E Q1FY19 YoY (%) Q4FY19 QoQ (%) Comments

Total Operating Income 12922.7 12929.9 13519.9 -4.4 14035.2 -7.9 Topline came in line with our estimates at | 12,923 crore

Raw Material Expenses 9159.1 9235 9557 -4.2 10037 -8.7

M&M realised savings out of raw material cost with RM as

percentage of sales for quarter coming in at 70.9%, down 60

bps QoQ

Employee Expenses 784.1 776 752 4 709 11

Other expenses 1356.8 1,422 1,340 1.2 1,643 -17.4Other expenses also came in lower by 120 bps QoQ to 10.5% in

Q1FY20

EBITDA 1622.7 1,497.2 1,871.6 -13.3 1,645.8 -1.4

EBITDA Margin (%) 12.6 11.6 13.8 -129 bps 11.7 83 bps EBITDA margins came in healthy at 12.6% primarily tracking

savings realised in raw material costs as well as other

Other income 319.1 251.7 265.0 20.4 236.8 34.8

Depreciation 545.4 506 393 38.8 533 2.4 Depreciation came in higher and will be a new normal, going

Interest 27.1 31 33 -17 28 -3

Tax 422.6 364 511 -17.3 368 14.7

PAT 2313.8 848 1221 89.5 849 172.6

PAT for the quarter came in higher tracking beat on margins as

well as exceptional gains amounting to | 1367 crore on account

of sales of some investments as well gains on shares sold by

M&M benefit trust

EPS 9.3 7.2 9.7 -4.0 7.4 25.6

Key Metrics

Automotive revenues (|

crore)

8100.7 8,069 8,188 -1.1 10,442 -22.4 Segmental revenues were largely on expected lines

FES revenues (| crore) 4382.2 4,525 5,007 -12.5 3,206 36.7

EBITDA margins (%) 12.6 11.6 13.8 -129 bps 11.7 83 bps

Source: Company, ICICI Direct Research

Exhibit 2: Change in estimates

FY20E FY21E

(| Crore) Introduced Introduced Comments

Revenue 55,380 61,460 We expect revenues at M&M to grow at a CAGR of 7.1% over FY19-21E

EBITDA 6,966 6,884

EBITDA Margin (%) 12.6 11.2

EBITDA margins in FY20E are expected to improve 20 bps YoY to 12.6% and then

optically dip to 11.2% in FY21E due to increase in ASPs & costs associated with BS-

VI (same in absolute numbers)

PAT 5,525 3,948

EPS (|) 44.4 31.8 Earnings CAGR expected to be muted at M&M, going forward


Exhibit 3: Assumptions

Introduced Introduced Comments

Units FY18 FY19 FY20E FY21E

Automotive volumes 548,664 608,597 611,015 630,142On automobile front; with UV as its major forte, we expect M&M to outperform

industry and post 0.4% YoY growth in FY20E followed by 3.1% growth in FY21E

Automotive ASP's (|) 580,009 580,892 617,579 679,472ASP increase primarily tracking increase in regulatory compliance costs due to

increased mandatory safety features as well transition to BS-VI (April 2020)

FES Volumes 318,538 330,436 317,087 332,322On FES front, we expect M&M to maintain its market leadership with 40%+ market

share. However, industry is expected to consolidate over FY19-21E

FES ASPs (|) 505,232 510,679 505,643 510,001 Tractor ASPs expected to be largely stable





Conference Call Highlights

Management outlook/guidance and demand

M&M believes the worst may be over on the tractor side, with the

industry posting flattish growth for FY20E if the remaining eight months

registering ~8% volume growth. Continued normal rains and a good

Rabi sowing season would be upside risks to the management’s outlook

The company refrained from giving growth outlook on the PV side.

However, it is hopeful of outpacing the industry

The issues currently facing the industry are three-pronged:

(a) Financing – Tighter financing norms resulting in ~20% drop in

customers, fall in car LTV ratio over the past 12-18 months from ~90%

earlier to ~80% levels now and poor transmission of interest rate cuts

by banks

(b) Transaction costs – Higher insurance incidence and cost increase

relating to regulatory changes and registration fees, etc

(c) Sentiment – Adversely impacted by a general economic slowdown

and lower government spend in rural areas along with deficient

monsoons in some parts

It believes solutions lie in better policy rate transmission, improved

financing terms, a relook at current road taxes and GST structure,

possible rollback of insurance cost increases and a well thought out

scrappage policy

The management, however, sees some green shoots in the form of

recent normalisation of monsoons and low inflation. Growth in H2FY20E

could possibly be supported by some pre-buy before BS-VI rollout, the

festive season and a favourably low base from last year

Under BS-VI, the company sees 1.2 L diesel engine migrating fully to

petrol and the mix in 1.2-2.0L diesel engine (i.e. sub-4m UV) to migrate

from current 75:25 (diesel: petrol) to ~50:50. Diesel, however, is seen

retaining prominence in larger capacity engines (>2.0 L)

M&M has ~5,000 EV units on ground. In its view, recent policy initiatives

have made the e-3W and e-4W (fleet) segments viable for customers

from an affordability standpoint

The company’s relative volume performance in Q1FY20 was aided by

new product launches. SsangYong performance was hurt by slowdown

in South Korea market and strong export geographies for the subsidiary

Sales, costs and margins

M&M realised ~0.5% benefits from lower commodity prices in Q1FY20;

these are expected to continue in Q2FY20 also

The company maintained gross margins in FES while automotive EBIT

margins were hurt by model mix skewness towards recent launches

Higher depreciation during the quarter was on account of elevated

amortisation costs on newer products introduced. The same is likely to

persist, going forward, with FY21E depreciation set to increase due to

rollout of BS-VI compliant vehicles

Others

Dealership closures for M&M are limited to a handful (single digit).

Channel inventory is normal, barely ~2,000-3,000 units (~2 days) higher

than usual in both, PV & tractors.




Annual Report FY19 - Key takeaways

Key developments during the year

Revealed electric hyper-car Pininfarina Battista and revived iconic

motorcycle brand, Jawa

Mahindra Electric Mobility sets up EV technology manufacturing facility

in Bangalore at an outlay of | 100 crore

Electric Vehicle (EV)

The company has invested in manufacturing battery packs, power

electronics and motor assembly and power train. It is also investing

| 500 crore on EV Project under new EV Policy of Maharashtra

government for product development and capacity enhancement of EV

and components

M&M is developing EV versions of KUV10 and XUV300 to complement

existing EV offerings in 3-W, 4-W and LCV range

During FY19, the company along with Mahindra Electric Mobility sold

10,276 EVs (1,811 4-W & 8,465 3-W) vs. 4,026 units YoY in FY18

JV, collaborations and acquisitions

Furthered strategic collaboration with Ford by signing definitive

agreements for a) supplying BS-VI compliant gasoline engines to Ford

in India, b) joint development of connected vehicle solutions to be used

by M&M and Ford, c) developing, manufacturing and supplying of a new

midsize SUV by M&M to Ford

Acquired 10% stake in Canadian startup Resson Aerospace, which is

focused on precision agriculture solutions

Mahindra Agri Solutions entered into 60:40 JV with Sumitomo

Corporation for crop care business

Incorporated step-down subsidiary Automobili Pininfarina GmBH for

design, engineering & manufacture of high technology and luxury EVs

All assets and liabilities of 100% subsidiary MVML transferred to M&M

at book value effective April 1, 2019

Exhibit 4: M&M’s EV manufacturing facility in Bangalore

Source: Company

According to M&M, share of diesel in passenger

cars has declined from 47% in FY13 to 19% in FY19.

However, for utility vehicles, demand for diesel

vehicles continue to be strong with diesel powered

UVs accounting for 83% of volume in FY19

The company’s R&D spend at 5% of sales highlights

its innovation focus




Financial story in charts

Exhibit 5: Top line trend

40875

44054

48686

53614

55380

61460

5.0

7.8

10.5 10.1

3.3

11.0

-

2

4

6

8

10

12

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

FY16 FY17 FY18 FY19 FY20E FY21E

(%

)

(| crore)

Total Operating Income Growth (%)


Exhibit 6: Segment wise revenue trend

7,682

7,890

7,115

9,136

8,188

8,639

8,084

10,442

8,101

4,321

3,958

4,098

3,716

5,007

4,028

4,634

3,206

4,382

0

1,500

3,000

4,500

6,000

7,500

9,000

10,500

12,000

Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20

(| crore)

Automotive Farm Equipment


Exhibit 7: Segment wise volume trend

117

138

129

165

140

151

143

175

132

85

81

82

71

101

78

91

61

86

0

20

40

60

80

100

120

140

160

180

200

Q1FY18

Q2FY18

Q3FY18

Q4FY18

Q1FY19

Q2FY19

Q3FY19

Q4FY19

Q1FY20

(000's

)

Automotive Farm Equipment


We expect sales to grow at a CAGR of 7.1% over

FY19-21E

Segment wise revenue mix for quarter i.e. Q1FY20

was at automotive: tractor: others: 63:34: 3

In Q1FY20; automotive segment volumes declined

6% YoY to 132 K units while sales for tractors

declined 14.3% YoY to 86,000 units




Exhibit 8: M&M tractor market share movement

222

203

250

304

317

550

491

598

728

787

40.4

41.3 41.8 41.8

40.3

30.0

32.0

34.0

36.0

38.0

40.0

42.0

44.0

100

200

300

400

500

600

700

800

900

FY15 FY16 FY17 FY18 FY19

(%

)

('0

00 units)

M&M Domestic tractor industry M&M market share (RHS)

Source: CRISIL, ICICI Direct Research

Exhibit 9: M&M UV market share movement

207

222

223

234

235

552

587

762

922

941

37.5 37.9

29.2

25.4 25.0

20.0

22.0

24.0

26.0

28.0

30.0

32.0

34.0

36.0

38.0

40.0

100

200

300

400

500

600

700

800

900

1,000

FY15 FY16 FY17 FY18 FY19

(%

)

('0

00 units)

M&M Domestic UV segment M&M market share (RHS)

Source: SIAM, ICICI Direct Research

Exhibit 10: EBITDA and EBITDA margin trend

4620

4515

6224

6640

6966

6884

11.3

10.2

12.8

12.4 12.6

11.2

8

10

12

14

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000


(%

)

(| crore)

EBITDA EBITDA Margins (%)


M&M outperformed industry in Q1FY20 with market

share regaining to ~43% as of quarter end

M&M is a leading UV player domestically. With

impressive launches in the recent past; we expect the

company to gain notable market share over FY19-21E

We build in 12.6% & 11.2% as EBITDA margins in

FY20E and FY21E, respectively




Exhibit 11: Profitability trend

3153

3220

4046

4819

4494

3948 3.2

2.1

25.7

19.1

(6.7)

(12.1)

(15)

(10)

(5)

-

5

10

15

20

25

30

-

1,000

2,000

3,000

4,000

5,000

6,000


(%

)

(| crore)

PAT Growth (%)


Exhibit 12: Return ratios trend

17.5

14.7

17.3 17.3

14.7

13.2

14.3

12.0

13.4

14.1

11.7

9.6

8

11

14

17

20


(%

)

RoCE RoE


PAT CAGR is in negative territory for M&M over

FY19-21E primarily tracking high base in FY19

RoCE profile at M&M is seen deteriorating to ~13%

by FY21E




Exhibit 13: Valuation matrix (SOTP Valuation)

Automotive Business (UV+PV+CV+Tractors) | crore |/share

Standalone business

FY21E EBITDA 6,884

Assigning EV/EBITDA Multiple of 6x 6.0

Enterprise Value 41,303 332

Net Debt (5,616) -45

Value of Standalone Business (A) 46,919 377

Mahindra Vehicle Manufacturers Ltd

Investment made by M&M (wholly owned subsidiary) 4,065

Assigning 0.5x P/B on investment value 0.5

Value of MVML attributable to M&M (B) 2,033 16

Total value of automobile business (C= A+B) 394

Value of Investments (listed companies)

M&M

stake

Estimated

value

Contribution

to M&M

(%) | crore | crore |/share

Tech Mahindra 26 63,893 16,650 134 IDirect Target market cap*

M&M Financial Services 51 22,241 11,387 92 IDirect Target market cap*

Mahindra Life space 52 1,949 1,005 8 IDirect Target market cap*

Mahindra CIE 11 8,717 997.2 8 IDirect Target market cap*

Mahindra Holidays & Resorts 67 2,840 1911.3 15 Current market cap*

SsangYong Motors 75 2,610 1,958 16 Current market cap*

Other subsidiaries & investments 9,850 79

Total Value of subsidiaries & associates (D) 43,758.3 352

Value of investments post 50% holding company discount (E = 0.5*D) 176

M&M Target Price (value of equity per share , C+E) 570

Valuation Matrix (SOTP)

Remark

Source: ICICI Direct Research

Exhibit 14: Valuation Summary

Sales Growth DEPS Growth PE EV/EBITDA RoNW RoCE

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

FY18 48,685.6 10.5 35.0 19.6 16.0 9.7 13.4 17.3

FY19 53,614.0 10.1 38.6 10.1 13.4 9.1 14.1 17.3

FY20E 55,380.3 3.3 44.4 15.2 14.4 8.5 11.7 14.7

FY21E 61,459.9 11.0 31.8 (28.5) 16.4 8.6 9.6 13.2

Source: Bloomberg, ICICI Direct Research




Exhibit 15: Recommendation history vs. consensus

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

400

600

800

1,000

1,200

1,400

1,600

1,800

Aug-19May-19Mar-19Dec-18Oct-18Jul-18May-18Mar-18Dec-17Oct-17Jul-17May-17Mar-17Dec-16Oct-16

(%

)(|)

Price Idirect target Consensus Target Mean % Consensus with BUY

Aug-16

Source: Reuters, ICICI Direct Research

Exhibit 16: Top 10 shareholders

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

1 Prudential Management & Services Pvt. Ltd. 30-Jun-19 11.9 141.5 0.00

2 Life Insurance Corporation of India 30-Jun-19 11.2 133.4 10.13

3 M&M Benefit Trust 30-Jun-19 7.1 84.5 -19.20

4 M&M Farm Equipment Employees Welfare Fund 3-Jun-19 7.1 84.5 84.47

5 Mahindra & Mahindra Employees Stock Option Trust 23-Jul-19 4.3 51.2 -0.09

6 Stewart Investors 31-May-19 3.9 46.3 -0.25

7 SBI Funds Management Pvt. Ltd. 30-Jun-19 2.5 29.2 0.22

8 Caisse de Depot et Placement du Quebec 30-Jun-19 2.0 23.4 22.57

9 BlackRock Institutional Trust Company, N.A. 31-Jul-19 1.9 22.1 -0.11

10 The Vanguard Group, Inc. 30-Jun-19 1.8 21.1 -0.18

Source: Reuters, ICICI Direct Research, ICICI Direct Research

Exhibit 17: Recent activity

Investor name Value Shares Investor name Value Shares

M&M Farm Equipment Employees Welfare Fund +802.98M +84.47M M&M Benefit Trust -182.52M -19.20M

Caisse de Depot et Placement du Quebec +214.59M +22.57M ICICI Prudential Life Insurance Company Ltd. -125.08M -13.16M

Life Insurance Corporation of India +96.34M +10.13M CPP Investment Board -12.24M -1.26M

GIC Private Limited +10.75M +1.13M APG Asset Management N.V. -8.73M -0.90M

MFS Investment Management +8.89M +0.94M First State Investments (HK) Ltd. -6.67M -0.72M

Buys Sells


Exhibit 18: Shareholding pattern

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

Promoter 21.7 21.6 21.6 21.5 19.9

FII 34.0 34.0 33.0 31.3 34.5

DII 21.3 21.2 21.9 23.4 24.1

Others 23.1 23.2 23.6 23.8 21.6





Financial Summary

Exhibit 19: Profit and loss statement | crore

(Year-end March) FY18 FY19 FY20E FY21E

Total operating Income 48,685.6 53,614.0 55,380.3 61,459.9

Growth (%) 10.5 10.1 3.3 11.0

Raw Material Expenses 34,134.7 38,256.5 39,429.7 45,211.9

Employee Expenses 2,840.9 2,980.2 3,169.9 3,389.7

Other Expenses 5,486.0 5,737.7 5,814.8 5,974.4

Total Operating Expenditure 42,461.5 46,974.4 48,414.3 54,576.0

EBITDA 6,224.1 6,639.6 6,966.0 6,883.9

Growth (%) 37.9 6.7 4.9 -1.2

Depreciation 1,479.4 1,860.4 2,215.2 2,458.4

Interest 112.2 113.4 114.5 97.5

Other Income 1,036.4 1,689.0 1,320.4 1,311.8

PBT 5,668.8 6,354.8 5,956.7 5,639.9

Others (incl exceptional item) -433.6 29.7 -1,367.1 0.0

Total Tax 1,746.4 1,529.0 1,798.8 1,692.0

PAT 4,356.0 4,796.1 5,524.9 3,947.9

Growth (%) 19.6 10.1 15.2 -28.5

EPS (|) 35.0 38.6 44.4 31.8


Exhibit 20: Cash flow statement | crore


Profit after Tax 4,356.0 4,796.1 5,524.9 3,947.9

Add: Depreciation 1,479.4 1,860.4 2,215.2 2,458.4

(Inc)/dec in Current Assets -2,219.3 -1,803.9 -658.1 -1,255.7

Inc/(dec) in CL and Provisions 3,559.6 1,230.8 306.6 1,475.3

CF from operating activities 7,175.7 6,083.4 7,388.7 6,625.8

(Inc)/dec in Investments -2,784.7 -1,341.3 -2,800.0 -1,800.0

(Inc)/dec in Fixed Assets -2,658.7 -3,373.7 -3,000.0 -3,000.0

Others 227.4 734.7 -9.3 -32.1

CF from investing activities (5,216.0) (3,980.4) (5,809.3) (4,832.1)

Issue/(Buy back) of Equity -2.5 -195.9 0.0 0.0

Inc/(dec) in loan funds 91.5 -384.1 -300.0 -300.0

Dividend paid & dividend tax -1,118.9 -1,268.1 -1,268.1 -1,342.7

Others 276.4 582.9 -0.2 -0.2

CF from financing activities (753.5) (1,265.2) (1,568.3) (1,642.9)

Net Cash flow 1,206.2 837.8 11.1 150.9

Opening Cash 1,687.5 2,893.7 3,731.5 3,742.7

Closing Cash 2,893.7 3,731.5 3,742.7 3,893.6


Exhibit 21: Balance Sheet | crore


Liabilities

Equity Capital 595.0 595.8 595.8 595.8

Reserve and Surplus 29,699.1 33,613.4 37,870.3 40,475.5

Total Shareholders funds 30,294.0 34,209.2 38,466.1 41,071.3

Total Debt 2,864.4 2,480.3 2,180.3 1,880.3

Deferred Tax Liability 277.2 634.1 634.1 634.1

Others 1,326.4 1,487.9 1,536.9 1,705.6

Total Liabilities 34,762.0 38,811.5 42,817.4 45,291.4

Assets

Gross Block 17,892.0 21,974.6 25,394.4 28,394.4

Less: Acc Depreciation 10,032.5 11,892.9 14,108.1 16,566.5

Net Block 7,859.5 10,081.7 11,286.3 11,827.9

Capital WIP 3,128.7 2,419.8 2,000.0 2,000.0

Total Fixed Assets 10,988.3 12,501.5 13,286.3 13,827.9

Other investments 16,645.5 19,032.1 21,032.1 23,032.1

Liquid Investments 4,047.6 3,002.4 3,802.4 3,602.4

Inventory 2,701.7 3,839.3 4,096.6 4,546.4

Debtors 3,173.0 3,946.3 4,248.4 4,714.7

Loans and Advances 975.2 673.4 695.6 771.9

Other current assets 581.4 539.2 2,061.8 2,321.8

Cash 2,893.7 3,731.5 3,742.7 3,893.6

Total Current Assets 9,549.0 9,001.3 12,426.9 15,068.6

Creditors 6,881.1 8,603.4 9,678.2 9,862.3

Provisions 565.5 667.4 688.7 701.8

Total Current Liabilities 7,446.6 9,270.8 10,366.9 10,564.1

Net Current Assets 2,102.5 (269.5) 2,060.0 4,504.6

Application of Funds 34,762.0 38,811.5 42,817.4 45,291.4


Exhibit 22: Key ratios


Per share data (|)

EPS 35.0 38.6 44.4 31.8

Cash EPS 46.9 53.5 62.3 51.5

BV 243.7 275.2 309.4 330.4

DPS 7.5 8.5 8.5 9.0

Cash Per Share 23.3 30.0 30.1 31.3

Operating Ratios (%)

EBITDA Margin 12.8 12.4 12.6 11.2

PBT / Net sales 9.7 8.9 8.6 7.2

PAT Margin 11.3 11.3 9.0 8.3

Inventory days 20.3 26.1 27.0 27.0

Debtor days 23.8 26.9 28.0 28.0

Creditor days 64.5 65.9 65.0 65.0

Return Ratios (%)

RoE 13.4 14.1 11.7 9.6

RoCE 17.3 17.3 14.7 13.2

RoIC 94.5 60.2 49.9 44.9

Valuation Ratios (x)

P/E 14.8 13.5 11.7 16.4

EV / EBITDA 9.7 9.1 8.5 8.6

EV / Net Sales 1.2 1.1 1.1 1.0

Market Cap / Sales 1.3 1.2 1.2 1.1

Price to Book Value 2.1 1.9 1.7 1.6

Solvency Ratios

Debt/Equity 0.1 0.1 0.1 0.0

Current Ratio 0.8 0.8 0.9 0.9

Quick Ratio 0.5 0.5 0.6 0.6





Exhibit 23: ICICI Direct Research 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

Amara Raja (AMARAJ) 645 590 Reduce 11017 28.3 31.1 33.8 22.3 20.3 18.6 11.0 9.7 8.7 21.2 21.0 20.5 14.5 14.3 14.0

Apollo Tyre (APOTYR) 153 145 Hold 8741 11.9 14.8 16.2 12.6 10.1 9.3 6.8 6.8 6.4 8.0 7.7 8.2 8.3 8.0 8.2

Ashok Leyland (ASHLEY) 61 70 Hold 17951 6.8 5.3 5.5 9.1 11.5 11.1 6.1 6.6 6.2 26.9 23.1 22.7 24.3 17.4 16.7

Bajaj Auto (BAAUTO) 2632 2360 Reduce 76175 161.6 160.5 168.7 15.4 15.5 14.8 11.0 10.3 9.4 21.0 19.2 25.3 19.9 19.1 18.1

Balkrishna Ind. (BALIND) 729 740 Hold 14087 40.5 40.9 45.3 19.2 19.0 17.2 11.8 10.6 9.1 20.4 19.0 19.3 16.7 19.0 19.3

Bharat Forge (BHAFOR) 410 535 Buy 32590 22.2 23.8 25.4 21.0 19.5 18.3 11.9 11.0 10.3 18.4 18.5 19.1 19.1 17.9 17.5

Bosch (MICO) 14225 15550 Reduce 43416 523.6 538.6 573.1 32.5 31.6 29.7 23.3 22.0 20.5 17.5 15.9 15.0 25.8 23.5 22.3

Eicher Motors (EICMOT) 16577 15875 Hold 45189 808.1 821.9 903.2 20.2 19.9 18.1 14.3 13.6 11.7 32.5 27.7 26.1 24.8 20.8 19.4

Escorts (ESCORT) 468 430 Reduce 4157 54.6 47.3 53.4 8.5 9.8 8.6 5.1 4.9 4.2 21.6 18.0 18.0 15.6 12.3 12.3

Exide Industries (EXIIND) 176 205 Hold 14981 9.1 11.2 12.4 18.1 16.1 14.6 10.6 8.5 7.6 18.4 20.9 20.9 12.9 14.2 14.2

Hero Moto (HERHON) 2540 2200 Hold 50724 169.5 187.4 175.5 13.6 12.3 13.1 8.4 8.2 7.4 37.1 32.0 31.5 26.3 22.5 22.1

JK Tyre & Ind (JKIND) 56 60 Hold 1263 7.8 3.4 9.1 7.3 16.8 6.3 6.3 6.8 5.6 10.2 7.9 10.1 10.3 3.5 8.9

Mahindra & Mahindra (MAHMAH) 520 570 Hold 64646 38.6 44.4 31.8 13.5 11.7 16.4 9.1 8.5 8.6 17.3 14.7 13.2 14.1 11.7 9.6

Mahindra CIE (MAHAUT) 176 230 Buy 6647 13.2 14.1 17.1 14.8 13.8 11.4 7.8 7.8 6.4 12.4 11.1 11.9 13.2 12.6 14.2

Maruti Suzuki (MARUTI) 5773 5000 Reduce 174391 248.3 221.2 250.0 22.8 25.5 22.6 12.3 13.6 11.6 16.3 12.0 13.0 16.3 13.4 13.9

Motherson (MOTSUM) 94 125 Hold 29716 5.1 5.0 6.5 23.5 23.9 18.4 8.5 8.5 6.6 13.5 12.3 16.0 14.7 13.2 15.5

Tata Motors (TELCO) 120 160 Hold 50934 -84.6 9.3 21.4 -1.8 16.1 7.0 3.9 3.6 3.1 5.4 9.1 11.3 7.1 9.8 15.4

Wabco India (WABTVS) 6070 6510 Hold 11513 148.8 157.7 178.3 41.7 39.3 34.8 26.6 24.5 21.5 15.9 14.5 14.3 23.0 21.4 21.0

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





RATING RATIONALE

ICICI Direct endeavors to provide objective opinions and recommendations. ICICI Direct assigns ratings to its

stocks according to their notional target price vs. current market price and then categorizes them as Buy, Hold,

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

as the analysts' valuation for a stock

Buy: >15%

Hold: -5% to 15%;

Reduce: -15% to -5%;

Sell: <-15%

Pankaj Pandey Head – Research [email protected]

ICICI Direct Research Desk,

ICICI Securities Limited,

1st Floor, Akruti Trade Centre,

Road No 7, MIDC,

Andheri (East)

Mumbai – 400 093

[email protected]




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