rating matrix apollo tyres (apotyr) rating : buy target : | 228...

August 21, 2015

ICICI Securities Ltd | Retail Equity Research

Company Update

Margin expansion to outstrip revenues! • Apollo Tyres’ (ATL) revenues at | 2845 crore (down 12.4%) were

below our estimate of | 3098 crore, mainly led by 7% YoY de-growth in its standalone business (volume, price were down ~3.5% each)

• Consolidated EBITDA margins were at 17.7% vs. our estimate of 16.1% mainly led by lower input cost (NR + crude derivatives)

• PAT at | 291 crore (up 27.5% YoY) was above our estimate: | 228 crore • We believe ATL would have higher margins mainly due to lower raw

material cost, which is likely to remain benign in the medium term ATL remains dual tyre play - India + Europe! We believe ATL’s focus on geographically de-risking the business augurs well for the future. The increasing radialisation trend in the domestic T&B segment where it commands market share of ~25% is likely to improve radial volumes, albeit capacity constraint would hinder immediate growth possibilities. With the European business growing in line with the market, the capex planned for expanding capacity in Eastern Europe augurs well as existing capacity in Europe is operating at ~90% utilisation. Its exit from the non-profitable South African business is a further positive for ATL. However, capacity constraints on the radial side and surplus nylon capacity in the domestic market may cause a drag on sales growth. Major capacity addition in growth & margin segments a positive The Vredestein brand is a highly profitable business for ATL specialising in high performance summer and winter tyres. VBV is a >25% RoCE business operating at ~90% capacity utilisation. Thus, ATL has planned a greenfield plant in Hungary with spend likely to be ~€500 million over the next four or five years. Domestically, with the rapid move towards radialisation, ATL is among dominant players likely to benefit from dominant players in the truck & bus radial (TBR) segment. Hence, ATL embarked on a capacity expansion at its Chennai TBR plant (existing utilisation for TBR capacity ~90%). Raw material prices likely to remain benign, supporting margins! Raw materials prices have softened significantly over the past three or four years. Natural rubber (NR) prices have declined from | 250/kg in 2011 to | 131/kg in June 2015. Apart from NR, prices of crude linked materials like synthetic rubber, carbon black & fabrics have also softened. We expect raw material prices to remain benign while ATL’s margin profile is likely to remain stable even though there have been recent price cuts on the nylon side. We believe the domestic tyre market will remain split between strong pricing on the radial side with intermittent issues on the nylon truck side. Decent business case as valuations remain fair! ATL’s growth prospects appear muted in the near term mainly due to capacity constraints, slower OEM demand and stiff competition from Chinese players. However, the company is investing towards more diversified, rapid growth areas coupled with larger scale of business for coming years. As the outlook on raw material prices is favourable, this lends additional support to earnings. We build in revenue growth of ~4% CAGR in FY15-17E (South African business included in FY15) and earnings growth of ~10% in FY15-17E. Hence, we continue to remain positive on the stock valuing at 10x FY17E EPS to arrive at a target price of | 228. We maintain BUY recommendation.

Rating matrix Rating : BuyTarget : | 228

Target Period : 12 monthsPotential Upside : 17%

What’s Changed?

Target Unchanged | 228EPS FY16E Changed from | 22.6 to | 21.2EPS FY17E Unchanged at | 22.8Rating Unchanged

Quarterly Performance (| Crore) Q1FY16 Q1FY15 YoY Q4FY15 QoQRevenues 2,845.3 3,247.6 -12.4 3,117.6 -8.7EBITDA 502.5 428.7 17.2 517.9 -3.0EBITDA (%) 17.7 13.2 446 bps 16.6 105 bpsReported PAT 290.6 227.9 27.5 307.5 -5.5

Key Financials | Crore FY14 FY15 FY16E FY17ENet Sales 13,311 12,726 12,656 13,834 EBITDA 1,876.2 1,930.7 2,109.8 2,226.2 Net Profit 1,005.8 955.3 1,069.8 1,147.0 EPS (|) 20.0 19.0 21.2 22.8

Valuation summary

FY14 FY15 FY16E FY17EP/E (x) 9.7 10.2 9.1 8.5 Tgt P/E (x) 11.4 12.0 10.7 10.0 EV/EBITDA (x) 5.7 5.1 5.1 5.1 P/BV (x) 2.1 1.9 1.7 1.4 RoNW (%) 22.0 18.9 18.4 16.8 RoCE (%) 23.7 26.0 24.2 20.5

Stock data Particular AmountMarket Capitalization (| Crore) | 9779 CroreTotal Debt (FY15) (| Crore) | 801 CroreCash & Investments (FY15) (| Crore) | 695 CroreEV (| Crore) | 9885 Crore52 week H/L (|) 249 / 155Equity capital (| crore) | 50.4 CroreFace value (|) | 1

Price performance (%)

1M 3M 6M 12MApollo Tyres Ltd 3.3 6.4 7.2 13.2JK Tyres 19.2 -1.9 -7.1 101.0CEAT Ltd 50.8 40.5 39.0 104.1MRF Ltd 21.6 21.6 7.1 81.2Balkrishna Industries Ltd -1.6 -10.3 1.1 -10.0

Apollo Tyres (APOTYR) | 194

Research Analyst

Nishit Zota

[email protected]

Vidrum Mehta

[email protected]


Variance analysis- Consolidated (| crore) Q1FY16 Q1FY16E Q1FY15 YoY (%) Q4FY15 QoQ (%) CommentsTotal Operating Income 2,845 3,174 3,248 -12.4 3,118 -8.7 Below estimates; mainly after a decline in revenue of its standalone business

& discontinuance of its South African businessRaw Material Expenses 1,439 1,649 1,833 -21.5 1,763 -18.4 Lower raw material prices (NR + crude derivates) benefitEmployee Expenses 359 393 432 -16.9 338 6.1Other expenses 545 621 554 -1.6 498 9.4EBITDA 503 511 429 17.2 518 -3.0EBITDA Margin (%) 17.7 16.1 13.2 446 bps 16.6 105 bps Lower input cost expand marginsDepreciation 89 94 100 -11.7 88 1.1Interest 24.3 52.5 53.0 -54.1 35 -30.0Other income 25.4 25.0 29.0 -12.4 -5.9 -531.2Tax 124.5 107.0 76.4 62.8 79 58.4PAT 290.6 282.2 227.9 27.5 307.5 -5.5 Profitability largely driven by margin expansionEPS (|) 5.8 5.6 4.5 27.5 6.1 -5.5Key MetricsRevenue (| crore)India 2,155 2,298 2,328 -7.4 2,245 -4.0 Subdued demand environment & stiff competition from Chinese tyres

impacted its topline performanceEurope 770.7 1,164.0 875.9 -12.0 926.0 6.9EBIT Margin (%)India 16.8 12.5 10.7 609 bps 13.5 331 bps Margin expansion mainly due to lower raw material costEurope 11.1 12.6 11.9 -85 bps 10.3 78 bps

Source: Company, ICICIdirect.com Research Change in estimates (| Crore) Old New % Change Old New % Change CommentsRevenue 13,149 12,727 -3.2 14,260 13,924 -2.4 Subdued demand environment in both domestic as well as in European business

is likely to impact its performance; hence we have moderated our revenue estimate

EBITDA 1,950 2,110 8.2 2,040 2,226 9.1EBITDA Margin (%) 14.8 16.6 175 bps 14.3 16.0 168 bps Benefit of lower raw material prices (NR + crude derivative) is likely to continue

in the near termPAT 1,141 1,070 -6.2 1,150 1,147 -0.3EPS (|) 22.6 21.2 -6.1 22.8 22.8 -0.2

Source: Company, ICICIdirect.com Research Assumptions

FY14 FY15E FY16E FY17E FY16E FY17EIndiaTotal Tonnage Sold (MT) 404180.8 425384.2 432175.7 453784.5 448,765 479,617 Chinese competition likely to impact the company perfromanceRealisation per kg (|) 212 208 206 210 205 208 Better product mix to improve realisationNatural Rubber price (|/kg) 160 138 133 137 133 138 Sustained weakness in rubber prices witnessed over the past 12-15 months is

likely to continueEuropeTotal Tonnage Sold (MT) 67,383 71,956 77,713 82,764 74,834 78,977 Volume growth to pick with demand recovery and new capacity additionRealisation per MT ('000 €) 7,076 6,722 5,791 5,762 6,061 6,261 Stiff competition resulting into lower pricing power coupled with inventory

liquidation could impact realisations, going forward alsoEBIT per MT (€) 1,013 862 700 750 979 1,064 We have cut EBIT for the European business on account of sales growth in other

subsidiaries, which are weak on EBITDA

Source: Company, ICICIdirect.com Research


Key conference call takeaways • According to the management, the domestic tyre industry continues

to face growth challenges and has been adversely impacted by cheaper imported Chinese tyres in the domestic market. Further, the recent Chinese Yuan depreciation would further be more negative for domestic manufacturers. According to the management, Chinese imports are up 30% QoQ. ATL’s market share in the Indian truck and bus radial (TBR) replacement segment is at ~25% and has almost equal share to that of Chinese tyres

• Chinese truck bus radial (TBR) tyres are at ~30% discount to Indian

TBR tyres. This eventually results as the prices of Chinese TBR tyres are almost at par with Indian truck bus bias (TBB) tyres. To face this competition, ATL had taken a price cut of ~2% in the TBB segment during the quarter

• Consolidated revenue mix in terms of replacement and OEM is 75:25,

respectively. Segment wise, TBB and TBR account for 33% each of its revenue while 17% is through PCR segment and the remaining 17% is from other segments like industrial, LCV & farm tyres

• The company has planned a capex of | 7000 crore over the next three

years. Of this, | 4000 crore would be on its domestic business (~| 2700 crore for TBR capacity expansion and | 1300 crore on other capacity conversion & for maintenance purpose) while | 3000 crore is for expanding its European (Hungary) capacity

• ATL’s overall current capacity is at ~1440 tonnes/day. The current

TBR capacity at its Chennai plant is ~6,000 tyres/day (utilisation level at ~90%), which can be extended up to ~6400 tyres/day via de-bottlenecking. With the market shifting towards radial tyres, ATL plans to double its capacity to 12000 tyres/day over the next three years

• During Q1FY16, revenues from the domestic business declined 7.4%

YoY; with volume and price contributing the equal share of~3.5% • ATL’s European business revenue, in euro terms, was up 2% YoY,

with volume growth of ~8% during Q1FY16. However, an unfavourable exchange rate (in terms of translation) impacted its performance

• The restructuring exercise of its South African business is almost

complete. From Q2FY16 onwards it would only be a trading subsidiary

• ATL is also looking at exploring the 2-W segment and wishes to enter

the space, going forward • On a consolidated basis, its gross debt has reduced from | 1100 crore

in Q4FY15 to | 800 crore in Q1FY16. The company is debt free at the net debt levels

• The overall radialisation is likely to improve from 35% in FY15 to 70%

over the next five years


Company Analysis Strong global player – good business diversification across geographies!!

A quick glance at Apollo’s consolidated performance shows an increase in contribution of the European subsidiary from FY10 onwards. Revenue and profit contribution from Europe has increased from ~24% in FY10 to ~30% in FY15. With further capacity expansion planned for ~€500 million in Eastern Europe over the next four or five years, we expect a consistent increase in revenues and profitability for ATL after FY15. In Q1FY16, the constant currency growth for Europe was at 2% YoY (volume growth of 8% YoY). However, an unfavourable foreign currency movement impacted translated revenues in Q1FY16, which declined 13% YoY. ATL has completed the restructuring of its South African operations. From Q2FY16E onwards it would only be a trading subsidiary and would not be contributing meaningfully to its consolidated revenue. Exhibit 1: Revenue break-up - Geography-wise

5,03

7

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2,850 2,992 3,943 4,032 3,9074,440

1,097 1,183

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Exhibit 2: Profitability contribution - Geography-wise

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481 67

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(| c

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India Europe



Revenue growth strong on radial TB side as overall recovery muted! We have factored in a modest revenue growth at ~4% CAGR in FY15-17E, mainly led by volume growth. We believe the domestic market will improve but the radialisation trend in the truck bus segment would hurt companies with higher nylon capacity. Although in Indian operations, replacement forms ~65% of total revenues, we expect the share to remain steady as major OEM demand in the coming years in tonnage terms is expected to be in radial where ATL is already operating at ~90% utilisation. Further competition from cheaper imported Chinese tyre in the M&HCV space is taking away some of the replacement demand from Indian branded tyre players, thus registering moderate growth for ATL. Exhibit 3: We build modest revenue growth at 4% CAGR in FY15-17E

8,86

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Sales % growth


EBITDA margins to remain strong as RM price outlook soft! ATL’s margins have expended from 9.6% to 15.1% from FY12 to FY15 on the back of a reduction in raw material prices. Prices of natural rubber (account for ~40% of raw material cost) declined from | 250/kg in 2011 to ~| 131/kg in June 2015. We believe margins are likely to sustain above 16%, going forward, as we expect raw material prices to remain benign at least in the medium term. Also, a higher mix in terms of radial tyres to its overall revenue is likely to expand margins, going forward. We, thus, estimate margins at 16.6%, 16% in FY16E, FY17E, respectively.

Exhibit 4: EBITDA margins to remain strong over FY15-17E

978

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EBITDA EBITDA Margins (%)



Exhibit 5: Margin movement with RM trend

65.3

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10.6 11.1 10.911.9 11.7

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Raw materials/Sales Contribution OPM (LHS)


Exhibit 6: Declining trend of rubber prices!!

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Strong capital structure in capital intensive, cyclical business! Despite the capital intensiveness and cyclicality of the business, ATL has managed to maintain decent balance sheet strength. With net D/E at comfortable ~0.2x levels, we believe this is the company’s greatest strength in the good RoCE business. Despite the increase in borrowings due to huge capex planned of ~| 2,000 crore each for the next two years, the D/E ratio is likely to remain comfortable at these levels as CFO generation remains strong and would contribute to account for the bulk of the expenditure.


Exhibit 7: Comfortable debt position in high RoCE business!

0.8 0.8

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0.20.2

15.2 15.617.5

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(x)

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Nebt Debt/Equity RoCE


Strong CFO generation to lead to low debt levels despite capex plans!!! From ~| 295 crore in FY11, the CFO has increased to ~| 1800 crore in FY15, mainly due to lower input cost (natural rubber) and more of a price discipline maintained by domestic players. With OEM demand soon likely to revive, we expect volumes to improve, going forward. This would further sustain CFOs even as ATL embarks on a capex in FY17E in Eastern Europe and on enhancing capacity in the domestic business. Exhibit 8: CFOs on up trend!

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CFO Capex Debt



Profitability to remain at elevated levels as demand returns! With the expected demand revival, we believe volumes will improve as OE demand is likely to increase, going forward. This would help the company to post healthy profits with stable margins. The major reason for the increase in profitability has been a reduction in raw material prices coupled with a reduction in debt and, thereby, interest payment and stable depreciation. We expect FY16E, FY17E to witness PAT margin above 8.0% levels.

Exhibit 10: EBITDA growth vs. interest/depreciation trend

978

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EBITDA Interest Depreciation


Exhibit 9: Profit margins to remain as operational improvement kicks in!!!

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PAT PAT Margin (%)

Source: Company press release, ICICIdirect.com Research


Outlook and valuation ATL’s growth prospects appear muted in the near term due to capacity constraints, slower OEM demand and competition from imported Chinese tyres. However, the company is investing towards more diversified, rapid growth areas coupled with larger scale of business for coming years. ATL’s new European facility is slated to aid the current capacity crunch faced by Vredestein coupled with strong domestic demand improvement from FY17E onwards. With a low D/E profile, decent return ratios and strong operating cash flow visibility in the near term, the company is placed much better in this business cycle vis-à-vis previous up cycles due to its largely diversified and global scale of business. With the outlook on raw material prices favourable, this lends additional room for valuation multiples to expand. We build in earnings growth of ~4% CAGR in FY15-17E (South African business included in FY15). We continue to value the stock at 10x FY17E EPS and maintain our target price of | 228 with a BUY recommendation on the stock.

Exhibit 11: Valuation Revenues Growth EPS Growth PE EV/EBITDA RoNW RoCE

(| cr) (%) (|) (%) (x) (x) (%) (%)FY14 13311.0 4.8 20.0 64.0 9.7 5.7 22.0 23.7FY15 12725.6 -4.4 19.0 -5.0 10.2 5.1 18.9 26.0FY16E 12656.1 -0.5 21.2 12.0 9.1 5.1 18.4 24.2FY17E 13833.5 9.3 22.8 7.2 8.5 5.1 16.8 20.5



Company snapshot

Target Price : 228

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(|)

Source: Bloomberg, Company, ICICIdirect.com Research Key events

Date EventOct-10 Rubber prices start moving up on production concerns in Thailand on excessive rainsAug-11 Rubber prices begin to stabilise as production picks upJun-13 Apollo announces Cooper Tire deal acquisitionOct-13 Cooper deal under pressure on China labour strikeOct-13 Cooper Tire files suit against ApolloDec-13 Cooper Tire terminates deal with Apollo; court dismisses Cooper appealFeb-14 Cooper Tire files suit against ApolloJun-14 Apollo to invest ~|400 crore at its Kerala facility to expand its Off-highway tyre capacitySep-14 Company to invest greenfield facility at Hungary and is likely to invest Euro 475 million over next 4 to 5 yearsSep-14 Apollo Tyre Africa voluntarily decides to cease its business operations Oct-14 RBI hikes FII limit for investment upto 45% of paid up capital in Apollo TyreMay-15 Apollo plans to invest |1500 crore to expand its Truck bus radial (TBR) capacity at its Chennai plant from 6000 units/ day to 9000 units/dayAug-15 Board approves ATL's plans to raise debt of | 2,000 crore by way of rupee term loan, foregin currency term loan, NCDs from time to time

Source: Company, ICICIdirect.com Research Top 10 Shareholders Shareholding Pattern Rank Name Latest Filing Date % O/S Position (m) Change (m)1 Apollo Finance, Ltd. 30-Jun-15 10.66 54.3 17.532 Neeraj Consultants Pvt. Ltd. 30-Jun-15 8.35 42.5 0.003 Sunrays Properties & Investment Company Pvt. Ltd. 30-Jun-15 7.02 35.7 0.004 Constructive Finance Pvt. Ltd. 30-Jun-15 5.82 29.6 0.005 Apollo International, Ltd. 31-Mar-15 3.44 17.5 0.006 UTI Asset Management Co. Ltd. 31-May-15 2.92 14.9 0.177 Classic Auto Tubes, Ltd. 30-Jun-15 2.85 14.5 0.008 Mehta (Ashwin Shantilal) 30-Jun-15 2.65 13.5 0.009 ICICI Prudential Asset Management Co. Ltd. 30-Jun-15 2.61 13.3 1.6810 Skagen AS 30-Jun-15 2.56 13.0 0.67

(in %) Jun-14 Sep-14 Dec-14 Mar-15 Jun-15Promoter 44.1 44.1 44.1 44.1 44.1FII 36.8 34.2 35.0 30.7 24.4DII 6.4 8.4 8.0 10.9 17.7Others 12.8 13.4 13.0 14.3 13.9

Source: Reuters, ICICIdirect.com Research

Recent Activity

Investor name Value Shares Investor name Value SharesApollo Finance, Ltd. 46.92m 17.53m Caisse de Depot et Placement du Quebec -15.56m -4.39m William Blair & Company, L.L.C. 13.32m 4.67m Carmignac Gestion -11.24m -4.23m APG Asset Management 12.49m 3.76m Dimensional Fund Advisors, L.P. -10.19m -3.81m ICICI Prudential Asset Management Co. Ltd. 4.51m 1.68m Van Eck Associates Corporation -7.99m -2.41m Franklin Templeton Asset Management (India) Pvt. Ltd. 3.64m 1.36m L&T Investment Management Limited -3.97m -1.47m

Buys Sells

Source: Reuters, ICICIdirect.com Research


.

Financial summary Profit and loss statement | Crore

(Year-end March) FY14 FY15 FY16E FY17E

Total operating Income 13,412.6 12,785.1 12,726.8 13,924.2

Growth (%) 4.8 -4.7 -0.5 9.4

Raw Material Expenses 7,772.0 7,062.8 6,208.5 6,800.0

Employee Expenses 1,614.6 1,633.6 1,729.0 1,924.8

Other Expenses 2,149.8 2,158.1 2,679.5 2,973.2

Total Operating Expenditure 11,536.4 10,854.4 10,617.0 11,698.0

EBITDA 1,876.2 1,930.7 2,109.8 2,226.2

Growth (%) 28.8 2.9 9.3 5.5

Depreciation 410.9 410.9 407.5 477.7

Interest 283.8 182.7 181.9 136.0

Other Income 97.8 53.8 0.0 0.0

PBT 1,232.6 1,308.5 1,520.4 1,612.4

Exceptional items 0.0 0.0 -46.8 0.0

Total Tax 226.9 353.2 450.5 465.4

PAT 1,005.8 955.3 1,069.8 1,147.0

Growth (%) 64.2 -5.0 12.0 7.2EPS (|) 20.0 19.0 21.2 22.8


Cash flow statement | Crore(Year-end March) FY14 FY15 FY16E FY17E

Profit after Tax 1,005.8 955.3 1,069.8 1,147.0

Add: Depreciation 410.9 410.9 407.5 477.7

(Inc)/dec in Current Assets -187.8 490.6 -172.1 -316.5

Inc/(dec) in CL and Provisions 304.8 -60.1 63.2 354.0

CF from operating activities 1,533.7 1,796.6 1,368.5 1,662.2

(Inc)/dec in Investments 0.0 -100.0 0.0 0.0

(Inc)/dec in Fixed Assets -427.8 -392.6 -1,900.0 -1,900.0

Others 78.9 -59.1 -50.0 -100.0

CF from investing activities -348.9 -551.7 -1,950.0 -2,000.0

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

Inc/(dec) in loan funds -1,292.8 -654.9 400.0 500.0

Dividend paid & dividend tax -44.2 -122.5 -121.3 -151.7

Others 467.7 -523.2 -167.6 0.0

CF from financing activities -869.3 -1,300.6 111.1 348.3

Net Cash flow 315.4 -55.7 -470.4 10.5

Opening Cash 334.8 650.2 594.6 124.2Closing Cash 650.2 594.6 124.2 134.6


Balance sheet | Crore (Year-end March) FY14 FY15 FY16E FY17E

Liabilities

Equity Capital 50.4 50.9 50.9 50.9

Reserve and Surplus 4,513.5 4,991.3 5,772.2 6,767.6

Total Shareholders funds 4,563.9 5,042.2 5,823.2 6,818.5

Total Debt 1,613.4 800.6 1,200.6 1,700.6

Deferred Tax Liability 535.8 520.9 520.9 520.9

Total Liabilities 6,867.5 6,497.0 7,677.9 9,173.2

Assets

Gross Block 9,173.2 8,758.8 10,308.8 12,308.8

Less: Acc Depreciation 4,812.3 4,598.7 4,972.8 5,407.6

Net Block 4,459.7 4,269.7 5,512.1 7,134.4

Capital WIP 46.5 218.2 468.2 268.2

Total Fixed Assets 4,506.1 4,487.9 5,980.4 7,402.6

Investments 63.7 147.0 197.0 297.0

Goodwill on consolidation 137.6 116.5 116.5 116.5

Inventory 2,066.4 1,778.2 1,966.6 2,126.6

Debtors 1,042.7 958.9 953.5 1,042.3

Loans and Advances 370.7 239.1 241.9 283.8

Other current assets 59.4 72.4 58.7 84.6

Cash 650.2 594.6 124.2 134.6

Total Current Assets 4,189.4 3,643.2 3,344.9 3,671.9

Creditors 1,253.8 864.0 866.9 947.5

Provisions 568.9 591.6 584.9 629.8

Total Current Liabilities 1,822.7 1,455.6 1,451.7 1,577.3

Net Current Assets 2,366.7 2,187.5 1,893.1 2,094.6Application of Funds 6,867.5 6,497.0 7,677.9 9,173.2


Key ratios

(Year-end March) FY14 FY15 FY16E FY17E

Per share data (|)

EPS 20.0 19.0 21.2 22.8

Cash EPS 28.1 27.1 29.3 32.2

BV 90.8 100.0 115.5 135.3

DPS 0.7 2.0 2.0 2.5

Cash Per Share 12.9 11.8 2.5 2.7

Operating Ratios (%)

EBITDA Margin 14.1 15.2 16.7 16.1

PBT / Net sales 9.3 10.3 12.0 11.7

PAT Margin 8.0 5.0 3.4 4.8

Inventory days 56.2 55.1 54.0 54.0

Debtor days 28.6 27.5 27.5 27.5

Creditor days 34.4 24.8 25.0 25.0

Return Ratios (%)

RoE 22.0 18.9 18.4 16.8

RoCE 23.7 26.0 24.2 20.5

RoIC 25.9 27.5 22.8 19.3

Valuation Ratios (x)

P/E 9.7 10.2 9.1 8.5

EV / EBITDA 5.7 5.1 5.1 5.1

EV / Net Sales 0.8 0.8 0.8 0.8

Market Cap / Sales 0.7 0.8 0.8 0.7

Price to Book Value 2.1 1.9 1.7 1.4

Solvency Ratios

Debt/Equity 0.4 0.2 0.2 0.2

Current Ratio 1.9 1.7 1.5 1.4Quick Ratio 1.6 1.4 1.5 1.4



ICICIdirect.com coverage universe (Auto & Auto Ancillary) CMP M Cap(|) TP(|) Rating (| Cr) FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E

Amara Raja (AMARAJ) 1049 1050 Hold 17915 24.1 31.5 41.8 43.6 33.3 25.1 24.7 19.9 15.3 34.3 33.2 34.2 25.6 25.2 26.2Apollo Tyre (APOTYR) 194 228 Buy 9802 19.0 21.2 22.8 10.3 9.2 8.5 5.1 5.1 5.0 26.0 24.2 20.5 18.9 18.4 16.8Ashok Leyland (ASHLEY) 96 90 Hold 27007 1.2 3.2 5.1 81.3 29.6 18.8 27.2 13.9 10.4 7.2 17.2 23.5 6.5 16.1 21.5Bajaj Auto (BAAUTO) 2492 2526 Buy 72105 97.2 130.2 161.3 25.6 19.1 15.4 16.1 12.9 10.4 35.6 37.9 40.3 26.3 31.2 33.2Balkrishna Ind. (BALIND) 654 720 Hold 6324 50.6 55.7 58.5 13.5 12.3 11.7 8.2 7.7 6.6 17.8 17.7 19.0 21.3 17.8 17.7Bharat Forge (BHAFOR) 1261 1277 Hold 29370 32.9 38.0 51.7 38.3 33.1 24.4 20.5 16.4 12.7 19.0 24.7 30.6 23.3 22.9 25.5Bosch (MICO) 24821 25000 Hold 77937 426.0 478.2 610.3 58.5 52.2 40.9 38.5 35.4 27.9 18.2 17.6 19.1 19.4 19.4 21.3Eicher Motors (EICMOT) 21018 20545 Hold 56768 227.1 562.1 708.1 92.6 37.4 29.7 49.1 21.9 17.1 24.5 43.7 41.2 24.5 41.7 37.7Escorts (ESCORT) 160 100 Hold 1911 6.7 11.4 17.1 15.6 9.1 6.1 8.8 6.0 3.5 4.5 6.9 9.4 4.4 6.8 9.3Exide Industries (EXIIND) 161 175 Buy 13664 6.4 7.6 8.9 25.0 21.1 18.0 13.8 11.5 9.7 18.9 20.6 21.8 13.5 14.5 15.4Hero Mototcorp (HERHON) 2629 2655 Hold 52503 119.5 153.8 177.0 22.0 17.1 14.9 13.6 15.2 14.0 45.9 48.3 46.0 36.5 38.7 37.3JK Tyre & Ind (JKIND) 113 150 Buy 2563 14.5 21.9 22.1 7.8 5.2 5.1 5.5 4.2 3.8 18.7 22.0 20.3 23.3 26.9 21.8M&M (MAHMAH) 1335 1525 Buy 78793 50.7 61.6 78.8 26.3 21.7 16.9 18.0 11.5 9.0 14.5 17.0 19.9 17.1 16.5 18.2Mahindra CIE (MAHAUT) 272 299 Buy 8800 -2.4 8.8 13.1 NA 30.8 20.7 22.7 13.5 10.8 -4.1 12.3 16.9 5.9 11.5 15.9Maruti Suzuki (MARUTI) 4634 4857 Buy 140044 122.9 179.9 220.8 37.7 25.8 21.0 19.2 13.7 11.2 17.2 23.3 23.6 15.6 19.4 20.1Motherson (MOTSUM) 328 347 Hold 43355 6.5 10.7 18.8 50.3 30.5 17.4 15.1 12.4 8.2 24.7 27.9 38.7 25.9 34.5 46.0Tata Motors (TELCO) 342 480 Buy 105379 41.2 40.5 52.5 8.5 8.7 6.7 3.4 3.3 2.6 22.8 14.8 16.3 24.9 13.8 15.2Wabco India (WABTVS) 7072 6080 Hold 13437 63.6 114.8 168.9 111.2 61.6 41.9 57.2 37.2 26.4 14.0 20.5 23.5 18.2 24.4 27.8

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



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Pankaj Pandey Head – Research [email protected]

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[email protected]


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rating matrix apollo tyres (apotyr) rating : buy target : | 228...

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