ashok leyland accumulate - business...

Please refer to important disclosures at the end of this report 1

Quarterly highlights (Standalone) Y/E March (` cr) 3QFY13 3QFY12 % chg (yoy) 2QFY13 % chg (qoq)

Net Sales 2,381 2,903 (18.0) 3,296 (27.8)

EBITDA 102 210 (51.4) 334 (69.4)

EBITDA margin (%) 4.3 7.2 (295)bp 10.1 (584)bp

Adj. PAT (82) 67 - 143 -

Source: Company, Angel Research

Ashok Leyland (AL) reported disappointing results for 3QFY2013 as operating margins collapsed to 4.3%, down 295bp yoy and 584bp qoq, owing to higher discounts in the medium and heavy commercial vehicle (MHCV) segment, adverse product-mix (higher share of Dost) and lower utilization levels. Further, higher interest cost due to increasing working capital requirements also impacted the performance, leading to a bottom-line (adjusted basis) loss of `82cr. We lower our volume estimates to account for the continued weakness in the MHCV segment. We also lower our EBITDA margin estimates to factor in weak 3QFY2013 performance and higher levels of discounting in the industry. Additionally, we raise our estimates for interest outgo due to the increasing working capital requirements. Nevertheless, we believe that expected easing of interest rates in CY2013 will lead to revival in industrial activity and thus the demand for MHCVs. We therefore recommend an Accumulate rating on the stock.

Dismal 3QFY2013 results: AL posted a significant decline of 18% yoy (27.8% qoq) in its net sales to `2,381cr as against our estimates of `2,498cr. The disappointing performance was largely due to 29.5% yoy (30.7% qoq) decline in total volumes ex. Dost and 16% yoy (4.9% qoq) decline in net average realization owing to higher level of discounts and adverse product-mix. However, total volumes (including Dost), declined by only 2.8% yoy (24.1% qoq). At the operating level, AL witnessed a substantial contraction in margins to 4.3% (down 295bp yoy) as against our estimates of 8.3%. This can be attributed to 340bp (370bp qoq) and 160bp yoy (300bp qoq) increase in other expenditure and staff cost as a percentage of sales respectively. As a result, the adjusted net profit posted a loss of `82cr for the quarter.

Outlook and valuation: While the near term outlook for the MHCV industry remains challenging due to slowdown in overall industrial activity; we expect volumes to recover in FY2014E led by likely easing of interest rates in CY2013. At `25, AL is trading at 11.2x its FY2014E earnings. We recommend an Accumulate rating on the stock with a target price of `28.

Key financials (Standalone) Y/E March (` cr) FY2011 FY2012 FY2013E FY2014E

Net Sales 11,177 12,842 12,910 14,836

% chg 54.3 14.9 0.5 14.9

Net Profit 630 561 394 592

% chg 64.2 (11.0) (29.7) 50.2

EBITDA (%) 10.9 9.8 8.8 9.6

EPS (`) 2.4 2.1 1.5 2.2

P/E (x) 10.6 11.9 16.9 11.2

P/BV (x) 2.5 2.3 2.2 2.0

RoE (%) 16.5 13.7 9.3 13.3

RoCE (%) 14.4 12.9 10.3 12.7

EV/Sales (x) 0.6 0.5 0.5 0.5

EV/EBITDA (x) 6.3 6.0 6.7 5.5 Source: Company, Angel Research

ACCUMULATE CMP `25 Target Price `28

Investment Period 12 Months

Stock Info

Sector

Market Cap (` cr)

Net Debt (` cr)

Beta

52 Week High / Low

Avg. Daily Volume

Face Value (`)

BSE Sensex

Nifty

Reuters Code

Bloomberg Code

Shareholding Pattern (%)

Promoters 38.6

MF / Banks / Indian Fls 19.7

FII / NRIs / OCBs 31.4

Indian Public / Others 10.3

Abs. (%) 3m 1yr 3yr

Sensex 7.2 17.7 19.8

Ashok Leyland 7.5 (8.8) (3.2)

AL@IN

Automobile

1.0

20,104

6,075

ASOK.BO

6,652

1.1

33/20

971,753

3,494

Yaresh Kothari 022-3935 7800 Ext: 6844

[email protected]

Ashok Leyland Performance Highlights

3QFY2013 Result Update | Automobile

January 25, 2013

Ashok Leyland | 3QFY2013 Result Update

January 25, 2013

2

Exhibit 1: Quarterly financial performance (Standalone) Y/E March (` cr) 3QFY13 3QFY12 % chg (yoy) 2QFY13 % chg (qoq) 9MFY13 9MFY12 % chg (yoy)

Net Sales 2,381 2,903 (18.0) 3,296 (27.8) 8,684 8,531 1.8

Consumption of RM 1,402 1,992 (29.6) 2,097 (33.1) 5,434 5,929 (8.3)

(% of sales) 58.9 68.6 63.6 62.6 69.5 Staff costs 262 272 (3.9) 264 (0.8) 793 774 2.6

(% of sales) 11.0 9.4 8.0 9.1 9.1 Purchase of traded goods 309 156 97.4 303 2.1 865 324 166.8

(% of sales) 13.0 5.4 9.2 10.0 3.8 Other expenses 306 272 12.4 299 2.4 915 719 27.3

(% of sales) 12.8 9.4 9.1 10.5 8.4 Total Expenditure 2,278 2,693 (15.4) 2,962 (23.1) 8,007 7,745 3.4

Operating Profit 102 210 (51.4) 334 (69.4) 677 786 (13.9)

OPM (%) 4.3 7.2 10.1 7.8 9.2 Interest 107 60 77.5 104 3.3 294 183 60.9

Depreciation 93 87 7.5 98 (5.4) 281 257 9.2

Other income 14 9 64.5 24 (40.9) 51 29 72.4

PBT (excl. Extr. Items) (84) 72 (216.5) 156 (153.8) 153 376 (59.2)

Extr. income/(expense) (156) - - - - (156) - -

PBT (incl. Extr. Items) 72 72 0.7 156 (53.5) 309 376 (17.6)

(% of sales) 3.0 2.5 4.7 3.6 4.4 Provision for taxation (2) 5 (133.4) 13 (112.7) 26 68 (62.5)

(% of PBT) (2.3) 7.0 8.5 8.3 18.2 Reported PAT 74 67 10.8 143 (48.0) 284 307 (7.7)

Adj PAT (82) 67 (222.7) 143 (157.6) 127 307 (58.5)

Adj. PATM 3.1 2.3 4.3 3.3 3.6 Equity capital (cr) 266 266 266 266 266 Reported EPS (`) 0.3 0.3 10.8 0.5 (48.0) 1.1 1.2 (7.7)


Exhibit 2: 3QFY2013 – Actual vs Angel estimates Y/E March (` cr) Actual Estimates Variation (%)

Net Sales 2,381 2,498 (4.7)

EBITDA 102 208 (50.9)

EBITDA margin (%) 4.3 8.3 (404)bp

Adj. PAT (82) 67 -


Exhibit 3: Quarterly volume performance (units) 3QFY13 3QFY12 % chg (yoy) 2QFY13 % chg (qoq) 9MFY13 9MFY12 % chg (yoy)

MHCV passenger 4,639 5,721 (18.9) 5,348 (13.3) 16,591 17,172 (3.4)

MHCV goods 9,937 14,697 (32.4) 15,625 (36.4) 38,857 45,710 (15.0)

LCV (ex. Dost) 105 403 (73.9) 201 (47.8) 737 875 (15.8)

Total volume (ex. Dost) 14,681 20,821 (29.5) 21,174 (30.7) 56,185 63,757 (11.9)

Dost 7,980 2,490 220.5 8,666 (7.9) 23,984 2,700 788.3

Total volume (incl. Dost) 22,661 23,311 (2.8) 29,840 (24.1) 80,169 66,457 20.6

Exports (inc. above ) 1,702 3,079 (44.7) 2,083 (18.3) 6,788 8,848 (23.3)



January 25, 2013

3

Lower-than-expected growth in top-line: For 3QFY2013, net sales posted a significant decline of 18% yoy (27.8% qoq) to `2,381cr as against our estimates of `2,498cr. The disappointing performance was largely due to 29.5% yoy (30.7% qoq) decline in total volumes (ex. Dost) and 16% yoy (4.9% qoq) decline in net average realization. However, total volumes including Dost, declined by only 2.8% yoy (24.1% qoq) as Dost volumes surged significantly on a low base of last year. The net average realization fell sharply largely on account of higher contribution from the lower priced Dost vehicle and also due to higher discounts in the MHCV segment (higher by `15,000/vehicle to `115,000). Further, withdrawal of duty drawback rates on exports to 2% from 5.5% earlier also impacted the net average realization.

Exhibit 4: Volumes down on decline in MHCV sales


Exhibit 5: Net average realization down 16% yoy


Exhibit 6: Net sales down 18% yoy


Exhibit 7: Domestic market share trend

Source: Company, SIAM, Angel Research

EBITDA margin shrinks to 4.3%: On the operating front, EBITDA margin collapsed 584bp qoq (295bp yoy) to 4.3%, significantly lower than our estimates of 8.3%. This was primarily on account of higher discounts in the MHCV segment, inferior product-mix (share of Dost increased to 35.2% in 3QFY2013 vs 29% in 2QFY2013) and lower utilization levels (due to lower volumes). As a result, other expenditure and staff cost as a percentage of sales surged 340bp (370bp qoq) and 160bp yoy (300bp qoq) respectively during the quarter. The other expenditure was higher on account of higher power costs (due to frequent power cuts in Tamil Nadu), consultancy expenditure, and maintenance and warranty expenses.

18,437

29,680

19,277

23,659 23,215

35,688

27,578 29,840

22,661

14.3 15.0

(9.9)(3.8)

25.9 20.2

43.1

26.1

(2.4)

(20.0)

(10.0)

0.0

10.0

20.0

30.0

40.0

50.0

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

3QFY

11

4QFY

11

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

(%)(units) Total volumes yoy chg (%)

7.2

13.9

18.8 19.3

3.5

(6.8)

(16.3)

(16.1) (16.0)

(20.0)

(15.0)

(10.0)

(5.0)

0.0

5.0

10.0

15.0

20.0

25.0

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

3QFY

11

4QFY

11

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

(%)(`) Net average realisation yoy chg (%)

2,227

3,848

2,513

3,115 2,903

4,311

3,007 3,296

2,381

22.5

30.9 7.0

14.8

30.4

12.0

19.7

5.8

(18.0)

(30.0)

(20.0)

(10.0)

0.0

10.0

20.0

30.0

40.0

0 500

1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000

3QFY

11

4QFY

11

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

(%)(`cr) Net sales yoy chg (%)

48.945.1

39.7 39.643.8 43.5

39.135.2

43.3

15.6

24.619.2 21.1

17.722.3 22.7 23.5

19.0

20.4

27.222.2 23.7

21.025.5 26.0 25.4

22.6

0.0

10.0

20.0

30.0

40.0

50.0

60.0

3QFY

11

4QFY

11

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

(%) MHCV passenger MHCV goods Total MHCV


January 25, 2013

4

Exhibit 8: EBITDA margin shrinks to 4.3%


Exhibit 9: Adjusted bottom-line loss of `82cr


Adjusted bottom-line loss of `82cr: Led by disappointing operating performance and higher interest cost (up 77.5% yoy) due to increasing working capital requirements, AL reported a PBT loss of `84cr. However, on the net profit front, the company reported a `74cr profit led by an exceptional gain of `156cr (due to profit on sale of non-current investments). Nevertheless, adjusted for the exceptional gain, AL reported a net loss of `82cr as against `67cr profit in 3QFY2012 (`143cr in 2QFY2013).

7.5 13.2 9.7 10.6 7.2

10.9 8.0 10.1 4.3

73.2 72.8 72.9 74.7 75.3 75.8 74.4 74.5 73.7

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

3QFY

11

4QFY

11

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

(%) EBITDA margin Raw material cost/sales

43 298 86 154 67 257 67 143

(82)

1.9

7.7

3.4 4.9

2.3

6.0

2.2

4.3

(3.4)(6.0)

(4.0)

(2.0)

0.0

2.0

4.0

6.0

8.0

10.0

(150)(100)(50)

0 50

100 150 200 250 300 350

3QFY

11

4QFY

11

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

(%)(` cr) Net profit Net profit margin


January 25, 2013

5

Conference call – Key highlights

The management expects the MHCV industry to post a decline in FY2013; however it is hopeful of slightly better performance in 4QFY2013 as against 3QFY2013. The company expects to post 24,000-25,000 units of MHCV sales in 4QFY2013. The company sees Dost sales of ~36,000 units in FY2013.

While the MHCV industry sales have declined by ~20% in 9MFY2013, AL’s sales are down by ~12%. The company is targeting a market share of ~26% for FY2013 (YTD market share of ~25%). Going ahead, the Management expects that the company should grow at a rate of 10% in the MHCV segment and is targeting market share gains of ~100bp.

The management has indicated that Dost sales in December 2012 were impacted to the tune of 800-900 units due to the year-end phenomenon. The company expects a monthly run rate of 3,500 units of Dost in 4QFY2013. According to the Management, the breakeven levels for Dost are in the range of 50,000-55,000 units. The combined installed capacity (at AL and Nissan facilities) for Dost currently stands at 110,000 units (55,000 units each). AL sold ~5,800 units of Dost units outside Tamil Nadu and ~2,200 units in Tamil Nadu in 3QFY2013.

The contribution of southern India in overall CV industry was ~26% in 3QFY2013.

The debt levels of the company have increased as compared to March 2012. While long term debt stood at `3,500cr, working capital debt stood at `1,500cr as of December 2012. The company plans to divest some investments in the coming quarters, which will reduce FY2014 debt level by `500cr. Additionally, higher investments in inventories has led to higher working capital requirement and therefore higher interest cost. The company plans to reduce inventory to ~5,500 units (~11,000 units currently) which should lower working capital levels by `550cr.

Spare parts revenue during 3QFY2013 and 9MFY2013 stood at ~`230cr and ~`710cr respectively. Engine volumes stood at ~6,000 units. The management expects engine revenues to touch `500cr in FY2013.

The production at the Pantnagar plant is expected to be in the region of ~30,000 units in FY2013. For FY2014, the company is targeting a production of ~42,000 units from the Pantnagar facility. The income tax benefit at the Pantnagar plant will expire in FY2015 and thereafter the company will get 30% tax benefit; however excise benefits expire by 2020. Post the recent excise duty hike and increase in localization at the plant, benefits have increased to `60,000/vehicle, up from `45,000/vehicle.

The company has incurred a capex of `440cr YTD in FY2013 and is targeting a capex of `600cr for the full year FY2013.

AL has invested ~`500cr YTD in 9MFY2013 in Nissan JV, John Deere JV and Hinduja Foundries. The company plans to invest `900cr in FY2013. Of the incremental `400cr investments, `150cr would be invested in Hinduja Foundries, ~125cr in Albonair and balance in Nissan JV.


January 25, 2013

6

Investment arguments

Volume growth to benefit from easing of interest rates and recently launched Dost: MHCV demand has witnessed a substantial slowdown in recent times due to high interest rates and slowdown in industrial activity; however, we believe MHCV demand is near its trough. With reversal in interest rates in CY2013, we expect a pick-up in industrial activity, leading to a rebound in MHCV sales in FY2014. As a result, we expect AL’s MHCV volumes to register ~8% yoy growth in FY2014 (expected to post a decline of ~11% in FY2013). Further, the recently introduced LCV - Dost [through JV with Nissan]) has been received well by the markets and AL expects to ramp-up its production going ahead. We expect the company to clock sales of 40,000 units in FY2014.

EBITDA margin to improve by 80bp in FY2014: While raw-material prices have stabilized and AL continues to benefit from the ramp-up in production at the Pantnagar facility (total profitability estimated to be higher due to cost savings of ~`60,000/vehicle), the product-mix is set to change due to increasing proportion of the lower margin LCV - Dost (contribution to total volumes to increase from ~7% in FY2012 to ~28% in FY2013E). AL has indicated that it earns marketing/distribution fees of `15,000-`18,000/vehicle on Dost sales and has also guided that the margins should be structurally lower by 100bp-150bp due to Dost sales. While we expect the margins to decline by 100bp in FY2013 to 8.8% led by higher share of Dost and higher level of discounting, we expect the margins to improve ~80bp in FY2014 to 9.6% primarily on account of revival in MHCV sales leading to operating leverage benefits, price hikes of ~1.5% each in October 2012 and January 2013 and lower levels of discounts.

Outlook and valuation

We lower our volume estimates to account for the continued weakness in the MHCV segment. We also lower our EBITDA margin estimates to factor in weak 3QFY2013 performance and higher levels of discounting in the industry. Additionally, we raise our estimates for interest outgo due to the increasing working capital requirements.

Exhibit 10: Change in estimates Y/E March Earlier Estimates Revised Estimates % chg

FY2013E FY2014E FY2013E FY2014E FY2013E FY2014E

Net Sales (` cr) 13,350 15,300 12,910 14,836 (3.3) (3.0)

OPM (%) 9.2 10.0 8.8 9.6 (40)bp (40)bp

EPS (`) 2.0 2.6 1.5 2.2 (25.9) (14.5)


While the near term outlook for the MHCV industry remains challenging due to slowdown in overall industrial activity, we expect volumes to recover in FY2014E led by likely easing of interest rates in CY2013. At `25, AL is trading at 11.2x its FY2014E earnings. We recommend an Accumulate rating on the stock with a target price of `28.


January 25, 2013

7

Exhibit 11: Key assumptions

(units) FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E

MHCV passenger 19,981 18,481 25,226 25,845 25,328 26,848

MHCV goods 33,071 44,345 68,007 67,408 57,971 62,609

LCV (ex. Dost) 1,379 1,100 873 1,172 1,172 1,231

Dost - - - 7,593 32,000 40,000

Total volume (units) 54,431 63,926 94,106 102,018 116,471 130,687

% yoy chg (34.7) 17.4 47.2 8.4 14.2 12.2

Domestic 47,619 57,947 83,800 89,109 106,144 118,811

Exports 6,812 5,979 10,306 12,909 10,327 11,876


Exhibit 12: Angel vs consensus forecast

Angel estimates Consensus Variation (%)

FY13E FY14E FY13E FY14E FY13E FY14E

Total op. income (` cr) 12,910 14,836 13,484 15,542 (4.3) (4.5)

EPS (`) 1.5 2.2 1.8 2.4 (17.7) (7.3)

Source: Bloomberg, Angel Research

Exhibit 13: One-year forward P/E band


Exhibit 14: One-year forward P/E chart


Exhibit 15: One-year forward EV/EBITDA band


Exhibit 16: One-year forward EV/EBITDA chart


0

5

10

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-03

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Feb-

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-11

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(`) Share Price (`) 6x 9x 12x 15x

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(x) One-yr forward P/E Five-yr average P/E

0

2,000

4,000

6,000

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14,000

Apr

-03

Jan-

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-04

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-07

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-08

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(` cr) EV (` cr) 2x 4x 6x 8x

0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0

10.0

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-05

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-06

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-06

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07

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08

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-08

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-09

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11

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11

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-12

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(x) One-yr forward EV/EBITDA Five-yr average EV/EBITDA


January 25, 2013

8

Exhibit 17: Automobile - Recommendation summary

Company Reco. CMP (`)

Tgt. price (`)

Upside (%)

P/E (x) EV/EBITDA (x) RoE (%) FY12-14E EPS

FY13E FY14E FY13E FY14E FY13E FY14E CAGR (%)

Ashok Leyland Accumulate 25 28 13.9 16.9 11.2 6.7 5.5 9.3 13.3 2.7

Bajaj Auto Neutral 2,079 - - 19.3 16.5 13.6 11.1 45.8 42.8 8.9

Hero MotoCorp Accumulate 1,764 1,923 9.0 16.7 14.7 8.4 6.9 44.3 40.9 5.3

Maruti Suzuki Neutral 1,546 - - 24.0 16.6 11.6 7.9 11.6 14.9 35.6 Mahindra & Mahindra Accumulate 900 998 10.9 16.5 14.5 9.5 7.9 24.2 23.2 15.3

Tata Motors Accumulate 301 337 10.3 8.5 7.1 4.6 3.9 30.2 27.6 12.3

TVS Motor Accumulate 43 46 8.0 9.5 7.4 4.0 3.1 17.4 19.4 5.3


Company background

Ashok Leyland (AL) is the country's second largest CV manufacturer. The company has a strong presence in the MHCV segment, with a domestic market share of ~23% as of FY2012. AL enjoys a dominant position in southern India, with a ~48% market share, and is currently focusing on expanding its presence in northern India by increasing its touch points in the region. The company, through its JV with Nissan Motor and John Deere, intends to expand its product portfolio and has recently launched Dost to tap the growing LCV demand and a backhoe loader (used in the construction equipment segment).


January 25, 2013

9

Profit and loss statement (Standalone)

Y/E March (` cr) FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E

Total operating income 5,981 7,245 11,177 12,842 12,910 14,836

% chg (22.7) 21.1 54.3 14.9 0.5 14.9

Total expenditure 5,525 6,485 9,963 11,586 11,774 13,405

Net raw material costs 4,480 5,212 8,175 9,462 9,192 10,533

Other mfg costs 132 135 235 275 297 319

Employee expenses 563 667 975 1,020 1,020 1,172

Other 350 471 579 828 1,265 1,381

EBITDA 456 760 1,214 1,256 1,136 1,430

% chg (43.5) 66.6 59.8 3.5 (9.6) 25.9

(% of total op. income) 7.6 10.5 10.9 9.8 8.8 9.6

Depreciation & amortization 178 204 267 353 364 404

EBIT 278 555 946 903 773 1,027

% chg (56.0) 100.1 70.4 (4.5) (14.5) 32.9


Interest and other charges 160 102 189 255 353 371

Other income 91 91 44 40 50 58

(% of PBT) 46.3 18.1 5.6 5.9 10.7 8.1

Recurring PBT 208 545 802 688 469 713

% chg (67.3) 161.3 47.2 (14.1) (31.8) 52.0

Extraordinary income/(exp.) 11 40 1 4 - -

PBT 197 505 800 685 469 713

Tax 18 121 171 124 75 121

(% of PBT) 9.4 24.0 21.3 18.1 16.0 17.0

PAT (reported) 190 424 631 564 394 592

ADJ. PAT 179 384 630 561 394 592

% chg (60.3) 114.6 64.2 (11.0) (29.7) 50.2


Basic EPS (`) 0.7 1.6 2.4 2.1 1.5 2.2

Adj. EPS (`) 0.7 1.4 2.4 2.1 1.5 2.2

% chg (60.3) 114.6 64.2 (11.0) (29.7) 50.2


January 25, 2013

10

Balance sheet statement (Standalone)


SOURCES OF FUNDS

Equity share capital 133 133 133 266 266 266

Reserves & surplus 3,341 3,536 3,830 3,942 4,025 4,308

Shareholders’ Funds 3,474 3,669 3,963 4,208 4,291 4,574

Total loans 1,958 2,280 2,348 2,395 2,995 3,145

Deferred tax liability 263 385 444 490 490 490

Other long term liabilities - 4 4 4

Long term provisions 78 77 77 77

Total Liabilities 5,695 6,334 6,833 7,174 7,857 8,290

APPLICATION OF FUNDS

Gross block 4,939 6,019 6,692 7,256 7,476 8,321

Less: Acc. depreciation 1,540 1,769 2,058 2,343 2,706 3,110

Net Block 3,399 4,250 4,634 4,914 4,770 5,211

Capital work-in-progress 998 561 358 548 523 582

Goodwill - - - - - -

Investments 264 326 1,230 1,534 1,571 1,575

Long term loans and advances 385 608 608 608

Other noncurrent assets 3 7 7 7

Current assets 3,166 4,152 3,984 4,304 4,818 5,315

Cash 88 519 180 33 451 374

Loans & advances 790 973 431 810 904 964

Other 2,288 2,660 3,373 3,461 3,463 3,977

Current liabilities 2,141 2,961 3,760 4,742 4,442 5,009

Net current assets 1,025 1,191 224 (438) 377 306

Misc. exp. not written off 10 5 - - - -

Total Assets 5,695 6,334 6,833 7,174 7,857 8,290


January 25, 2013

11

Cash flow statement (Standalone)


Profit before tax 208 545 802 688 469 713

Depreciation 178 204 267 353 364 404

Change in working capital (785) 264 628 518 (398) (7)

Others (18) 289 (891) (275) - -

Other income (91) (91) (44) (40) (50) (58)

Direct taxes paid (18) (121) (171) (124) (75) (121)

Cash Flow from Operations (526) 1,090 591 1,120 310 931

(Inc.)/Dec. in fixed assets (2,466) (643) (470) (755) (195) (903)

(Inc.)/Dec. in investments 346 (63) (904) (304) (37) (4)

Other income 91 91 44 40 50 58

Cash Flow from Investing (2,028) (614) (1,329) (1,019) (182) (849)

Issue of equity - - - - - -

Inc./(Dec.) in loans 1,071 322 68 47 600 150

Dividend paid (Incl. Tax) 234 156 233 309 309 309

Others 519 (523) 97 (604) - -

Cash Flow from Financing 1,823 (45) 398 (248) 291 (159)

Inc./(Dec.) in cash (731) 430 (340) (147) 419 (78)

Opening Cash balances 451 88 519 180 33 451

Closing Cash balances 88 519 180 33 451 374


January 25, 2013

12

Key ratios

Y/E March FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E

Valuation Ratio (x) P/E (on FDEPS) 37.2 17.3 10.6 11.9 16.9 11.2

P/CEPS 18.1 11.3 7.4 7.3 8.8 6.7

P/BV 3.2 2.8 2.5 2.3 2.2 2.0

Dividend yield (%) 2.0 3.0 4.0 4.0 4.0 4.0

EV/Sales 1.2 1.0 0.6 0.5 0.5 0.5

EV/EBITDA 18.1 10.6 6.3 6.0 6.7 5.5

EV / Total Assets 1.4 1.3 1.1 1.0 1.0 0.9

Per Share Data (`)

EPS (Basic) 0.7 1.4 2.4 2.1 1.5 2.2

EPS (fully diluted) 0.7 1.4 2.4 2.1 1.5 2.2

Cash EPS 1.4 2.2 3.4 3.4 2.8 3.7

DPS 0.5 0.8 1.0 1.0 1.0 1.0

Book Value 7.9 8.8 10.0 10.9 11.2 12.3

Dupont Analysis

EBIT margin 4.6 7.7 8.5 7.0 6.0 6.9

Tax retention ratio 0.9 0.8 0.8 0.8 0.8 0.8

Asset turnover (x) 1.7 1.7 2.3 2.3 2.2 2.3

ROIC (Post-tax) 7.1 9.7 15.2 13.2 10.9 13.4

Cost of Debt (Post Tax) 10.2 3.7 6.4 8.8 11.0 10.0

Leverage (x) 0.3 0.4 0.3 0.2 0.2 0.2

Operating ROE 6.3 12.2 17.9 14.2 10.9 14.3

Returns (%)

ROCE (Pre-tax) 6.2 9.2 14.4 12.9 10.3 12.7

Angel ROIC (Pre-tax) 6.5 12.4 17.7 15.5 12.7 15.5

ROE 6.4 10.7 16.5 13.7 9.3 13.3

Turnover ratios (x)

Asset Turnover (Gross Block) 1.5 1.3 1.8 1.8 1.8 1.9

Inventory / Sales (days) 78 75 63 63 63 63

Receivables (days) 41 50 36 34 35 35

Payables (days) 116 112 97 109 113 112

WC cycle (ex-cash) (days) 33 41 12 (6) (8) (2)

Solvency ratios (x)

Net debt to equity 0.5 0.4 0.2 0.2 0.2 0.3

Net debt to EBITDA 3.5 1.9 0.8 0.7 0.9 0.8

Interest Coverage (EBIT / Int.) 1.7 5.5 5.0 3.5 2.2 2.8


January 25, 2013

13

Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com DISCLAIMER This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment.

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Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals.

The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly.

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Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.

Disclosure of Interest Statement Ashok Leyland

1. Analyst ownership of the stock No

2. Angel and its Group companies ownership of the stock No

3. Angel and its Group companies' Directors ownership of the stock No

4. Broking relationship with company covered No

Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%) Reduce (-5% to -15%) Sell (< -15%)

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

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