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AUTOMOBILE SECTOR VALUATION MODELS

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VALUATION MODELS. AUTOMOBILE SECTOR. P resented by:. ANKIT AGRAWAL01 SAGAR FAFADIA21 DHARMESH GANDHI24 RAMAKANT LADHA42 ABHISHEK MEHTA45 HARDIK MEHTA48 RAJ PANDYA60. AUTOMOBILE SECTOR. - PowerPoint PPT Presentation

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Page 1: AUTOMOBILE SECTOR

AUTOMOBILE SECTOR

VALUATION MODELS

Page 2: AUTOMOBILE SECTOR

PRESENTED BY: ANKIT AGRAWAL 01 SAGAR FAFADIA 21 DHARMESH GANDHI 24 RAMAKANT LADHA 42 ABHISHEK MEHTA 45 HARDIK MEHTA 48 RAJ PANDYA 60

Page 3: AUTOMOBILE SECTOR

AUTOMOBILE SECTOR Automobile is one of the largest

industries in global market. Being the leader in product and process technologies in the manufacturing sector, it has been recognized as one of the drivers of economic growth.

Page 4: AUTOMOBILE SECTOR

AUTOMOBILE SECTORINDIAN

AUTOMOTIVE

INDUSTRY

MULTI-UTILITYVEHICLE

SCARS

TWOWHEELE

RS

THREEWHEELE

RSTRACTOR

S

MOTORCYCLES SCOOTERS MOPEDS

Page 5: AUTOMOBILE SECTOR

INDIAN AUTO SECTOR

Page 6: AUTOMOBILE SECTOR
Page 7: AUTOMOBILE SECTOR

TWO WHEELERS SEGMENT Two-wheeler segment is one of the

most important components of the automobile sector that has undergone significant changes due to shift in policy environment. The two-wheeler industry has been in existence in the country since 1955. It consists of three segments viz. scooters, motorcycles and mopeds.

Page 8: AUTOMOBILE SECTOR

FACTORS FOR THE GROWTH OF MOTORCYCLES IN INDIA The Gross Domestic Product has grown to

8.8% The average family income has increased The finance have become easier to access The reduction in taxes and duties Introduction of international standards in

India The economic and fuel-efficient engines The teenager and the youth using more

and more motorcycles

Page 9: AUTOMOBILE SECTOR

CATEGORYMotorcycle segment 75 - 125cc sub-segment 125 - 250cc sub-segment Greater-than-250cc sub-segment Scooter segment Less-than-75cc sub-segment 75-125cc sub-segment Greater-than-125cc sub-segment Mopeds Electric TWs

Page 10: AUTOMOBILE SECTOR

MAJOR PLAYERS Hero Honda Motors Bajaj Auto TVS Motors Honda Motorcycle & Scooter India Kinetic Motor Company Ltd Yamaha Motors India Ltd

Page 11: AUTOMOBILE SECTOR

AUTO GROWTH IN LAST ONE YEAR

Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-100

2000

4000

6000

8000

10000

12000

Close

Page 12: AUTOMOBILE SECTOR

AUTO GROWTH

Previous Close30 Sep 2010

Week Ago24 Sep 2010

Month Ago01 Sep 2010

Year Ago01 Oct 2009

Value Points % Value Point

s % Value Points % Value Points %

9,527.64 229.32

2.41

9,507.88

249.08

2.62

8,838.05

918.91

10.40

6,603.19

3,153.77

47.76

Previous Close01 Oct 2010

Week Ago24 Sep 2010

Month Ago01 Sep 2010

Year Ago01 Oct 2009

Value Points % Value Points % Value Points % Value Points %

9,756.96 175 1.83 9,507.88 249.08 2.62 8,838.05 918.91 10.40 6,603.19 3,153.77 47.76

Page 13: AUTOMOBILE SECTOR
Page 14: AUTOMOBILE SECTOR

बुलंद भारत की बुलंद तस्वीर  

 

हमारा बजाज!

Page 15: AUTOMOBILE SECTOR

BAJAJ THREE WHEELER

Page 16: AUTOMOBILE SECTOR

Company Profile

Page 17: AUTOMOBILE SECTOR

BAJAJ PLANTS

Chakan

Waluj

Pant Nagar

Page 18: AUTOMOBILE SECTOR

BAJAJ HISTORY 1945: Bajaj Auto is founded.

1960: Rahul Bajaj becomes the Indian licensee for Vespa scooters. 1977: Technical collaboration with Piaggio ends. 1984: Work begins on a second plant. 1998: Bajaj plans to build its third plant to meet demand.

Page 19: AUTOMOBILE SECTOR

BAJAJ ACHIEVEMENTSProduct Award Award BodyPulsar 135LS Bike of the Year ET NOW – ZigWheels

Kawasaki Ninja 250cc Bike of the Year ET NOW - ZigWheels

Discover DTS-Si Most Value for Money-Bike of the Year

ET NOW - ZigWheels

Bajaj Discover DTS-Si Motorcycle of the Year - Bike upto 125 cc

NDTV Profit - Car & Bike

Bajaj Discover And Pulsar Best Integrated Campaign - Two wheelers

NDTV Profit - Car & Bike

Kawasaki Ninja Bike of the Year CNBC - Overdrive

Pulsar135LS Viewer's Choice of the Year UTV Bloomberg-AutoCar

Bajaj Discover Best TV Commercial Auto India

Bajaj Auto Most Trusted Brands - Auto Two Wheeler

Brand Equity

Bajaj Auto Most Popular Two Wheelers Amongst Youth

Global Youth Marketing Forum 2010

Bajaj Auto Chakan Plant - Super Platinum for Manufacturing Excellence

ET - Frost & Sullivan

Bajaj Auto Waluj Plant -Best-In-Class Manufacturing Leadership Award - 2Wheeler

Stars of the Industry Group

Page 20: AUTOMOBILE SECTOR

BAJAJ SHAREHOLDING PATTERN

Page 21: AUTOMOBILE SECTOR

FINANCIALS Sector Auto

Face Value Rs.10.00

Market Cap. 41830 (Rs Cr.)

52 wk. High/ Low 1525/684

Page 22: AUTOMOBILE SECTOR

KEY FUNDAMENTAL

EPS - (Rs):117.51

P/E Ratio (x):9.82

Latest Div. (%):400.00

Div. Yield (%):2.78

Book Value / sh. (Rs) :101.20

P/B Ratio (x):1421.77

 

Page 23: AUTOMOBILE SECTOR

INDEX COMPARISION

Page 24: AUTOMOBILE SECTOR

YOY CHANGE IN PROFITS

Page 25: AUTOMOBILE SECTOR

Rs in Crores 2010A 2011E 2012E 2013E 2014E 2015EGrowth in Sales 25% 20% 15% 15% 15%

Sales Turnover12043.4

815054.3

518065.2

220775.0

023891.2

527474.9

4

Total Expenses 9344.0912031.4

414437.7

216603.3

819093.8

921957.9

7PBDIT 2699.39 3022.91 3627.50 4171.62 4797.36 5516.97Interest 59.80 75.27 90.33 103.88 119.46 137.37PBDT 2639.59 2947.64 3537.17 4067.75 4677.91 5379.59Depreciation 136.45 150.54 180.65 207.75 238.91 274.75Profit Before Tax 2503.14 2797.10 3356.52 3860.00 4438.99 5104.84Tax 707.50 923.04 1107.65 1273.80 1464.87 1684.60Reported Net Profit 1702.73 1874.06 2248.87 2586.20 2974.13 3420.25Shares in issue 14.47 28.94 28.94 28.94 28.94 28.94Earning Per Share (Rs) 117.69 64.76 77.72 89.37 102.78 118.20Capex 73.75 752.72 903.26 831.00 955.65 1099.00

WC-

1154.00 -301.09 -361.30 -415.50 -477.83 -549.50

Projected P&L Account for Bajaj Auto Ltd

Source for 2010A: Balance sheet of Bajaj Auto Ltd.

Page 26: AUTOMOBILE SECTOR

Risk-free rate(rf) 6.70 Total debt 1338.00

Market return(rm) 16.50

Interest 59.80

Risk Premium(rp) 9.80 Cost of debt 4.47Beta 0.60 Estimated cost 4.69Cost of Equity 12.58

Weight 80%Cost of Debt 4.69Weight 20%WACC 11.00

WACC

Sources of data1. rf: RBI 364 day T-bill rate2. rm: 1 yr sensex returns on 15-sept-10

3. All other data from balance sheet

4. Estimated cost of debt is 7% before tax …Estimated cost is post tax cost of debt

Page 27: AUTOMOBILE SECTOR

Rs in Crores 2010A 2011E 2012E 2013E 2014E 2015E

PAT 1702.73

1874.06

2248.87

2586.20

2974.13

3420.25

Interest(1-.33) 40.07 50.43 60.52 69.60 80.04 92.04

Depreciation 136.45 150.54 180.65 207.75 238.91 274.75investment in FA 73.75 752.72 903.26 831.00 955.65 1099.0

0

Investment in WC

-1154.0

0-301.09 -361.30 -415.50 -477.83 -549.50

FCFF 2959.50

1623.40

1948.08

2448.04

2815.25

3237.54

WACC 11.00 11.00 11.00 11.00 11.00 11.00Present value factor 1.00 0.90 0.81 0.73 0.66 0.59

Present Value 2959.50

1462.52

1581.11

1789.99

1854.49

1921.32

FCFF

Page 28: AUTOMOBILE SECTOR

Terminal Value 68635.79

TV discount factor 0.59present Value of TV 40732.0

0Value of the firm 49341.4

3Market Value of debt 1338.58Value of Equity 48002.8

5Value per share (FCF) 1658.8

9Value per share (DDM) 1489.1

9

VALUE PER SHARE

Page 29: AUTOMOBILE SECTOR
Page 30: AUTOMOBILE SECTOR

INTRODUCTION World largest two-wheeler company Joint venture Key people: Brijmohan & Pawan Munjal 48% market share Set’s a benchmark for fuel thrift and low

emission. Fill it – Shut it – Forget it

Source: Annual Report, cline.capitaline.com

Page 31: AUTOMOBILE SECTOR

Manufacturing unit at dharuhera and gurgaon in haryana and third unit was inaugurated at haridwar.

Overall plants capacity – 4.4 million units year

Sales and service network of over 4500 customer touch points.

Target audience Source: Annual Report, cline.capitaline.com

Page 32: AUTOMOBILE SECTOR

KEY MILESTONES World no. 1 two wheeler company for the

ninth consecutive year Sales landmark of 30 million two-wheelers 59 % share in the domestic motorcycle market 48 % share in the domestic two wheeler

market Accomplished production of 11 millionth

Splendor motorcycles Source: Annual Report, cline.capitaline.com

Page 33: AUTOMOBILE SECTOR

AWARDS NDTV Profit Business Leadership Lifetime

Achievement Award 2009 SIAM Golden Jubilee Award for Outstanding

contribution in automobile industry Lifetime Achievement Award by ACMA PHD Lifetime Achievement Awards 2009 IIM , Luknow Lakshmipat Singhania Leadership

Awards for 2009

Source: Annual Report, cline.capitaline.com, Economic Times

Page 34: AUTOMOBILE SECTOR

SHAREHOLDING PATTERNForeign (Pro-

moter & Group)26%

Indian (Promoter & Group)

26%

Non Promoter (Institution)

37%

Non Promoter (Non-Institution)

11%

Page 35: AUTOMOBILE SECTOR

KEY FUNDAMENTAL Sector AUTO(two

wheeler)

Face Vaule Rs.2.00

Market Cap. Rs. 35,863 Cr.

52 wk. High/ Low 2094.00/1535.00

Page 36: AUTOMOBILE SECTOR

2006 2007 2008 2009 2010

8719.209999999969905.94999999996 10345.01

12325.38

15775.77

971.34 857.89 967.88 1281.762231.83

Profitabilitysales Profit

Page 37: AUTOMOBILE SECTOR

EPS

Page 38: AUTOMOBILE SECTOR

EQUITY DIVIDEND(%)

Page 39: AUTOMOBILE SECTOR

KEY HIGHLIGHTS New launches 44% of Hero Honda’s sales come from

the rural sector, which is best positioned for high growth from a good monsoon.

75% of its sales are from 100cc products.

Most selling bikes of Hero Honda are Splendor, Passion ,CD Deluxe.

Export increased 20% from previous year in Sri-lanka, Bangladesh, Columbia.

Page 40: AUTOMOBILE SECTOR

Years 2010A 2011E 2012E 2013E 2014E 2015EGrowth Rate 20% 15% 15% 15% 15%Sales Turnover 16792.62 20151.14 23173.

8226649.

8930647.

3735244.48

Total Expenses 13102.26 16104.79 18520.51

21298.59

24379.98

28036.98

PBDIT 3002.58 4046.35 4653.30

5351.30

6267.39

7207.50

Interest 2.10 14.11 16.22 18.65 21.45 24.67PBDT 3023.20 4032.24 4637.0

85332.6

46245.9

37182.82

Depreciation 191.47 286.15 329.07 378.43 429.06 493.42Profit Before Tax 2831.73 3746.10 4308.0

14954.2

15816.8

76689.40

Tax 599.90 1236.21 1421.64

1634.89

1919.57

2207.50

Reported Net Profit 2231.83 2509.89 2886.37

3319.32

3897.30

4481.90

Shares in issue 19.97 19.97 19.97 19.97 19.97 19.97Earning Per Share (Rs) 111.77 125.68 144.54 166.22 195.16 224.43Capex 1992.28 2216.63 2549.1

22931.4

93064.7

43524.45

WC -917.82 -1007.56 -1158.6

9

-1332.4

9

-1379.1

3

-1586.00

Projected P&L Account for Hero Honda

Page 41: AUTOMOBILE SECTOR

Risk free return (RF) 6.70%Market return(RM) 16.50

%Risk premium 9.80%Beta of a Stock .56Cost Of Equity 12.20

%

Total Debt 66.03Total Interest 2.1Tax 30%Cost of Debt 2.23%Estimated COD

4.69%

WACCWeights Weight Cost

Cost of Equity 0.95 11.60%Cost of Debt 0.05 0.20%

Total WACC 11.83%

WACC

Page 42: AUTOMOBILE SECTOR

Years 2010A 2011E 2012E 2013E 2014E 2015E

PAT 2231.83 2509.89

2886.37

3319.32

3897.30 4481.90

Interest(1-.33) 1.41 9.45 10.87 12.50 14.37 16.53

Depreciation 191.47 286.15 329.07 378.43 429.06 493.42

investment in FA 1992.28 2216.63

2549.12

2931.49

3064.74 3524.45

Investment in WC -917.82-

1007.56

-1158.6

9

-1332.4

9

-1379.1

3-1586.00

FCFF 1350.25 1596.41

1835.88

2111.26

2655.13 3053.41

WACC 12.00 12.00 12.00 12.00 12.00 12.00

Present value factor 1.00 0.89 0.80 0.71 0.64 0.57

Present Value OF FCFF 1350.25 1425.37

1463.55

1502.75

1687.39 1732.58

FCFF

Page 43: AUTOMOBILE SECTOR

Terminal Value 53943.49TV discount factor 0.57

present Value of TV 30608.99

Value of the firm 38420.63

Market Value of debt 66.03

Value of Equity 38354.60

Value per share (FCF) 1920.61Value per share (DDM)

1844

Page 44: AUTOMOBILE SECTOR
Page 45: AUTOMOBILE SECTOR

PEER COMPANY REVIEWCOMPANY HERO

HONDABAJAJ AUTO TVS

MOTORSLML

SHARE PRICE (LTD)

1843.84 1543.70 73.85 11.50

52 WEEK HIGH / LOW

2094 / 1452 1525 / 684 151.90 / 52.25

14.28 / 8.31

SALES 15775.77 11813.25 4363.11 163.78

NET PROFIT 2231.83 1702.73 88.01 51.62

MARKET CAP

37244.71 41830.90 3508.52 94.45

TOTAL ASSETS OR CAPEX

3506.23 4266.92 1866.50 75.57

Page 46: AUTOMOBILE SECTOR

----------------RATIO----------------COMPANY HERO

HONDABAJAJ AUTO

TVS MOTORS

LML

PRICE EARNINGRATIO(%)

18.17 23.09 25.38 N/A

EPS 111.77 117.69 3.71 -6.30

OPM (%) 16.87 21.05 2.80 0.64

RETURN ON NET WORTH (%)

64.41 58.14 10.53 15.44

Page 47: AUTOMOBILE SECTOR

DIVIDENDCOMPANY / YEAR

2007 2008 2009 2010

HERO HONDA

850 % 950 % 1000% 5500 %

BAJAJ AUTO

NIL 200 % 220 % 400 %

TVS MOTORS

15 % 70 % 70 % 70 + 50 %

MAH SCOOTER

30 % 60 % 55 % 55 %

Page 48: AUTOMOBILE SECTOR

FUTURE EXPANSION OF BAJAJ AUTO The company are planning to go for set up

plant in uttarakhand for major expansion.

The company plans to increase its capacity of two and three wheelers from the current 4,260,000 numbers per annum to 4,980,000 numbers per annum by 31 March 2011.

Page 49: AUTOMOBILE SECTOR

FUTURE EXPANSION OF HERO HONDA The company will be investing Rs. 350 crore in

2010-11 on capex, which includes Rs. 130 crore for increasing the company's production capacity at the Haridwar plant.

the company may build a fourth factory as it targets rural markets and possible exports to Africa.

The company will launches new six bikes.

Page 50: AUTOMOBILE SECTOR

CALL BAJAJ AUTO

CMP : 1543.70TARGET PRICE : 1658.89CALL : Buy(if price falls)

HERO HONDACMP : 1843.85TARGET PRICE : 1920.61CALL : Buy(if price falls)

Page 51: AUTOMOBILE SECTOR

REFERENCES Annual Reports Capitaline.com BSE & NSE websites Moneycontrol.com Economic Times

Page 52: AUTOMOBILE SECTOR