automobile sector
DESCRIPTION
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 PresentationTRANSCRIPT
AUTOMOBILE SECTOR
VALUATION MODELS
PRESENTED BY: ANKIT AGRAWAL 01 SAGAR FAFADIA 21 DHARMESH GANDHI 24 RAMAKANT LADHA 42 ABHISHEK MEHTA 45 HARDIK MEHTA 48 RAJ PANDYA 60
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.
AUTOMOBILE SECTORINDIAN
AUTOMOTIVE
INDUSTRY
MULTI-UTILITYVEHICLE
SCARS
TWOWHEELE
RS
THREEWHEELE
RSTRACTOR
S
MOTORCYCLES SCOOTERS MOPEDS
INDIAN AUTO 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.
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
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
MAJOR PLAYERS Hero Honda Motors Bajaj Auto TVS Motors Honda Motorcycle & Scooter India Kinetic Motor Company Ltd Yamaha Motors India Ltd
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
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
बुलंद भारत की बुलंद तस्वीर
हमारा बजाज!
BAJAJ THREE WHEELER
Company Profile
BAJAJ PLANTS
Chakan
Waluj
Pant Nagar
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.
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
BAJAJ SHAREHOLDING PATTERN
FINANCIALS Sector Auto
Face Value Rs.10.00
Market Cap. 41830 (Rs Cr.)
52 wk. High/ Low 1525/684
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
INDEX COMPARISION
YOY CHANGE IN PROFITS
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.
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
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
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
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
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
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
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
SHAREHOLDING PATTERNForeign (Pro-
moter & Group)26%
Indian (Promoter & Group)
26%
Non Promoter (Institution)
37%
Non Promoter (Non-Institution)
11%
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
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
EPS
EQUITY DIVIDEND(%)
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.
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
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
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
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
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
----------------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
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 %
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.
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.
CALL BAJAJ AUTO
CMP : 1543.70TARGET PRICE : 1658.89CALL : Buy(if price falls)
HERO HONDACMP : 1843.85TARGET PRICE : 1920.61CALL : Buy(if price falls)
REFERENCES Annual Reports Capitaline.com BSE & NSE websites Moneycontrol.com Economic Times