automobile sector security analysis

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SECURITY ANALYSIS OF AUTOMOBILE SECTOR

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Page 1: Automobile sector security analysis

SECURITY ANALYSIS OF AUTOMOBILE SECTOR

Page 2: Automobile sector security analysis

Economic Factor Affecting Automobile Sector

• Pricing Pressure

• Financing options

• Income of the consumer / buyer

• Efficient Operations

• Wide Dealer Network

Page 3: Automobile sector security analysis

Economic Factor Affecting Automobile Sector

• Access to Latest Technologies

• Factor of production

• Government policies and taxes

• Presence across segments

• Advertising and marketing

Page 4: Automobile sector security analysis

Risk In Automobile Sector

• Labour unrest and industrial action.

• Unexpected delays and cost overrun due to.

• Slow down in government decision due to political instability.

• Raw material price.

• Restructuring of Automobile company

• Financial - Allocation and cash flow Supply Chain

• Operational Efficiency & Raw Material prices

• Fuel Efficiency & Fuel Prices

• segment Competitiveness & Emerging markets

Page 5: Automobile sector security analysis

COMPANY ANALYSIS

Page 6: Automobile sector security analysis

Maruti SuzukiBSE: 532500|NSE: MARUTI|BLOOMBERG: MSIL:IN

CMP: 1186.80| Target Price: 1250| Rating: BUY

Financial Statement

Market Cap (Mn INR) : 343,889.72EPS (TTM):: 52.2552 Wk High/Low(Rs.):1428.50/905.50Face Value: Rs.5

INR Crore

FY11 FY12 FY13ETotal Income 35,849 34,706 42,887Total Expenditure 32,980 33,074 40,528EBIDTA 2,869 1,632 2,359Depreciation 1,014 1,138 1,303EBIT 1,855 494 1,056Interest 25 55 86Other Income 1,278 1,708 1,606PBT 3,108 2,147 2,576TAX 820 511 644PAT 2,288 1,636 1,932EPS 15.9 22.58 66.87

Page 7: Automobile sector security analysis

VALUATION & INVESTMENT RECOMMENDATIONS

• Manesar Plant reopens under full security of employees• MSIL to fast track its New alto launch which is priced about 2 lakhs• Suzuki making MSIL a small car manufacturing hub• Volume growth of 10.8% for FY2012• Company facing slowdown as the demand environment is impacted• Share in diesel vehicle is 38% during 1st quarter FY13 •Net sales grew by 27.5% yoy to Rs.10,778cr in 1st quarter FY13

• EPS Estimates to be INR 66.87 and ROE of 12.1% for FY2013• Expected significant volume growth of 15% for FY13• Coming up with new plant and Skill development center in Gujarat and R&D center in Haryana• Maintain BUY with long term perspective target price of INR 1250

Page 8: Automobile sector security analysis

Hero MotoCorpBSE: 500182|NSE: HEROMOTOCO|BLOOMBERG: HMCL:IN

CMP: 1937| Target Price: 2125| Rating: BUY

Financial Snapshot Market Cap (Mn INR) : 386,595.00P/E Ratio: 16.25EPS (TTM):119.0926Shares Outstanding (Mn): 199.69Free Float (%): 47.79Dividend Yield (%): 2.3252 Week High/ Low (Rs.): 2279/1704

INR Million  FY11 FY12 FY13 Net Sales 1,92,450 2,33,681 2,61,940

Total Expenditure 1,67,980 1,99,700 2,24,313

EBITDA 24,603 34,078 37,715

Depreciation 4,024 10,973 11,693

EBIT 20,579 23,105 26,022Interest Cost -19 213 120

Other Income 4,249 5,756 5,722

PBT 24,048 28,647 31,624Tax 4,769 4,866 5,218PAT 19,279 23,781 26,406EPS 96.544644 119.09 132.235

Page 9: Automobile sector security analysis

VALUATION & INVESTMENT RECOMMENDATIONS

• Capacity Expansion to more than 9 Mn units• R& D ramp up in terms of talent• International Tie-ups for Technology• Strong Exports momentum • Volume demand to moderate to 10 %• EPS Estimates to be INR 132/146 for FY13/FY14

• Long term potential remains intact• Significant Volume growth• Margin expansion potential ahead• Maintain BUY with target price of INR 2,125

Page 10: Automobile sector security analysis

Tata MotorsBSE: 500570|NSE: TATA MOTORS|BLOOMBERG: TTMT:IN

CMP: 246| Target Price: 136| Rating: SELL

Financial SnapshotMarket Cap (Mn INR) : 726,039.38P/E Ratio: 6.4595EPS (TTM):42.5925Shares Outstanding (Mn): 2,665.11Dividend Yield 5Y(%): 6.652 Week High/ Low (Rs.): 305.84/135.19

INR Million  FY11 FY12 FY13 FY14 FY15 Net Sales

1,231,333 1,680,131 1,894,543 2,045,280 2,206,857Total Expenditure

1055783 1438196 1611786 1736241 1873404

EBITDA

175,550 241,935 282,757 309,039 333,453Depreciation

56,180 70,807 74,530 80,450 86,806EBIT 119370 171128 208227 228589 246647

Interest Cost

20,454 24,066 26,556 27,066 29,204Other Income 895 2,100 2,300 2,500 2,698PBT 99,810 149,162 183,971 204,023 220,141Tax 12,164 28,700 36,095 40,700 43,915PAT 87,646 120,462 147,876 163,323 176,226EPS 27.7 35.9 44.1 48.7 53

Page 11: Automobile sector security analysis

VALUATION & INVESTMENT RECOMMENDATIONS

• Highest ever volumes growth 29.1% by Jaguar Land Rover•TML Drivelines Sales volumes increased on the back of growth in domestic CV market• Anticipated CAGR of 30.9% in truck market for 5year period 2010 –15 • Future products in pipeline for FY 12 including Variants from Prima range, World LCV range, ACE variants & Safari Storme • Strong operating cash flows in JLR and Capex ,Investment plans expected to be about GBP 2 bn in FY 13• Extend export potential• EPS Estimates to be INR 44.1/48.7 for FY13/FY14

•Credit Suisse has downgraded Tata Motors based on poor financials•The CMP is Rs.246.00 against the valuation of Rs.135.37• Tata Daewoo decreasing EBITDA and PAT margins• Increasing Debt ,which could reach to Rs.491,000 m in FY14-15 • Recommendation- Do Not Buy

Page 12: Automobile sector security analysis

Eicher MotorsBSE: 505200|NSE: EICHERMOTEQ|BLOOMBERG: EIM:IN

CMP: 2227| Target Price: 2125| Rating: HOLD

Financial SnapshotMarket Cap (Cr. INR) : 58,94.313P/E Ratio: 19.0704EPS (TTM): 114.4812Shares Outstanding (Cr.): 2.7Free Float (%): 44.8Dividend Yield (%): 0.7152 Week High/ Low(Rs.):2360.95/1306

INR Crores

FY11 FY12 FY13

Total Income 5,726 6805 9251

Total Expenditure 5,137 6106 8306

EBITDA 589 699 945

Depreciation 64 80 109

EBIT 525 619 835

Interest Cost 8 7 9

Other Income 142 166 176

PBT 660 778 1003

Tax 163 195 260

PAT 309 314 513

EPS 114 142.7 189.6

Page 13: Automobile sector security analysis

VALUATION & INVESTMENT RECOMMENDATIONS

•Acquired 50 acres of land for construction of its new manufacturing facility at Oragadam, Chennai, (Expected to commence in 1st half of 2013).•The VEPT project, announced in 2010, is on track for scheduled commencement of operations by end of 2012.•Recently signed a 50:50 Joint Venture with Polaris Industries Inc. to set up a greenfield project. Eicher Motors will invest Rs125cr.•EPS estimate comes to be around 189.6 for FY 13

•Enhance production capacity •Improve profitability •New product launches •Distribution and after market footprint •Maintain HOLD with target price of INR 2,125

Page 14: Automobile sector security analysis

Ashok LeylandBSE: 500477|NSE: ASHOKLEY |BLOOMBERG: AL:IN

CMP: 21.85| Target Price: 41.27| Rating: BUY

Financial Snapshot

Market Cap (Mn INR) : 58,135.79P/E Ratio: 10.27EPS (TTM): 2.12Shares Outstanding (Mn): 2,660.68Dividend Yield (%) 5yr ng: 5.9252 Week High/ Low (Rs.): 30.57/20.0

INR Million

Income Statement Y/e 2011 2012E 2013E

Net Revenue 1,11,177 1,30,996 1,60,675

Raw Material Expenses 81,210 96,488 1,20,254

gross profit 29,967 34,508 40,421

employee cost 9,597 10,461 11,768

other expenses 8,192 10,459 12,796

EBITDA 12,178 13,589 15,856

Depr. & Amortization 2,674 3,503 3,758

Net Interest 1,636 2,307 2,570

Other Income 151 90 250

PBT 8,019 7,869 9,778

Total Tax 1,705 1,495 1,858

PAT 6,314 6,374 7,921

Ex-Od items / Min. Int.   -150  

Adjusted PAT 6,314 6,524 7,921

Avg. Shares O/S (m) 2,660.70 2,660.70 2,660.70

EPS (Rs.) 2.4 2.5 3

Page 15: Automobile sector security analysis

• One of the largest commercial vehicle manufacturers in India with a turnover of US $ 2.5 billion in 2011-12 • The largest supplier of logistics vehicles to the Indian Army• 2 facilities in Prague (Czech Republic) and Ras Al Khaimah (UAE).• 50:50 Joint Ventures (JV) with Nissan Motor Company (Japan) for Light Commercial Vehicles and John Deere (USA) for construction equipment• JV with Continental AG (Germany) is for developing automotive Infotronics •JV with the Alteams Group is for producing high press die casting aluminum components for both the automotive and Telecommunication sector

Ashok Leyland

Page 16: Automobile sector security analysis

•Registered the highest growth of a 45 per cent CAGR over 2006-07 to 2011-12•Expected demand for buses growing by 8-10 per cent from 2011-12 to 2016-17•Expected CAGR of 17-20 per cent during 2010-11 to 2015-16 in SCV category while 12-14 % in HCV category•While Total Industry Volume dipped 12% last year, its market share is up 4%•Proposed FDI in retail

VALUATION & INVESTMENT RECOMMENDATIONS

• EPS Estimates to be INR 3/3.5 for FY13/FY14 •Operating margins for the next 2 years are expected to improve•Significant Sales growth• Maintain BUY with target price of INR 40.27

Page 17: Automobile sector security analysis

TVS MotorBSE: 532343|NSE: TVSMOTOR|BLOOMBERG: TVSL:IN

CMP: 40| Target Price: 50| Rating: BUY

Financial SnapshotMarket Cap (Mn INR) : 19,193.52P/E Ratio: 14.58EPS (TTM): 2.77Shares Outstanding (Mn): 475.09Free Float (%): 40.69Dividend Yield (%): 2.7352 Week High/ Low (Rs.): 70.30/31.8

INR MillionFY 11 FY12 FY13

Total operating income 62891 75851 85496

Total operating expenses 58963 70381 79576

EBITDA 3928 5470 5921

Other income 113 23 23

Depreciation 1073 1439 1469

EBIT 2968 4054 4475

Interest 470 461 461

Recurring PBT 2498 3593 4014

Net extra ordinary items -17 0 0

PBT 2481 3593 4014

Total taxes 535 886 1204

PAT 1946 2708 2810

EPS 4.09 5.69 5.9

Page 18: Automobile sector security analysis

VALUATION & INVESTMENT RECOMMENDATIONS

Company has planned to launch a series of new product in FY13. The company expects to grow more than the industry

expects(10%). Technology tie up with BMW may lead to increase in share prices. EPS estimates to be INR 5.9 for the FY13.

Market price has undervalued so growth in share price can be expected

Volatility is in favor of share price. Maintain BUY with target price of

INR 50.

FY 2011 FY 2012 FY 20130

1

2

3

4

5

6

7

4.09

5.69 5.9

Expected EPS for 2013

Series1

Page 19: Automobile sector security analysis

ANALYSIS OF PRESENT-FUTURE OPPORTUNITIES

• Unfavorable and volatile due to currency movements

• Imported raw materials and components• Loss because of operating leverage • Dip in consensus points• Max growth expected

Page 20: Automobile sector security analysis

INVESTMENT OPPORTUNITIES

Page 21: Automobile sector security analysis

THANK YOU

Rahul Hedau (73)Sujit Kumar Jha (76)Sneha Manocha (81)Shilpa Sharma (87)Rajesh Bhagat (109)Risabh Srivastava (110)Vinayak Chauhan (111)