bosch ltd (boslim) | 18140content.icicidirect.com/mailimages/idirect_bosch_q3fy19.pdf · all...

February 14, 2019

ICICI Securities Ltd | Retail Equity Research

Result Update

Technological prowess; fairly valued…

Bosch reported mixed Q3FY19 results. Revenues came in at | 3,096

crore (up 0.8% YoY). Gross revenues from the automotive segment

(~80% of revenue) were flat YoY at | 2,537 crore, with the

Powertrain Solutions business declining 2.7% YoY and the

aftermarket division growing 5.8% YoY

Gross revenue from the Non-automotive segment increased 4.8%

YoY to | 596 crore, driven by double digit growth in security systems

and solar energy division

EBITDA declined 5.6% YoY to | 423 crore. Attendant EBITDA

margins came in at 13.7% (down 92 bps YoY). The company

reported higher other income, which was at | 179 crore & also

incurred lower depreciation charges that positively impacted the

profitability. Consequent PAT increased 19.3% YoY to | 335 crore

Bosch is currently executing a buyback offer comprising 10.3 lakh

shares at a maximum buyback price of | 21,000/share (aggregate

amount: | 2157 crore) and is open from February 6-20, 2019

Near term growth impacted by M&HCV blip, BS-VI pre-buy on the anvil!

The domestic M&HCV space growth trajectory has been curtailed in

recent months. After posting 47.9% YoY volume growth for H1FY19, the

twin impact of revised axle load norms (permitting higher carry loads) and

lack of credit facilities from NBFCs (tight system liquidity) played

spoilsport. Consequently, the segment recorded 7.1% YoY decline in

volumes for Q3FY19, with Q4FY19 now expected to be flat YoY with due

consideration to a high base from last year. However, going forward into

FY20E, demand is expected to revive on the OEM side on account of pre-

buying before the new emission norms, i.e. BS-VI. Bosch has formidable

presence in diesel injection systems that caters to the M&HCV space &

would benefit from this opportunity. We factor in revenue growth of 9.6%

YoY and 11.6% YoY for FY19E and FY20E, respectively.

Opportunities (BS-VI, ABS, EV) galore, execution will be closely tracked!

A variety of opportunities have presented themselves to auto component

suppliers with the pace of regulatory (BS-VI), technological (EV and

hybrid) and safety (ABS) changes. The challenge for them would be to

capture a portion of these opportunities and gain market share while

ensuring margin accretion. For Bosch in particular, pace of localisation

would be an important monitorable because of the reliance on sourcing

from its parent. In the past, its margin was impacted while transitioning

from BS III to BS IV due to higher import content. The company hopes to

partner with its key clients on BS-VI technology in the 2W, PV as well as

CV space, however its impact on margins cannot be ascertained at this

point in time due to heightened competitive intensity as several suppliers

vie for the BS-VI opportunity

Unlevered B/S, MNC parent, robust return ratios, maintain HOLD!

Courtesy its strong parentage and history of technological expertise,

Bosch continues to retain an advantage during times of disruption. It

boasts of an unlevered, cash surplus B/S with healthy profitability (RoCE

>20%). Incorporating the change in demand scenario domestically

amidst muted global auto demand and limited scope for margin

expansion (built in 90 bps over FY18-20E) due to competitive intensity

going forward, we estimate sales, PAT CAGR at 10.6% YoY and 17.8%

YoY, respectively, in FY18-20E. Valuing the company at its long period

one year forward average P/E of ~28.2x, we arrive at a target price of

| 17,565 on FY20E EPS of | 622.9 and maintain HOLD rating on the stock.

Rating matrix

Rating : Hold

Target : | 17565

Target Period : 12 months

Potential Upside : -3%

What’s Changed?

Target Changed from | 20500 to | 17565

EPS FY18E Changed from | 593.7 to | 545.6

EPS FY19E Changed from | 661.5 to | 622.9

Rating Unchanged

Quarterly Performance

Q3FY19 Q3FY18 YoY (%) Q2FY19 QoQ (%)

Revenue 3,095.5 3,071.9 0.8 3,201.1 -3.3

EBITDA 422.6 447.6 -5.6 596.2 -29.1

EBITDA (%) 13.7 14.6 -92 bps 18.6 -497 bps

PAT 335.4 281.0 19.3 420.0 -20.1

Key Financials

| Crore FY17 FY18 FY19E FY20E

Net Sales 10,176 11,690 12,815 14,308

EBITDA 1,960 2,093 2,308 2,686

Net Profit 1,741 1,371 1,665 1,901

EPS (|) 570.5 449.1 545.6 622.9

Valuation summary

FY17 FY18 FY19E FY20E

P/E (x) 31.8 40.4 33.2 29.1

EV / EBITDA (x) 27.2 25.1 22.4 18.9

Tgt EV/E (x) 26.3 24.3 21.7 18.2

P/BV (x) 6.3 5.5 4.9 4.4

RoNW (%) 16.4 14.4 14.9 15.2

RoCE (%) 24.1 21.4 22.2 22.6

Stock data

Particular Amount

Market Capitalization (| Crore) 55,365

Total Debt (FY18) (| Crore) 0.0

Cash and Investments (FY18) (| Crore) 2,817

EV (| Crore) 52,548

52 week H/L (|) 22400 / 16990

Equity capital (| crore) 30.5

Face value (|) 10.0

Price performance (%)

1M 3M 6M 12M

Bosch Ltd -8.2 -8.9 -6.7 -8.4

Wabco India Ltd -2.9 -8.2 -7.1 -14.6

Motherson Sumi Systems -17.5 -20.1 -31.6 -45.3

Research Analyst

Shashank Kanodia, CFA

[email protected]

Jaimin Desai

[email protected]

Bosch Ltd (BOSLIM) | 18140


Variance analysis

Q3FY19 Q2FY19E Q3FY18 YoY (%) Q2FY19 QoQ (%) Comments

Total Operating Income 3096 3383 3072 0.8 3201 -3.3

Operating income came in lower than expected on account of flat revenues in the

automotive segment.

Raw Material Expenses 1718 1912 1623 5.9 1815 -5.3 Lower raw material costs helped expand gross margin by 120 bps on QoQ basis

Employee Expenses 338 355 341 -1.1 340 -0.8

Other expenses 617 710 660 -6.5 450 37.3 Other expenses lower YoY on account of one-time accruals in base quarter

EBITDA 423 406 448 -5.6 596 -29.1

EBITDA Margin (%) 14 12 15 -92 bps 19 -497 bps Margins dragged by spike in other expenses despite gross margin expansion

Other Income 179 132 102 74.7 140 28.0

Other income jumped due to MTM gains on marketable securities and higher interest

rates

Depreciation 101 96 124 -18.6 95 6.5 Lower additions in R&D assets (high rate item) help lower depreciation YoY

Interest 10 0 3 281.6 0 NA

Total Tax 155 146 142 8.9 221 -30.0

PAT 335 296 281 19.3 420 -20.1 Higher other income and lower depreciation aid profitability

Key Metrics

Automotive revneue 2,537 2,748 2,540 -0.1 2,748 -7.7

Powertrain Solutions business de-grew 2.9% YoY while Aftermarket business growth

moderated to 5.8% YoY

Non Automotive revenues 596 463 569 4.8 463 28.7

Source: Company, ICICI Direct Research,

Change in estimates

(| Crore) Old New % Change Old New % Change Comments

Revenue 13,391 12,815 -4.3 15,000 14,308 -4.6 Revenue estimates revised downward to reflect weakness in OEM space

EBITDA 2,539 2,308 -9.1 2,857 2,686 -6.0

EBITDA Margin (%) 19.0 18.0 -95 bps 19.0 18.8 -27 bps Competitive intensity in run up to BS VI to keep margins under check

PAT 1,786 1,665 -6.8 1,970 1,901 -3.5 Lower revenue and margin estimates to drag PAT

EPS 585 546 -6.7 645 623 -3.5

FY19E FY20E

Source: Company, ICICI Direct Research;

Assumptions

Current Earlier Comments

FY17 FY18 FY19E FY20E FY19E FY20E

Revenue (| crore)

Automotive 9,722 10,187 10,889 12,196 11,352 12,714

Non- automotive 1,692 1,751 1,993 2,152 2,046 2,292 Non automotive segment to provide moderate growth

EBIT margins (%)

Automotive 19.6 16.2 18.1 18.5 17.5 16.5

Non- automotive 8.3 18.9 10.6 12.0 14.2 13.7

Source: Company, ICICI Direct Research


Key conference call takeaways

Management outlook/guidance and demand

The management expects moderate growth in FY20E, with low

consumer sentiment juxtaposed against an encouraging Union

Budget and BS-VI pre-buy fillip.

On the Aftermarket side, the company is confident of clocking

double digit growth again in coming quarters.

On the BS-VI side, the company is looking after the system

integration and will address the after-treatment with the help of

some of its partners.

With increased cost difference between petrol and diesel

variations post BS-VI, the self-owned small diesel car segment

(1.0-1.2L engine) is expected to shrink.

Components for 2-W ABS can come from unlisted sister

companies in India.

Bosch views 2-W fuel injectors as a large prospective opportunity.

Sales, costs and margins

Raw material cost was up on YoY basis during Q3FY19 due to

adverse FX movement and adverse product mix.

Depreciation was lower YoY due to lower additions to R&D assets

which attract higher depreciation rates.

Other income was higher YoY on account of MTM gains on

marketable securities and increase in interest rates.

Others

All powertrain solutions (petrol, diesel and future electrification)

and mobility solutions businesses will remain in the listed Indian

company.

The parent company has invested ~EUR 400 million per year over

the last 10 years for electrification technologies. The company is

involved in all areas of electrification except making the battery

cells.

The company believes ICE will remain the dominant technology

till 2030 and beyond even though electrification scope is

prominent.

2-W, 3-W and intra city mass transport would precede passenger

cars in the electrification timeline.


Company Analysis

Auto segment to continue to remain key driver of sales growth…

The domestic M&HCV space growth trajectory has been curtailed in

recent months. After posting 47.9% YoY volume growth for H1FY19, the

twin impact of revised axle load norms (permitting higher carry loads) and

lack of credit facilities from NBFCs (tight system liquidity) played

spoilsport. Consequently, the segment recorded 7.1% YoY decline in

volumes for Q3FY19, with Q4FY19 now expected to be flat YoY with due

consideration to a high base from last year. However, going forward into

FY20E, demand is expected to revive on the OEM side on account of pre-

buying before the new emission norms, i.e. BS-VI. Bosch has formidable

presence in diesel injection systems that caters to the M&HCV space &

would benefit from this opportunity. We factor in revenue growth of 9.6%

YoY and 11.6% YoY for FY19E and FY20E, respectively.

Bosch (parent) believes there is future for diesel!

The management reiterated its stance that the internal combustion engine

(ICE) is going to be dominant till 2030 as well as beyond. The heavy load

& power vehicles (CV, SUV and tractors) requires diesel system for their

smooth function. In order to support the industry’s requirement and make

practically zero-emissions traffic reality, Bosch is making heavy

investments – both in making electro-mobility & also enhancing the ICE

vehicle. Bosch (parent) has achieved a breakthrough in new diesel

technology – in which they have succeeded in getting NOx emissions

down to 1/10 (at 13 mg vs. 120 mg that will be permitted >2020). Thus,

the management believes that despite the industry moving towards the

EV space, ICE will continue to have a future in coming days.

Await clarity on technology/product for electric vehicle!

We await management clarity on their strategy for EV, which is expected

to disrupt the fuel based engine system thereby impacting Bosch. We

understand that its MNC parent is well equipped with some of the EV

ancillary products & continues to invest in R&D. The parent is currently

sourcing EVs -batteries from its partner but plans to manufacture the

same, going forward. We believe Bosch India will surely have an

advantage in terms of new technology/product, which will be backed by

its strong MNC parent. However, import/trading of such products will

negatively impact its margin in the initial phase of the transition.

Exhibit 1: Revenue growth trend

8,659

8,820

12,086

9,701

10,435

11,690

12,815

14,308

6.01.9

37.0

-19.7

7.6

12.0

9.6

11.6

-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0

40.0

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

CY12 CY13 FY15 FY16 FY17 FY18 FY19E FY20E

%

| crore

Total Operating Income % Increase

* Change in accounting year, FY15 is a 15-month period

Source: Company press release, ICICI Direct Research


Exhibit 2: Revenue mix – Segment wise (%)

89

87

88

86

85

86

11 13 12 14 15 14

-

10

20

30

40

50

60

70

80

90

100

CY12 CY13 FY15 FY16 FY17 FY18

%

Industrial Automotive



Exhibit 3: Revenue mix – Geography wise (%)

89

88

88

91

92

91

11 12 12 9 8

9

-

10

20

30

40

50

60

70

80

90

100


%

Export Domestic

*

Change in accounting year, FY15 is a 15-month period


Exhibit 4: Mobility solution (automotive) revenue mix (%)

88

87

87

91

92

91

12 13 13 9 8

9

-

10

20

30

40

50

60

70

80

90

100


%

Export Domestic



Exhibit 5: Non-mobility solution (industrial) revenue mix (%)

94

94

93

89

89

84

6 6 7 11 11 16

-

10

20

30

40

50

60

70

80

90

100


%

Export Domestic

*

Change in accounting year, FY15 is a 15-month period


EBITDA margin to remain steady!

Bosch has seen some EBITDA margin shave-offs from the CY11 peak but

has stabilised at ~15-16%. The same, however, has improved from FY16

onwards owing to a demand revival and new product launches in lieu of

changes in emission norm gradually. Its consistent focus on localisation

efforts is likely to expand gross margins resulting in higher profitability.

Bosch had anticipated a gradual transition to BS IV norms. However, the

sudden liquidation of BS-III inventories compelled OEMs to ramp up

volumes thereby resulting in demand-supply mismatch at Bosch’s end.

Even at high utilisation rate, it was unable to cater to the sudden demand

from OEMs. Thus, it had higher share of traded goods (sourced from

parent in H1FY18), impacting its margins. Even for Q2FY19 rupee

depreciation & higher cost of imported injectors impacted the gross

margins. We believe even while transition to BS VI norms, there could be

some pressure on Bosch’s margins however structurally they are likely to

move upwards. On the flip side, consistent focus on cost reduction

measures (employee expense at ~11% vs >14% in the past), operational

efficiency & moving out from single digit margin (SMG) business will

provide some cushion. Thus, we estimate margin profile at ~18.0% for

FY19E & at ~18.8% for FY20E.


Strong operational cash flows; clean revenue accounting policies!

Bosch’s business generates strong cash flows from operations (CFO) that

were at | 2126 crore in FY18. Strong cash inflows from operations keep

the business cash rich and debt free, something that is better than other

ancillary peers. For FY19E & FY20E, we believe Bosch will invest around

~| 570 crore each, mainly towards development of plants, corporate

office and some investment is towards R&D activity. However, despite

higher investment, the CFO remains at a healthy level. We believe the

CFO/EBITDA ratio is likely to remain healthy, going forward.

Exhibit 7: CFO, EBITDA reflective of nature of accounting policies

1,213

1,380

1,822

1,636

2,448

2,126

1,903

2,196

89.8

106.9

92.0

87.1

124.9

101.6

82.4

81.7

-

20.0

40.0

60.0

80.0

100.0

120.0

140.0

-

500

1,000

1,500

2,000

2,500

3,000


%

| crore

CFO CFO/EBITDA



Exhibit 6: EBITDA margin to improve

1,350

1,291

1,981

1,878

1,960

2,093

2,308

2,686

15.6

14.6

16.4

19.4 18.8

17.9 18.0

18.8

-

5.0

10.0

15.0

20.0

25.0

-

500

1,000

1,500

2,000

2,500

3,000


%

| c

rore

EBITDA EBITDA Margins %




Maintains decent return ratios

Bosch has always had a history of being able to generate above normal

returns of employed capital (RoCE). Since CY08-12, it had RoCEs ranging

between 17% and 23%. The strong capital expenditure exercise started in

CY12-13 along with domestic automotive weakness leading to a mild

reduction in RoCE in CY13. However, we expect the same to improve. We

expect Bosch to maintain decent return ratios, going forward.

Higher revenue growth & steady margins will drive profitability

PAT margins are expected to continue to move northwards primarily

driven by EBITDA margins expansion. Margins had come down in CY13

due to higher depreciation charge (they depreciate assets faster than

income tax requirements causing incremental ~1-1.5% decline in

reported PAT more than required). The change in asset base was mainly

due to a change in accounting year (from CY to FY) resulting in lower

depreciation lifting profitability. Thus, going forward, we believe its PAT

margins will be >13%.

Exhibit 8: Return ratio profile

17

14

19

16 16

14 15 15

23

20

28

22 24

21 22 23

10

15

20

25

30


%

RoE RoCE



Exhibit 9: PAT margin to improve, going forward

958

885

1,338

1,531

1,741

1,371

1,665

1,901

11.1 10.0

11.2

15.6 13.8

12.3

13.0

13.3

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000


%

| c

rore

PAT PAT Margins %




Outlook and valuation

Courtesy its strong parentage and history of technological expertise,

Bosch continues to retain an advantage during times of disruption. It

boasts of an unlevered, cash surplus B/S with healthy profitability (RoCE

>20%). Incorporating the change in demand scenario domestically

amidst muted global auto demand and limited scope for margin

expansion (built in 90 bps over FY18-20E) due to competitive intensity

going forward, we estimate Sales, PAT CAGR at 10.6% YoY and 17.8%

YoY respectively over FY18-20E. Valuing the company at its long period

one year forward average P/E of ~28.2x, we arrive at a target price of |

17,565 on FY20E EPS of | 622.9, and maintain HOLD rating on the stock.

Exhibit 10: Valuation

Revenues Growth EPS Growth PE EV/EBITDA RoNW RoCE

(| cr) (%) (|) (%) (x) (x) (%) (%)

FY17 10435.2 1.9 570.5 -7.5 31.8 27.2 16.4 24.1

FY18 11690.2 12.0 449.1 -21.3 40.4 25.1 14.4 21.4

FY19E 12815.1 9.6 545.6 21.5 33.2 22.4 14.9 22.2

FY20E 14308.0 11.6 622.9 14.2 29.1 18.9 15.2 22.6


Exhibit 11: One year forward P/E (Bosch currently trading at 29.1x)

0

5000

10000

15000

20000

25000

30000

Feb-12

Apr-12

Jun-12

Aug-12

Oct-12

Dec-12

Feb-13

Apr-13

Jun-13

Aug-13

Oct-13

Dec-13

Feb-14

Apr-14

Jun-14

Aug-14

Oct-14

Dec-14

Feb-15

Apr-15

Jun-15

Aug-15

Oct-15

Dec-15

Feb-16

Apr-16

Jun-16

Aug-16

Oct-16

Dec-16

Feb-17

Apr-17

Jun-17

Aug-17

Oct-17

Dec-17

Feb-18

Apr-18

Jun-18

Aug-18

Oct-18

Dec-18

Feb-19

(|)

41.7x 36.3x 33.6x 30.9x 22.7x 17.3x 11.8x

Source: Reuters, ICICI Direct Research\


Recommended history vs. consensus

0.0

20.0

40.0

60.0

80.0

100.0

0

3,000

6,000

9,000

12,000

15,000

18,000

21,000

24,000

27,000

30,000

Feb-19Nov-18Aug-18May-18Feb-18Nov-17Sep-17Jun-17Mar-17Dec-16Sep-16Jun-16Mar-16Dec-15

(%

)(|)

Price Idirect target Consensus Target Mean % Consensus with HOLD

Source: Bloomberg, Company, ICICI Direct Research

Key events

Date Event

Mar-08 Bosch plans to turn India into a hub for its packaging business

Sep-08 Buyback of shares approved by board for a maximum price of | 4500 per share

Dec-08 Indefinite lockout imposed at Jaipur plant as a result of indefinite strike by workers

Apr-09 Buyback fails to enthuse investors as financials dip on demand slowdown

Jan-10 Bosch announces investment of | 2000 crore in India between 2010 and 2012

Mar-10 Lockout declared at Bangalore plant as wage negotiations with worker unions fail

Mar-11 Increasing trend of dieselation in Indian passenger vehicles space aids Bosch considering it is the market leader in diesel injection systems

Feb-12 Strong Q4CY11 results given a strong thumbs-up by markets

Jun-12 Bosch begins to rationalise production as inventory piles up on slow demand

Dec-12 Senior management rejigged as Dr Stepehn Berns takes over as MD from long standing MD VK Vishwanathan

Jun-13 Commercial vehicle industry witnesses unprecendented fall in volumes affecting Bosch's results significantly

Jun-14 Board approves change in accounting year from CY to FY; accordingly CY14 would be for 15 months commencing from January 2014 to March 2015

Aug-14 Workmen of the company's Jaipur plant go on illegal "tool down" strike and resume after 2 days

Sep-14 Worker of company's Banglore plan go on strike; demanding hike in pay and other benefits

Nov-14 To adjust its production and to avoid unnecessary build up in inventory; Bosch suspends manufacturing at its Nashik plant for two days

Mar-15 Company's Naganathapura plant accidently catches fire. However, there is no major impact and the plant is adequately covered under insurance


Top 10 Shareholders Shareholding Pattern

Rank Name Latest Filing Date % O/S Position (m) Change (m)

1 Robert Bosch GmbH 31-Dec-18 70.5 21.5 0.00

2 General Insurance Corporation of India 31-Dec-18 3.2 1.0 0.00

3 The New India Assurance Co. Ltd. 31-Dec-18 2.8 0.9 0.00

4 Life Insurance Corporation of India 31-Dec-18 2.5 0.8 0.00

5 United India Insurance Co. Ltd. 31-Dec-18 1.2 0.4 0.00

6 Aberdeen Standard Investments (Asia) Limited 31-Dec-18 1.0 0.3 0.00

7 The Vanguard Group, Inc. 31-Dec-18 0.8 0.3 0.00

8 BlackRock Institutional Trust Company, N.A. 31-Jan-19 0.7 0.2 0.01

9 Aditya Birla Sun Life AMC Limited 31-Dec-18 0.7 0.2 0.00

10 First State Investments (HK) Ltd. 31-Oct-18 0.4 0.1 0.00

(in %) Dec-17 Mar-18 Jun-18 Sep-18 Dec-18

Promoter 70.5 70.5 70.5 70.5 70.5

FII 6.9 6.9 7.0 6.9 7.3

DII 13.1 13.4 13.5 13.7 13.0

Others 9.5 9.2 9.1 9.0 9.3

Source: Reuters, ICICI Direct Research

Recent Activity

Investor name Value ($mn) Shares (mn) Investor name Value ($mn) Shares (mn)

IDFC Asset Management Company Private Limited 1.83 0.01 Reliance Nippon Life Asset Management Limited -13.31 -0.05

BlackRock Institutional Trust Company, N.A. 1.54 0.01 DHFL Pramerica Asset Managers Private Limited -0.54 0.00

Kotak Mahindra Asset Management Company Ltd. 0.82 0.00 Amundi Hong Kong Limited -0.53 0.00

L&T Investment Management Limited 0.37 0.00 Edelweiss Asset Management Ltd. -0.47 0.00

Mahindra Asset Management Company Pvt. Ltd. 0.35 0.00 Storebrand Kapitalforvaltning AS -0.15 0.00

Buys Sells

Source: Reuters, ICICI Direct Research


.

Financial summary

Profit and loss statement | crore

(Year-end March) FY17 FY18 FY19E FY20E

Total operating Income 10,435.2 11,690.2 12,815.1 14,308.0

Growth (%) 7.6 12.0 9.6 11.6

Raw Material Expenses 5,309.2 6,301.4 7,100.1 7,906.4

Employee Expenses 1,342.8 1,356.5 1,359.3 1,472.1

Other Expenses 1,822.8 1,939.1 2,047.4 2,243.7

Total Operating Expenditure 8,474.8 9,597.0 10,506.8 11,622.1

EBITDA 1,960.4 2,093.2 2,308.3 2,685.9

Growth (%) 4.4 6.8 10.3 16.4

Depreciation 456.2 467.2 384.5 429.2

Interest 27.2 3.3 10.2 0.0

Other Income 617.4 511.8 565.0 572.3

PBT 2,094.4 2,134.5 2,478.8 2,829.0

Less Exceptional items -297.1 93.9 0.0 0.0

Total Tax 650.2 669.9 813.4 927.9

PAT 1,741.2 1,370.7 1,665.3 1,901.1

Growth (%) 13.7 -21.3 21.5 14.2

EPS (|) 570.5 449.1 545.6 622.9


Cash flow statement | crore


Profit after Tax 1,741.2 1,370.7 1,665.3 1,901.1

Add: Depreciation 456.2 467.2 384.5 429.2

(Inc)/dec in Current Assets 93.0 -604.2 -495.4 -584.0

Inc/(dec) in CL and Provisions 130.2 889.1 338.7 449.4

CF from operating activities 2,420.6 2,122.8 1,893.0 2,195.7

(Inc)/dec in Investments 507.2 -1,101.9 -500.0 -700.0

(Inc)/dec in Fixed Assets -605.7 -667.3 -570.0 -570.0

Others 40.7 41.4 -57.2 -75.8

CF from investing activities -57.9 -1,727.8 -1,127.2 -1,345.8

Issue/(Buy back) of Equity -0.9 0.0 0.0 0.0

Inc/(dec) in loan funds -14.9 0.0 0.0 0.0

Dividend paid & dividend tax -596.7 -366.2 -457.8 -549.4

Others -1,906.0 173.8 -10.2 0.0

CF from financing activities -2,518.5 -192.4 -468.0 -549.4

Net Cash flow -113.8 170.1 308.0 300.5

Opening Cash 1,831.4 1,717.6 1,887.7 2,195.7

Closing Cash 1,717.6 1,887.7 2,195.7 2,496.2


Balance sheet | crore


Liabilities

Equity Capital 30.5 30.5 30.5 30.5

Reserve and Surplus 8,769.1 9,950.8 11,158.3 12,510.0

Total Shareholders funds 8,799.6 9,981.3 11,188.8 12,540.5

Total Debt 0.0 0.0 0.0 0.0

Other non-current Liabilities 370.2 427.0 427.6 428.5

Total Liabilities 9,169.8 10,408.3 11,616.4 12,969.0

Assets

Gross Block 2,196.8 2,679.8 3,249.8 3,819.8

Less: Acc Depreciation 877.4 1,344.6 1,729.1 2,158.3

Net Block 1,319.4 1,335.2 1,520.7 1,661.5

Capital WIP 128.9 313.2 313.2 313.2

Total Fixed Assets 1,448.3 1,648.4 1,833.9 1,974.7

Investments 4,120.9 5,222.8 5,722.8 6,422.8

Inventory 1,180.4 1,225.8 1,404.4 1,568.0

Debtors 1,186.2 1,615.6 1,771.1 1,977.4

Loans and Advances 1,116.0 1,282.8 1,406.2 1,570.1

Other current assets 431.1 393.7 431.6 481.9

Cash 1,717.6 1,887.7 2,195.7 2,496.2

Total Current Assets 5,631.3 6,405.6 7,209.0 8,093.6

Creditors 1,339.9 2,023.1 2,217.8 2,476.1

Provisions 754.3 745.0 816.7 911.8

Other Current Liabilities 535.8 751.0 823.3 919.2

Total Current Liabilities 2,630.1 3,519.1 3,857.8 4,307.2

Net Current Assets 3,001.3 2,886.5 3,351.3 3,786.4

Deferred Tax Asset 467.6 490.5 537.7 600.3

Other non-current Assets 117.44 110.0 120.6 134.6

Application of Funds 9,169.8 10,408.3 11,616.4 12,969.0


Key ratios


Per share data (|)

EPS 570.5 449.1 545.6 622.9

Cash EPS 720.0 602.2 671.6 763.5

BV 2,883.2 3,270.3 3,666.0 4,108.8

DPS 162.4 100.0 125.0 150.0

Cash Per Share 562.8 618.5 719.4 817.9

Operating Ratios (%)

EBITDA Margin 18.8 17.9 18.0 18.8

PBT / Net sales 14.4 13.9 15.0 15.8

PAT Margin 13.8 12.3 13.0 13.3

Inventory days 41.3 38.3 40.0 40.0

Debtor days 41.5 50.4 50.4 50.4

Creditor days 46.9 63.2 63.2 63.2

Return Ratios (%)

RoE 16.4 14.4 14.9 15.2

RoCE 24.1 21.4 22.2 22.6

RoIC 23.3 24.5 27.6 31.1

Valuation Ratios (x)

P/E 31.8 40.4 33.2 29.1

EV / EBITDA 27.2 25.1 22.4 18.9

EV / Net Sales 5.1 4.5 4.0 3.5

Market Cap / Sales 5.3 4.7 4.3 3.9

Price to Book Value 6.3 5.5 4.9 4.4

Solvency Ratios

Debt/Equity 0.0 0.0 0.0 0.0

Current Ratio 1.5 1.3 1.3 1.3

Quick Ratio 1.0 0.9 0.9 0.9



ICICI Direct coverage universe (Auto & Auto Ancillary)

CMP M Cap

(|) TP(|) Rating (| Cr) FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E

Amara Raja (AMARAJ) 740 700 Hold 12647 27.6 30.2 39.8 26.8 24.5 18.6 14.8 13.1 10.2 23.3 22.0 24.7 16.0 15.2 17.1

Apollo Tyre (APOTYR) 200 225 Buy 11647 12.7 14.2 22.5 16.1 14.3 9.1 6.7 6.7 5.7 7.8 9.1 11.0 7.4 9.1 11.1

Ashok Leyland (ASHLEY) 82 137 Hold 23278 5.3 7.7 11.1 15.4 10.7 7.4 10.2 7.7 5.0 28.1 34.1 40.3 21.9 26.6 30.3

Bajaj Auto (BAAUTO) 2822 2380 Hold 81660 140.6 149.7 167.2 17.8 16.7 14.9 11.9 11.3 9.3 22.9 21.1 21.7 21.5 20.3 20.2

Balkrishna Ind. (BALIND) 805 820 Hold 15604 38.2 42.5 49.8 21.1 19.0 16.2 14.2 11.6 9.5 22.4 21.0 22.4 18.1 21.0 22.4

Bharat Forge (BHAFOR) 484 700 Buy 22534 16.2 23.3 28.0 29.9 20.8 17.3 17.6 14.5 12.2 18.2 22.9 25.7 17.3 23.3 23.9

Bosch (MICO) 18140 17565 Hold 56960 449.1 545.6 622.9 40.4 33.2 29.1 25.1 22.4 18.9 14.4 14.9 15.2 21.4 22.2 22.6

Eicher Motors (EICMOT) 21000 21250 Hold 57246 718.9 848.4 1112.9 29.2 24.8 18.9 19.0 16.7 12.3 39.1 34.6 35.3 29.9 26.0 26.4

Escorts (ESCORT) 635 700 Hold 7786 28.1 40.7 44.1 23.8 16.5 15.2 14.2 10.6 9.3 18.8 20.9 20.8 13.5 16.5 15.3

Exide Industries (EXIIND) 212 235 Hold 18054 8.2 8.4 9.8 25.8 25.4 21.7 15.2 14.1 12.0 19.1 17.6 19.1 13.0 12.2 13.1

Hero Moto (HERHON) 2849 3000 Buy 56889 185.1 174.5 199.9 15.4 16.3 14.3 8.7 9.0 7.7 42.4 38.0 39.0 31.4 26.9 27.4

JK Tyre & Ind (JKIND) 89 100 Hold 2013 2.9 12.9 21.9 30.5 6.9 4.1 9.8 6.0 4.6 7.7 12.6 15.4 3.6 15.0 18.6

Mahindra CIE (MAHAUT) 226 280 Buy 8559 9.5 14.5 17.7 23.9 15.6 12.8 13.7 9.9 8.2 9.8 12.9 13.7 11.2 15.0 17.1

Maruti Suzuki (MARUTI) 7203 6000 Hold 216663 255.6 250.3 284.4 25.5 26.0 22.9 13.5 13.8 11.8 21.1 17.8 18.8 18.5 16.3 16.6

Motherson (MOTSUM) 130 125 Hold 41179 5.1 5.3 7.0 25.8 24.6 18.6 9.3 8.5 6.8 16.3 15.2 18.0 17.4 15.7 18.0

Tata Motors (TELCO) 152 145 Hold 45571 26.8 -83.4 16.6 5.6 NA 9.1 2.4 3.3 2.6 9.1 5.1 9.9 10.3 5.9 12.6

Wabco India (WABTVS) 6160 6800 Hold 11704 143.8 172.2 212.3 42.8 35.8 29.0 28.0 24.1 19.1 17.9 17.8 18.2 25.1 25.7 26.0

Sector / Company

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



RATING RATIONALE

ICICI Direct endeavours to provide objective opinions and recommendations. ICICI Direct assigns ratings to its

stocks according to their notional target price vs. current market price and then categorises them as Strong

Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is

defined as the analysts' valuation for a stock.

Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;

Buy: >10%/15% for large caps/midcaps, respectively;

Hold: Up to +/-10%;

Sell: -10% or more;

Pankaj Pandey Head – Research [email protected]

ICICI Direct Research Desk,

ICICI Securities Limited,

1st Floor, Akruti Trade Centre,

Road No 7, MIDC,

Andheri (East)

Mumbai – 400 093

[email protected]


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