CMP 131.60

Target Price 149.00

ISIN: INE637H01016

Aug 17th

, 2012

SHIVAM AUTOTECH LIMITED Result Update: Q1 FY 13

BUYBUYBUYBUY

Stock Data

Sector Auto Components

BSE Code 532776

Face Value 10.00

52wk. High / Low (Rs.) 135.95/85.10

Volume (2wk. Avg ) 2147.00

Market Cap ( Rs in mn ) 1316.00

Annual Estimated Results (A*: Actual / E*: Estimated)

Years FY12A FY13E FY14E

Net Sales 3525.42 4160.00 4617.60

EBITDA 849.73 1002.56 1122.08

Net Profit 186.26 228.43 265.54

EPS 18.63 22.84 26.55

P/E 7.07 5.76 4.96

Shareholding Pattern (%)

1 Year Comparative Graph

BSE SENSEX Shivam Autotech Ltd

SYNOPSIS

Shivam Autotech Ltd is formerly known

as Munjal Auto Components (MAC) & it

manufactures markets Components for the

Auto Sector to an Original Equipment

Manufacturer (OEM).

During the quarter, the robust growth of

Net Profit is increased by 78.70% to Rs.

76.36 million.

The company has recommended the

dividend a dividend @ 32 % i.e. Rs. 3.20 per

equity share of Rs. 10/- each for the

Financial Year 2011-2012.

Revenue for the quarter rose 23.93% to

Rs.996.77 million from Rs.804.33 million,

when compared with the prior year period.

Net Sales and PAT of the company are

expected to grow at a CAGR of 20% and

21% over 2011 to 2014E respectively.

Indian auto component industry derives 60%

of its turnover from sales to domestic original

equipment manufacturers (OEMs), 25 %

from sales to the domestic replacement

market and around 15 % from exports.

Peer Groups CMP Market Cap EPS P/E (x) P/BV(x) Dividend

Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)

Shivam AutoTech Ltd 131.60 1316.00 18.63 7.07 1.15 25.00

Bosch Ltd 8700.00 273170.40 367.06 23.70 5.78 1350.00

Suprajit Engineering Ltd 26.05 3144.50 3.72 7.04 2.46 65.00

Talbros Automotive Components Ltd 36.95 456.20 9.16 4.03 0.50 12.00

Investment Highlights

Results updates- Q1 FY13,

Shivam Autotech Ltd known as Munjal Auto

Components (MAC) is a fully fledged autonomous

wing of the HERO Group, reported its financial

results for the quarter ended 30 June, 2012. The first

quarter witness a healthy increase in overall sales as

well as profitability of the company.

Months Jun-12 Jun-11 % Change

Net Sales 996.77 804.33 23.93%

PAT 76.36 42.73 78.70%

EPS 7.64 4.27 78.70%

EBITDA 255.74 178.28 43.45%

The company’s net profit jumps to Rs.76.36 million against Rs.42.73 million in the corresponding quarter ending

of previous year, an increase of 78.70%. Revenue for the quarter rose 23.93% to Rs.996.77 million from

Rs.804.33 million, when compared with the prior year period. Reported earnings per share of the company stood

at Rs.7.64 a share during the quarter, registering 78.70% increase over previous year period. Profit before

interest, depreciation and tax is Rs.255.74 millions as against Rs.178.28 millions in the corresponding period of

the previous year.

Expenditure :

During the quarter variable cost rose by 10 per cent

mainly on account of increase in Other Expenses

along with consideration of depreciation in the

rupee impact. Total expenditure in Q1 FY13 was at

746.60 million as against Rs.680.10 million in

Q1FY12.Cost of Material Consumed Rs.283.36

against Rs.250.77 millions in the corresponding

period of the previous year. Other Expenses was at

Rs. 137.55 million and Employee Benefit Expenses

Rs. 58.92 million in Q1FY13 are the primarily

attributable to growth of expenditure.

Latest Updates

• Recommended Dividend

Shivam Autotech Ltd has recommended a dividend @ 32 % i.e. Rs. 3.20 per equity share of Rs. 10/- each for

the Financial Year 2011-2012, subject to the approval of shareholders.

Company Profile

Shivam Autotech Limited, formerly known as Munjal Auto Components Ltd, is a Hero Group company based in

New Delhi. The Hero group has two flagship companies under it Hero Honda Motors Limited world’s Largest

Two-wheeler Company & Hero Cycles Limited world’s largest in bicycles manufacturing. It has employee

strength of 800 members it manufactures and markets auto components to an original equipment manufacturer.

Apart from Hero Honda its clients include BOSCH, HILTI etc. It is among the auto component manufactures which

uses the Near Net Shape Technology for cold and warm Forging.

Technology

Shivam Autotech Ltd uses the latest technology to deliver the best to the customers. The Unique Selling

Proposition is among the few of India's auto-component manufacturers that are using Near Net Shape

Technology.

The forging is the process of beating metal by compressing it and making it flow into the desired shape of tool or

die geometry. The term Near Net Shape, implies that the die so produced is as close to the final product as is

possible, leading to marginal machining allowances.

Inspection & Testing

Shivam Autotech is the supplier of Technology and not merely auto components and to produce auto

components using the latest techniques of cold and warm Near Net Shape Forging.

The production of the tools and the end products are the latest in the market, the world over and the production

facilities are spread over various specialized areas:

• Profile Projector

• Surface Roughness Tester

• Magnetic Crack Detector

• Brinell Hardness Tester

• Rockwell Hardness Tester

• Metallurgical Microscope

• Image Analyzer

• Micro viker Hardness Tester

• Cutting & Polishing M/C

• CNC Gear Analyzer

• Chemical Lab

• Gear Rolling Tester

• CMM (Zeiss).

� Products

• Transmission Gear

• Transmission Shafts

• Warm Forged Components

• Power Train Components

• Near net Shape Technology

• Engine Transmission Components

• 3 STN Hot Formed Components

• 5 STN Cold Formed Components

� Group companies

• Hero Honda Motors Ltd

• Hero Cycles Ltd

• Munjal Showa Ltd

• Sunbeam Auto Ltd

• Majestic Auto Ltd

• Hero Exports

• Munjal Auto Industries Ltd

• Rock man Industries Ltd

• Highway Industries Ltd

• Hero Honda Fin lease Ltd

• Hero Financial Services Ltd

• Munjal Castings Ltd.

• Munjal Sales Corporation

• Satyam Auto Components Ltd

• Easy Bill Ltd

• Hero Corporate Service Ltd

• Munjal E-Systems

• Hero Global Design Ltd

• Hero Motors Ltd

• Hero Management Service Ltd.

� Manufacturing

• Gear Manufactures

• Shaft

• CNC Holdings

• Forge Gears & Shafts

• Hot Forging

• Cold Forgings

• Spline.

• Ratchet Teeth.

� Infrastructure

• Forge Shop

• Heat treatment Shop

• Machine Shop

• Tool Room

• CNC Honing

• Gear Shaping

• Cold Former

• Hot Former

• Shot Blasting

• Continous Tempering.

� Client

� Certifications

• The company has certified ISO/TS: 16949 ISO: 14001 in the unique selling propositon

• OHSAS: 18001.

• Shivam Autotech Ltd has got the Excellence in performance 2005-2006.

� Network Locations

• Gurgaon

• Haridwar

Financial Highlight

Balance sheet as at March31, 2011

(A*- Actual, E* -Estimations & Rs. In Millions)

Particulars March (Rs.in.mn) FY11A FY12E FY13E

1.Shareholder’s Funds

a) Capital 100.00 100.00 100.00

b) Reserves & Surplus 888.24 1041.26 1269.69

Total Net worth 988.24 1141.26 1369.69

2.Loan Fund

a) Secured loans 1933.89 2107.93 2200.68

b) Differed Tax liability 73.17 84.15 91.72

Total Liabilities (1+2) 2995.30 3333.34 3662.09

1.Fixed Assets

a) Gross block 3436.64 3780.30 4082.73

b) Depreciation 957.52 1053.27 1121.73

c) Net Block 2479.12 2727.03 2960.99

d) Capital Work in Progress 12.75 9.56 8.32

Total Fixed Assets 2491.87 2736.59 2969.31

2. Investments 0.00 0.00 0.00

3.Current Assets, Loans & Advances

a) Inventories 351.93 404.72 449.52

b) Sundry Debtor 413.79 488.27 561.51

c) Cash & Bank Balance 81.42 93.63 104.87

d) Loans & Advances 144.92 162.31 176.92

Total Current Assets 992.06 1148.94 1292.82

Less: Current Liabilities & Provisions

a) Liabilities 451.96 506.20 546.70

b) Provisions 36.67 45.99 53.35

Net Current Assets 503.43 596.75 692.78

Total Assets( 1+2+3+4) 2995.30 3333.34 3662.09

Annual Profit & Loss Statement for the period of 2011 to 2014E.

Value(Rs.in.mn) FY11 FY12 FY13E FY14E

Description 12m 12m 12m 12m

Net Sales 2637.20 3525.42 4160.00 4617.60

Other Income 0.00 76.63 0.00 0.00

Total Income 2637.20 3602.05 4160.00 4617.60

Expenditure -2023.50 -2752.32 -3157.44 -3495.52

Operating Profit 613.70 849.73 1002.56 1122.08

Interest -208.31 -270.50 -297.55 -318.38

Gross profit 405.39 579.23 705.01 803.70

Depreciation -236.54 -294.19 -341.26 -382.21

Profit Before Tax 168.85 285.04 363.75 421.49

Tax -20.26 -98.78 -135.31 -155.95

Profit After Tax 148.59 186.26 228.43 265.54

Extraordinary Items -0.82 0.00 0.00 0.00

Net Profit 147.77 186.26 228.43 265.54

Equity capital 100.00 100.00 100.00 100.00

Reserves 888.24 1041.26 1269.69 1535.23

Face value 10.00 10.00 10.00 10.00

EPS 14.78 18.63 22.84 26.55

Quarterly Profit & Loss Statement for the period of 31 Dec, 2011 to 30 Sep, 12E

Value(Rs.in.mn) 31-Dec-11 31-Mar-11 30-Jun-12 30-Sep-12E

Description 3m 3m 3m 3m

Net sales 940.55 948.10 996.77 1106.41

Other income 0.00 0.00 0.53 0.00

Total Income 940.55 948.10 997.30 1106.41

Expenditure -712.04 -701.74 -741.56 -840.88

Operating profit 228.51 246.36 255.74 265.54

Interest -75.78 -68.81 -66.27 -72.90

Gross profit 152.73 177.55 189.47 192.64

Depreciation -73.30 -84.28 -75.86 -83.07

Profit Before Tax 79.43 93.27 113.61 109.58

Tax -18.49 -52.56 -37.25 -30.13

Net Profit 60.94 40.71 76.36 79.44

Equity capital 100.00 100.00 100.00 100.00

Face value 10.00 10.00 10.00 10.00

EPS 6.09 4.07 7.64 7.94

Ratio Analysis

Particulars FY11 FY12 FY13E FY14E

EPS (Rs.) 14.78 18.63 22.84 26.55

EBITDA Margin (%) 23.27% 24.10% 24.10% 24.30%

PBT Margin (%) 6.40% 8.09% 8.74% 9.13%

PAT Margin (%) 5.63% 5.28% 5.49% 5.75%

P/E Ratio (x) 8.91 7.07 5.76 4.96

ROE (%) 15.04% 16.32% 16.68% 16.24%

ROCE (%) 29.10% 33.99% 36.27% 36.81%

Debt Equity Ratio 1.96 1.95 1.70 1.50

EV/EBITDA (x) 2.14 1.55 1.31 1.17

Book Value (Rs.) 98.82 114.13 136.97 163.52

P/BV 1.33 1.15 0.96 0.80

Charts

Outlook and Conclusion

� At the current market price of Rs.131.60, the stock P/E ratio is at 5.76 x FY13E and 4.96 x FY14E

respectively.

� Earnings per share (EPS) of the company for the earnings for FY13E and FY14E are seen at Rs.22.84 and

Rs.26.55 respectively.

� Net Sales and PAT of the company are expected to grow at a CAGR of 20% and 21% over 2011 to 2014E

respectively.

� On the basis of EV/EBITDA, the stock trades at 1.31 x for FY13E and 1.17 x for FY14E.

� Price to Book Value of the stock is expected to be at 0.96 x and 0.80 x respectively for FY13E and FY14E.

� We expect that the company surplus scenario is likely to continue for the next years, will keep its growth

story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of

Rs.149.00 for Medium to Long term investment.

Industry Overview

The Indian auto and auto components industry is growing at a steady pace of 15 - 18 per cent annually. As per

the estimates, the retail market for auto components is valued at Rs 600 crore (US$ 107.12 million) and is

expected to witness a quantum jump on the back of robust domestic demand. Rajkot-based Ikon Marketing

Consultants predicts that the Indian auto component industry, which is currently valued at US$ 30 billion, will

touch US$ 100 billion by 2020.

Indian auto component industry derives 60% of its turnover from sales to domestic original equipment

manufacturers (OEMs), 25 % from sales to the domestic replacement market and around 15 % from exports.

Market Structure

According to industry statistics derived by the Automotive Component Manufacturers Association of India

(ACMA), engine parts form the largest segment (31%) of auto part industry followed by drive transmission and

steering parts (19%). Suspension & braking parts and body & chassis account for 12 % each in the entire product

range, followed by equipment accounting for 10 per cent of the same.

Further estimates made by ACMA reveal that auto component exports would robustly grow at a compounded

annual growth rate (CAGR) of 18.8 % over 2011-21, garnering about US$ 29 billion. OEMs account for 80 per

cent of the exports while the rest 20 % is handled by aftermarket or retailers. European and North American

markets account for 36 and 23 %of the entire industry exports respectively, while 28 % of the exports are made

to Asian countries.

The Global Auto Hub

Supportive Government policies, positive business environment, availability of reasonably priced talented

workforce and stable outlook for the industry has made India a global hub for the international manufacturers to

set up their facilities in the country. The auto components manufacturers are also reaping the benefits.

Blaupunkt, the German in-car entertainment brand, has set up its plant in India via a 55:45 joint venture (JV)

with its business partner Auto Sonics India. Till now the brand was present in India through multi-channeled

distribution networks for almost 15 years. Industry experts believe that the alliance will help the company boost

its access points, improve after-market sales and connect better with OEMs.

In a bid strengthen its presence in Asia, French auto components maker Faurecia has set up a new, expanded

research and development (R&D) facility in Pune. The Tech Center, developed for conceptualizing, designing and

validation for products in automotive interior systems, automotive seating and auto exteriors, is the company's

second centre in India after Bangalore.

Key Developments and Investments

• Toyota Kirloskar Auto Parts has decided to build its third manufacturing plant for automotive

components at Bidadi, about 32 km from Bangalore, at an investment of Rs 500 crore (US$ 89.28 million).

The company has signed a MoU with the State Government for the investment as a part of which it would

manufacture petrol engine parts and transmission units for Toyota's small car, Etios Liva, and Etios

Sedan

• Toyota Kirloskar Auto Parts, a JV between Toyota Motor Corporation (Japan), Toyota Industries

Corporation (Japan) and Kirloskar Systems (Bangalore), already has two manufacturing plants at Bidadi -

for exports, as well as the domestic market

• Apollo Tyres, in an effort to enhance its presence in South Africa, has set up a component manufacturing

unit at Ladysmith tyre manufacturing facility in the country. The possessing potential for further

expansion has been installed at an investment of US$ 35 million.

Government Initiatives

Gujarat has been one of the most proactive states in terms of investor-friendly policies and environment. Maruti

Suzuki India Ltd has recently signed a state support agreement (SSA) with the State Government for the purchase

of land to set up its third manufacturing facility. The company plans to infuse about Rs 4,000 crore (US$ 714.08

million) in the initial phase of the project and equivalent amount would be invested by the company's ancillary

suppliers to set up a vendor park near the facility. The new unit is expected to commence operations by 2015-16.

In a bid to improve safety features of vehicles, the Government has asked automobile manufacturers to develop a

gadget which would be similar to the 'black box' installed in planes. The owner would not be able to turn the

instrument off or on and the snapshot could be viewed by legal bodies, insurance companies and automakers. Mr

C P Joshi, Minister of Road Transport and Highways, has asked manufacturers to contemplate on the option of

fixing such IT-enabled instrument to improve safety and security of the vehicles.

Meanwhile, seeing its peer states such as Gujarat, Tamil Nadu, Rajasthan, Haryana and Karnataka, the

Government of Odisha has also prepared a draft of its proposed auto component policy to attract investment in

the state. Meticulously prepared, the draft policy envisages a concession of up to 50 per cent on land to be made

available to auto component manufacturers and electricity duty waiver for 10 years. The policy also delineates

various fiscal incentives, reimbursements up capital grants to attract manufacturers to set up their factories in

the state.

Road Ahead

Hybrid and electronic vehicles are new developments on the automobile canvas and India is one of the key

markets for them. Price sensitive Indian customers are showing positive bent of outlook towards green

technologies and are migrating towards new vehicle technologies. The global and Indian OEMs are focusing their

efforts to develop innovative products, technologies and supply chains.

Frost and Sullivan made an Analysis of Medium to Heavy - duty Hybrid and Electric Commercial Vehicle Market

in China and India and arrived with the estimates that component revenues from India will reach US$ 212

million by 2020, which would account for 11 per cent of the global component market. Volatility in energy prices

and rising consumer awareness are major factors that giving the market for hybrid and electric commercial

vehicles a considerable impetus.

Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale

of any financial instrument or as an official confirmation of any transaction. The information contained herein is

from publicly available data or other sources believed to be reliable but do not represent that it is accurate or

complete and it should not be relied on as such. First call India Equity Advisors Pvt. Ltd. or any of it’s affiliates 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. This document is provide for assistance only and is not intended to be and must

not alone be taken as the basis for an investment decision.

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