mining infrastructure… · 2018-12-25 · cv market share - fy18 rising share of higher tonnage...

Christmas Special – CV Thematic

Ashwin Patil [email protected] | +91 22 6635 1271 24-December, 2018

New Axle norms

Mining Infrastructure

Scrappage Policy

BS VI PolicyOverloading ban

LKP Research 2

• Autosales,especiallytheCVsaleshavebeenimprovingfollowingtherecoveryineconomyledbypublicsectorinvestmentsandprivateconsumption.

• PostalullobservedaftertheDeMon,BSIVandGSTimplementations,CVindustrytookaUturnandbouncedbackwithhealthygrowthratescloseto25-30%.

• BytheendofFY18,theCVindustrygrewatagrowthrateof19.4%,whileby7MYTDFY19,ithasgrownby42%,andisexpectedtoendtheyearwithatleast15-20%growth.

• DespitetheshorttermtrendofslightweakeningofCVsalesonthebackofliquiditycrunch,risinginterestratesandfuelcosts,webelievethelongtermtrendisintact

• WithinfrastructureactivitiesgatheringsteamacrossIndia,especiallyinthemetrosandAcities,demandfortrucksisexpectedtoremainbuoyant.

• Withtheeasingofminingban,thedemandfortippersismovingup.EventherecentfloodsinKeralamayrequirethegovernmentbodiestorebuildinfrastructureinmajorpartofthestate.Thismayleadtotruckdemandgoingupinthestateinthecomingmonths.

• In linewithelections scheduled in2019, therewillbea rush tocompletemany infrastructureprojects that isexpected toimproveCVsales.

• Certain regulatoryactions linedupby thegovernment like theBSVI implementation fromApril2020and scrappagepolicycomingbythesametimeareexpectedtotriggermulti-yeardemandforCVs

• OverloadingbanincertainkeymarketsofthecountryalongwithannouncementofnewaxlenormsmayfurtherdriveCVsales.

• Tonnagewise,shareofhighertonnagevehicleshaveincreasedto23%byFY18endfrom5.4%inFY11,leadingtoimprovingprofitabilityoftheentiresector..

CVIndustrytobedrivenbymultipledrivers

LKP Research 3

Annual domestic sales volumes (Units) Monthly MHCV volume growth trend

CV Market share - FY18 Rising share of higher tonnage vehicles.

AshokLeyland34.00%

M&M3.00%

VECV12.00%

TataMotors49.00%

Others2.00%

0

100000

200000

300000

400000

500000

600000

FY07 FY09 FY11 FY13 FY15 FY17

MHCV LCV

-1.00-0.75-0.50-0.250.000.250.500.751.001.251.501.752.00

Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18

%growth

0%10%20%30%40%50%60%70%80%90%

100%

FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18

>35T 25Tto35T 7.5Tto25T

Source : SIAM & LKP Research

LKP Research 4

Ashok Leyland Buy @ ₹ 104 | Target ₹ 130

• Pre-buyingbeforetheBSVIimplementationinApril2020toresultinaspurindemandandhencebuoyancyintrucksales.

• VariousinfrastructuraldevelopmentsinthecountrymayleadtothecontinuityofcurrentgrowthmomentuminH2FY19aswell.

• Upcomingelectionsin2019maypushMHCVsalesonthebackofGOIexpeditinginfrareforms

• Axlenormsimplementationmaypulldowntrucksalestosomeextentintheensuingmonths,buttheintrinsicdemandstrengthmaywelloffsetthispulldowninthemid-longterm.

• Newtrucklaunchesinthehighertonnagesegment(>40T)bythecompanymayhelpstrongvolumemovementastheindustryisshiftingtowardshighrangetrucks

• OntheLCVsideofthebusinesstherecentlaunchofDost+,Boss,GuruandCaptainaretakingupthemarketshare(8.8%v/s7.5%yoy).Newlaunchesin2-5-7Trangemayaddthesteam.

• ContinuousgainingoftheDefenseorders(~10%oftopline)fromGOI,strongexportspenetration(10%oftopline),wideAfterMarket(AM)penetrationmarket(20%MS)arefurtherpositives.

• Operatingleverage,priceincreasetakenandimprovingproductmix(infavorofhighertonnagetrucks,exports,AMandDefense)maycounterRMpricehikesdiscountsfrommarginspointofview

• At13.6xtimesFY20Eearnings,thestocklooksextremelyattractivetousfromamidtolongtermview.

Revenues (₹ bn) EBITDA (₹ bn) EBITDA margins (%) PAT (₹ bn) EPS (₹) P/E (x)

FY17 200 22 11.0% 12 4.75 21.9

FY18 262 27 10.4% 16 5.53 18.8

FY19E 314 32 10.1% 18 6.28 16.6

FY20E 361 38 10.5% 22 7.67 13.6

LKP Research 5

Ashok Leyland

-60.0%

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

140.0%

160.0%

0

2000

4000

6000

8000

10000

12000

14000

16000

Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Feb-18 Apr-18 Jun-18 Aug-18 Oct-18

M&HCV %yoy

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

0

1000

2000

3000

4000

5000

6000

Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Feb-18 Apr-18 Jun-18 Aug-18 Oct-18

LCV %yoy

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

0

5000

10000

15000

20000

25000

30000

FY11 FY13 FY15 FY17

EBITDA EBITDAmargins%

13.5%

9.7%

0.7%

6.5% 7.2%

20.0%21.8%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

FY12 FY13 FY14 FY15 FY16 FY17 FY18

ROE%ROCE%

M&HCV Segment volumes (units) and growth (%) LCV Segment volumes (units) and growth (%)

Yearly EBITDA (Rs.mn) growth & margins (%) Healthy return ratios

Source: Company, SIAM & LKP Research

LKP Research 6

Income StatementYE Mar (₹ mn) FY 17 FY 18 FY 19E FY 20E

Total Revenues 2,00,186 2,62,479 3,14,176 3,61,419 RawMaterialCost 1,39,572 1,86,212 2,23,693 2,56,607EmployeeCost 15,309 18,119 22,621 27,829OtherExp 23,279 30,757 36,130 39,033EBITDA 22,025 27,391 31,732 37,949 EBITDAMargin(%) 11.0% 10.4% 10.1% 10.5%Otherincome 1,363 1,898 1,775 1,650Depreciation 5,179 5,546 5,734 6,061Interest 1,554 1,312 1,108 950PBT 16,655 22,430 26,665 32,588 PBTMargin(%) 8.3% 8.5% 8.5% 9.0%Tax 3,137 6,681 8,799 10,754Adj PAT 13,518 15,749 17,866 21,834

AdjPATMargins(%) 6.8% 6.0% 5.7% 6.0%

Exceptionalitems -1,287 -121.1 0.0 0.0PAT 12,231 15,628 17,866 21,834

PATMargin(%) 6.1% 6.0% 5.7% 6.0%

Source: Company, LKP Research

Balance SheetYE Mar (₹ mn) FY 17 FY 18 FY 19E FY 20E

EQUITY AND LIABILITIES

Sharecapital 7,536 7,536 7,536 7,536

Reservesandsurplus 50,879 60,256 70,976 84,076

Total networth 61,261 71,648 81,439 94,539

Non current liabilities

Longtermborrowingsandprov. 12,788 6,707 4,907 2,607

Deferredtaxliabilities 1269 2984 2984 2984

Current liabilities

Shorttermborrowings 1,986 1,000 1,100 1,600

Currentliabilitiesandprov. 36,352 52,748 64,493 75,075

Othercurrentliabilities 25,876 28,721 37,012 45,549

Totalequityandliabilities 1,40,397 1,65,859 1,92,800 2,23,219

ASSETS

Netblock 46,562 46,876 48,142 49,081

Capitalworkinprogress 1,576 2,129 3,129 4,129

Intangibleassets 3,630 4,748 6,248 6,748

Non current investments

Longtermloansandadvances 1,362 244 244 244

Longterminvestments 26,266 33,164 39,664 46,564

Totalnoncurrentassets 79,395 87,161 97,427 1,06,765

Current assets

Inventories 26,310 17,099 20,837 28,121

Tradereceivables 10,643 9,805 13,772 17,823

Cashandcashbank 9,119 10,044 14,085 18,515

Shorttermloansandadvances 214 241 172 100

Othercurrentassets 5,940 10,957 12,957 15,843

Totalcurrentassets 60,998 78,697 95,374 1,16,454

Total Assets 1,40,393 1,65,857 1,92,801 2,23,219

Ashok Leyland

LKP Research 7

Key RatiosYE Mar FY 17 FY 18 FY 19E FY 20E

Per Share Data (₹)

Adj.EPS 4.75 5.53 6.28 7.67

CEPS 6.6 7.5 8.3 9.8

BVPS 21.5 25.2 28.6 33.2

DPS 1.7 2.2 2.5 3.1

Growth Ratios(%)

Totalrevenues 5.7% 31.1% 19.7% 15.0%

EBITDA -2.3% 24.4% 15.8% 19.6%

PAT 12.7% 16.5% 13.4% 22.2%

EPSGrowth 12.7% 16.5% 13.4% 22.2%

Valuation Ratios (x)

PE 21.9 18.8 16.6 13.6

P/CEPS 15.8 13.9 12.5 10.6

P/BV 4.8 4.1 3.6 3.1

EV/Sales 1.5 1.1 0.9 0.8

EV/EBITDA 13.6 10.6 9.0 7.3

Operating Ratios (Days)Inventorydays 48.0 23.8 34.0 40.0

RecievableDays 19.4 13.6 16.0 18.0

Payablesday 56.8 64.8 68.0 70.0

Profitability Ratios (%)

ROCE 22.1% 26.2% 28.8% 31.6%

ROE 20.0% 21.8% 21.9% 23.1%

Dividendpayout 40.0% 40.0% 40.0% 40.0%

Dividendyield 1.7% 2.1% 2.4% 3.0%

Cash FlowYE Mar (₹ mn) FY 17 FY 18 FY 19E FY 20E

PBT 12,231 15,626 17,866 21,834

Depreciation 5,179 5,546 5,734 6,061

Interest 1,554 1,312 1,108 950

Chnginworkingcapital -2,328 -333 21,433 12,500

Taxpaid -3,476 -4,149 -8,799 -10,754

Otheroperatingactivities 8,389 36,181 -4,144 3,445

Cash flow from operations (a) 21,549 54,183 33,196 34,037

Capitalexpenditure -3,783 -5,372 -8,000 -8,000

Chngininvestments -10,959 -7,457 -6,000 -5,500

Otherinvestingactivities -27 -20,492 -4,798 -3,923

Cash flow from investing (b) -14,769 -33,321 -18,798 -17,423

Inc/decinborrowings -7,726 -11,536 -2,000 -2,500

Dividendpaid(incl.tax) -3,254 -5,495 -7,146 -8,733

Otherfinancingactivities -2,737 -2,582 -1,108 -950

Cash flow from financing (c) -13,717 -19,613 -10,254 -12,183

Net chng in cash (a+b+c) -6,936 1,249 4,144 4,430

Closing cash & cash equivalents 8,691 9,940 14,085 18,515Source: Company, LKP Research

Ashok Leyland

LKP Research 8

• AutomotiveAxles(AAL),themarketleaderinCVaxlesandbrakes,aproxytothedomesticCVindustry,tocontinuewithastronggrowthatthetoplineaswellasbottomlineintheensuingyears.

• Strongmanagementbackupwith35:35%stakeofBharatForgeandMeritorInc(US)

• Awidearrayofdomesticandglobalclientstoboastof,whosourcesignificantlyfromAAL.

• Marketshareof29%inAxles(70%excludingcaptiveofTataMotors)and30%inbrakes,withastrongcommandontheindustryascom-paredtoitsrivals.

• UpcomingBSVIimplementationfromApril2020wouldleadtoapreponementofCVdemandinFY20leadingtohigherdemandfortrucksandthusforaxlesandbrakes,thusalleviatingthefearofCVcycleturningintheoppositedirection.

• ThenewaxlenormsimplementationannouncedinJuly2018mayleadtoademandsurgewithnewvehicleshavingabetteraxleefficiencyandloadingbearing.

• ThepossibilityofscrappagepolicyimplementationbyApril2020willleadtoamulti-yeardemandforCVswhichwouldleadtocontinuationofCVcycleforalongertimetocome.

• RapidshifttowardsthehighertonnagetrucksandMultiAxleVehiclesisresultingintohigherdemandforaxlesandbetterrealizations.

• Launchingofnewerproductsliketheslippertypesuspensionswhicharewithbetterrealizationsandcostbenefitefficienciesfortheopera-torisexpectedtobethenextbigthinginsuspensionsmarket.

• Capacityadditionatnotsobigcapexwillcatertheanticipateddemandfortrucks.

• Solidmargins,earningsgrowth,superiorreturnratios,comfortablefreecashpositiongivesuscomfortinthissmallcap.


FY17 11.72 1.13 9.7% 0.49 32.73 40.7

FY18 15.19 1.67 11.0% 0.84 55.58 23.9

FY19E 18.93 2.27 12.0% 1.18 78.08 17.0

FY20E 22.42 2.85 12.7% 1.51 99.91 13.3

Automotive Axles Buy @ ₹ 1,331 | Target ₹ 1,898

LKP Research 9

Automotive Axles

75% 80%

45%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

AshokLeyland M&M VECV

Axles58.00%

Brakes20.00%

Offhighway4.00%

LCV5.00%

Exports10.00%

AM3.00%

0%

2%

4%

6%

8%

10%

12%


EBITDAmargins% Netmargins%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%


ROE(%) ROCE(%)

% sourced from AAL by various OEM clientsRevenue breakup

EBITDA margin & net margin Improving return ratios

Company, SIAM & LKP Research

LKP Research 10


Total Revenues 11,723 15,194 18,929 22,419

RawMaterialCost 8,257 10,622 13,156 15,469

EmployeeCost 814 993 1,155 1,368

OtherExp 1,518 1,911 2,347 2,735

EBITDA 1,133 1,668 2,272 2,847

EBITDAMargin(%) 9.7% 11.0% 12.0% 12.7%

Otherincome 20 45 60 80

Depreciation 391 429 568 673

Interest 12 5 4 3

PBT 750 1,278 1,760 2,252

PBTMargin(%) 6.4% 8.4% 9.3% 10.0%

Exceptionalitems 0 0 0 0

Tax 256 439 581 743

APAT 494 839 1,179 1,509

APATMargins(%) 4.2% 5.5% 6.2% 6.7%

PAT 494 839 1,179 1,509

PATMargin(%) 3.8% 5.4% 6.2% 6.7%Source: Company, LKP Research


Equity and Liabilities

EquityShareCapital 151 151 151 151

Reserves&Surplus 3,615 4,292 5,271 6,523

TotalNetworth 3,766 4,443 5,422 6,674

Totaldebt 0 0 550 700

NetDeferredTax 11 -59 60 60

Otherlongtermliabilities 6 7 7 7

Longtermprovisions 34 46 58 68

Current Liab & Prov 52 -6 674 834

Shorttermborrowings 0 0 0 0

Othercurrentliabilities 75 205 255 305

Tradepayables 1688 2562 3215 3931

Totalprovisions 56 79 99 119

Total Equity & Liabilities 5,636 7,283 9,666 11,864

Assets

Netblock 1,458 1,176 908 1,536

CapitalWIP 73 167 517 367

Othernoncurrentassets 152 209 229 249

Total fixed assets 1,683 1,552 1,654 2,152

CashandBank 351 445 1,116 1,113

Inventories 988 1,371 1,802 2,289

Tradereceivables 2,314 3,500 4,564 5,651

Loan,Advances&others 288 401 516 646

Othercurrentassets 14 14 14 14

Total current Assets 3,954 5,731 8,012 9,712

Total Assets 5,636 7,283 9,666 11,864

Automotive Axles

LKP Research 11


Per Share Data (₹)Adj.EPS 32.7 55.6 78.1 99.9

CEPS 58.6 84.0 115.7 144.5

BVPS 249.4 294.3 359.1 442.0

DPS 5.5 8.0 13.3 17.0

Growth Ratios(%)

Totalrevenues 8.0% 19.3% 21.8% 18.4%

EBITDA 19.2% 47.2% 36.2% 25.3%

PAT 45.6% 70.4% 37.7% 28.0%

EPSGrowth 45.6% 70.4% 37.7% 28.0%

Valuation Ratios (x)

PE 40.7 23.9 17.0 13.0

P/CEPS 21.9 15.3 11.1 8.9

P/BV 5.2 4.4 3.6 2.9

EV/Sales 1.6 1.2 1.0 0.8

EV/EBITDA 16.8 11.4 8.3 6.7

Operating Ratios (Days)

Inventorydays 43.7 47.1 50.0 54.0


Payablesday 52.6 61.5 62.0 64.0

NetDebt/Equity(x) -0.09 -0.10 -0.10 -0.06


ROE 13.1% 18.9% 21.7% 22.6%

ROCE 19.4% 27.9% 27.9% 29.0%Source: Company, LKP Research


PBT 750 1,278 1,760 2,252


Interest 12 5 4 3

Chnginworkingcapital 85 -720 -954 -970

Taxpaid 313 508 581 743

Otheroperatingactivities -581 -988 -1,155 -1,496

Cash flow from operations (a) 971 512 803 1,204

Capitalexpenditure -244 -308 -650 -1,150

Chngininvestments 0 0 0 0

Otherinvestingactivities 9 28 28 28

Cash flow from investing (b) -225 -272 -614 -1,114

Inc/decinborrowings -288 0 681 160

Dividendpaid(incl.tax) -83 -121 -200 -256

Otherfinancingactivities -26 -25 4 3

Cash flow from financing (c) -398 -146 484 -93

Net chng in cash (a+b+c) 348 94 674 -3

Closing cash & cash equivalents 348 442 1,116 1,113

Automotive Axles

LKP Research 12

• Astrongplayerintheautomobileshockabsorberspacewithawidespreadclienteleacrosstheverticalsoftheautomobileindustry

• 25%marketshareeachinthePVand2W/3Wspacesand85%inCVspace.

• NosingleclientconcentrationasTVSisthebiggestclientwith20%contributiontotoplinefollowedbyMSIL

• SinglesourcesuppliertothelikesofVitarraBrezza,Ignis,SCross,KUV1oo,XUV5oo,Scorpio,BoleroandsecondsourcesuppliertoAlto,WagonR,Tiago,Tigorandmostofthe2WsfromBajaj,Yamaha,TVS,Suzuki,HMSIandRE

• GabrielwinsaduopolisticcontracttoprovidetotheAltoreplacementtobelaunchednextyear.ThisisabigopportunitywhichmayallowthecompanytogainmarketshareinPVs.

• TheestablishmentofGreenfieldfacilityatSanandbyGabrieltocatertotheHMSIplantinGujaratgivesanopportunitytogain2Wmarketshareandtoplinegrowth.

• TheintrinsicdemandatCVssegmentwillkeepthegrowthbuoyant.Theshiftintoplinecontributiontiltedtowards2WsnowmovingtowardsPVsandCVstoassistmargingrowth.

• RapidincreaseindealersandtouchpointsintheAMbusiness(40%MS)andincreaseintradedautoparts(10%ofAMtopline)tohelpmargingrowth.

• WideusageofLHBsinrailwayswillcontributeheavilytomargins.

• Cleanbalancesheet,minimaldebt,highreturnratios(>20%)makestheinvestmentcasestronger.

• Attractivevaluationsof14.4xtimesFY20EEPS,providesagoodentryopportunity.


FY17 15.21 1.46 9.6% 0.83 5.78 22.7

FY18 18.33 1.71 9.3% 0.94 6.56 20.0

FY19E 20.82 2.02 9.7% 1.13 7.85 16.7

FY20E 22.82 2.33 10.2% 1.31 9.10 14.4

Gabriel India Buy @ ₹ 131 | Target ₹ 173

LKP Research 13


Segment mix Channel mix

Market shares Improving margins & return ratios

2W60%

PV26%

CV14%

OEM86%

Replacement11%

Exports3%

25% 25%

40%

85%

65%

25%

43%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

2W PV UV CV 3W Railways AM0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

FY16 FY17 FY18 FY19E FY20E

EBITDAmargins% ROE% ROCE%

Gabriel India

LKP Research 14


TotalRevenues 15,206 18,332 20,823 22,816


EmployeeCost 1,112 1,377 1,520 1,666

OtherExp 1,112 1,377 1,520 1,666

EBITDA 1,465 1,712 2,020 2,327

EBITDAMargin(%) 9.6% 9.3% 9.7% 10.2%

OtherIncome 58 71 55 60


EBIT 1,112 1,329 1,565 1,812

EBITMargin(%) 7.3% 7.3% 7.5% 7.9%

Interest 39 29 9 5

PBT 1,131 1,371 1,611 1,867

PBTMargin(%) 7.4% 7.5% 7.7% 8.2%

Tax 301 429 483 560

PAT 830 942 1,128 1,307

PATMargins(%) 5.5% 5.1% 5.4% 5.7%

Exceptionalitems 0 0 0 0

Adj PAT 830 942 1,128 1,307

AdjPATMargins(%) 5.5% 5.1% 5.4% 5.7%



Equity and LiabilitiesEquityShareCapital 144 144 144 144Reserves&Surplus 4,358 5,105 5,962 6,955Total Networth 4,502 5,249 6,106 7,099Totaldebt 77 72 62 57NetDeferredTax 141 198 218 238Longtermprovisions 97 117 167 217Current Liab & ProvTradepayables 2,147 2,650 3,081 3,501Shorttermprovisions 171 161 201 241Othercurrentliabilities 552 560 590 620Totalcurrentliabandprivs 2,869 3,371 3,872 4,362Total Equity & Liabilities 7,686 9,007 10,425 11,973AssetsNetblock 2,829 2,926 3,571 3,656CapitalWIP 18 78 98 298Othernoncurrentassets 44 53 73 93Shorttermprovisions 171 161 201 241Total fixed assets 3,601 3,416 4,141 4,486Currentinvestments 283 623 773 873CashandBank 40 180 169 496Inventories 1,312 1,491 1,584 1,861Tradereceivables 2,118 2,791 3,252 3,751Loan,Advances&others 286 199 179 159Othercurrentassets 46 307 327 347Total current Assets 4,085 5,591 6,284 7,487Total Assets 7,686 9,007 10,425 11,974

Gabriel India

LKP Research 15


Per Share Data (₹)

Adj.EPS 5.8 6.6 7.8 9.1

CEPS 8.2 9.2 11.0 12.7

BVPS 31.3 36.5 42.5 49.4

DPS 1.2 1.3 1.6 1.8

Growth Ratios(%)

Totalrevenues 5.7% 20.6% 13.6% 9.6%

EBITDA 13.2% 16.9% 18.0% 15.2%

PAT 10.1% 13.5% 19.7% 15.9%

EPSGrowth 10.1% 13.5% 19.7% 15.9%

Valuation Ratios (X)

PE 22.7 20.0 16.7 14.4

P/CEPS 0.1 0.1 0.1 0.1

P/BV 4.3 3.7 3.2 2.7

EV/Sales 1.3 1.1 0.9 0.8

EV/EBITDA 13.5 11.4 9.6 8.2


Inventorydays 44.2 41.5 39.0 42.0


Payablesday 51.5 52.8 57.0 60.0

NetDebt/Equity(x) 0.08 0.05 0.04 0.03

ProfitabilityRatios(%)

ROCE 23.1% 23.6% 23.9% 23.8%

ROE 18.4% 18.0% 18.5% 18.4%

Dividendpayout 20.5% 20.3% 20.0% 20.0%

Dividendyield 0.9% 1.0% 1.2% 1.4%


PBT 1,127 1,371 1,611 1,867


Interest 39 29 9 5

Chnginworkingcapital 114 -218 -53 -285

Taxpaid -244 -441 -483 -560

Otheroperatingactivities -31 -86 0 0

Cash flow from operations (a) 1,358 1,038 1,538 1,542

Capitalexpenditure -498 -536 -1,120 -800

Chngininvestments -478 168 -20 -21

Otherinvestingactivities 23 43 0 0

Cash flow from investing (b) -1,225 -635 -1,290 -921

Free cash flow (a+b) 133 403 248 621

Inc/decinborrowings -27 -3 40 45

Dividendpaid(incl.tax) -205 -230 -271 -314

Interestpaid -41 -28 -9 -5

Other financiang activities -171 -2 -20 -20Cash flow from financing (c) -444 -263 -260 -294

Net chng in cash (a+b+c) -311 140 -12 327

Closingcash&cashequivalents 41 181 169 496


Gabriel India

LKP Research 16

• MarketleaderinleafspringsusedinCVsandglobally#2inthisbusinesshasgotawidearrayofclientele

• Strongmarketshareof73%intheleafspringsspaceand95%inparabolicleafspringsspace

• Thecompanyearns83%ofitstoplinefromOEMsandhenceisproxytotheCVcycle

• TataMotorssources~73%whileAshokLeylandsources91%ofitsrequirementfromthecompany.

• Wideningdistributionnetwork,increasingtie-upswithretailersandgaragepersonalandgrowingaftermarketexportsarepositivesforthereplacementbusiness(10-15%marketshare).

• Withcapacityutilizationof75%thecompanyhasagoodpotentialforgainingfromoperatingleverage.

• Increasingdemandforparabolicleafspringsusedinhighertonnagetrucksismovingupwiththeshiftintonnagefromlowertohigher.

• Higheremphasison InfraprojectsbyGOI,pickup inminingactivity,demandfromsomeofthebigcorporatestoupdatetheCVfleetandpossibleimplementationof‘scrappagepolicy’willensureCVsalesremainonfasttrack.JamnaisEVagnostic.

• Cleanbalancesheet,zeronetdebt,highreturnratios(between30-40%)makestheinvestmentcasestronger.

• Atinexpensivevaluationsof10.6xtimesFY20EEPS,itisagoodinvestmentopportunity.


FY17 12.98 1.81 14.0% 1.03 2.59 24.5

FY18 17.38 2.38 13.7% 1.25 3.15 20.1

FY19E 20.12 2.66 13.2% 1.71 4.29 14.8

FY20E 24.25 3.64 15.0% 2.37 5.96 10.6

Jamna Auto Buy @ ₹ 64 | Target ₹ 90

LKP Research 17

Jamna Auto

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

FY16 FY17 FY18 FY19E FY20E

EBITDAmargins(%) ROE(%) ROCE(%)

JamnaAuto73.00%

ToyoSprings20.00%

SoniAuto5.00%

Others2.00%

Leafsprings76.10%

LiftAxle8.90%

Looseleavesreplacement

15.00%

OEM83.10%

Aftermarket16.10%

Exports0.80%

Product wise breakup Segment wise breakup

Market share Strong return ratios & margins


LKP Research 18

Income Statement

YE Mar (₹ mn) FY 17 FY 18 FY 19E FY 20ETotalRevenues 12,976 17,381 20,122 24,251


EmployeeCost 1,083 1,275 1,610 1,819

OtherExp 2,124 2,816 3,179 3,759

EBITDA 1,812 2,379 2,656 3,638

EBITDAMargin(%) 14.0% 13.7% 13.2% 15.0%


EBIT 1,334 1,966 2,349 3,283

EBIT Margin(%) 10.3% 11.3% 11.7% 13.5%

OtherIncome 239 79 200 200

Interest 148 182 110 95

PBT 1,425 1,862 2,439 3,388

PBTMargin(%) 11.0% 10.7% 12.1% 14.0%

Tax 1,425 1,862 2,439 3,388

PAT 1,029 1,254 1,707 2,371

PATMargins(%) 7.9% 7.2% 8.5% 9.8%


Balance Sheet

YE Mar (₹ mn) FY 17 FY 18 FY 19E FY 20EEquity and LiabilitiesEquityShareCapital 398 398 398 398Reserves&Surplus 2,954 3,867 5,011 6,600Total Networth 3,352 4,265 5,409 6,998Totaldebt 229 332 302 287NetDeferredTaxAsst/Liabs 0 0 0 0Longtermprovisions 221 257 267 282Current Liab & ProvTradepayables 635 1,559 1,378 1,329Shorttermborrowings 523 226 176 126Shorttermprovisions 230 304 331 332Othercurrentliabilities 286 502 662 864Totalcurrentliabandprivs 1,674 2,591 2,546 2,651Total Equity & Liabilities 5,325 7,338 8,428 10,126AssetsNetblock 2,661 2,716 3,709 4,354CapitalWIP 81 308 268 243Longtermloansandadvances 0 93 123 173

Othernoncurrentassets 828 401 386 371Total fixed assets 3,569 3,519 4,487 5,142CashandBank 61 70 40 65Inventories 871 1,458 1,771 2,183Tradereceivables 483 1,758 1,929 2,525Loan,Advances&others 7 14 110 133Othercurrentassets 334 520 90 78Total current Assets 1,756 3,819 3,941 4,984Total Assets 5,325 7,338 8,428 10,126

Jamna Auto

LKP Research 19


Per Share Data (₹)Adj.EPS 2.6 3.2 4.3 6.0

CEPS 3.8 4.2 5.1 6.9

BVPS 8.4 10.7 13.6 17.6

DPS 1.0 1.0 1.4 2.0

Growth Ratios(%)

Totalrevenues 3.3% 33.9% 15.8% 20.5%

EBITDA 11.7% 31.3% 11.7% 37.0%

PAT 43.9% 21.9% 36.1% 38.9%

EPSGrowth 43.6% 21.9% 36.1% 38.9%

Valuation Ratios (X)

PE 24.5 20.1 14.8 10.6

P/CEPS 16.7 15.1 12.5 9.2

P/BV 7.5 5.9 4.7 3.6

EV/Sales 2.4 1.8 1.5 1.2

EV/EBITDA 14.2 10.8 9.6 7.0


Inventorydays 39.9 48.8 51.0 53.0


Payablesday 17.9 32.7 25.0 20.0

NetDebt/Equity(x) 0.02 0.02 0.01 0.01


ROCE 36.5% 41.4% 39.9% 43.9%

ROE 30.7% 29.4% 31.6% 33.9%

Dividendpayout 38.9% 33.0% 33.0% 33.0%

Dividendyield 1.6% 1.6% 2.2% 3.1%Source: Company, LKP Research

Cash FlowYE Mar (₹ mn) FY 17 FY 18 FY 19E FY 20EPBT 1,310 1,750 2,439 3,388


Interest 115 169 110 95Chnginworkingcapital -626 -587 -199 -891Taxpaid -448 -531 -732 -1,016Other operating activities 0 0 0 0Cashflowfromoperations(a) 418 816 2,035 2,115Capitalexpenditure -761 -605 -1,260 -975Chngininvestments -15 -0 0 0Other investing activities 342 400 15 15Cash flow from investing (b) -434 -204 -1,245 -960Freecashflow(a+b) -15 612 790 1,155Inc/decinborrowings 78 194 -20 -200Dividendpaid(incl.tax) -402 -332 -563 -783Interestpaid -2 0 0 0Other financiang activities 4 0 20 20Cash flow from financing (c) 29 8 -30 25Net chng in cash (a+b+c) 32 61 70 40Closing cash & cash equivalents 61 70 40 65

Jamna Auto

LKP Securities Ltd, 13th Floor, Raheja Center, Free Press Road, Nariman Point, Mumbai-400 021. Tel -91-22 - 66351234. www.lkpsec.com

LKPSec.ltd.(CIN-L67120MH1994PLC080039,www.Lkpsec.com)anditsaffiliatesareafull-fledged,brokerageandfinancinggroup.LKPwasestablishedin1992andisoneofIndia'sleadingbrokerageanddistributionhouse.LKPisacorporatetradingmemberofBombayStockExchangeLimited(BSE),NationalStockExchangeofIndiaLimited(NSE),MCXStockExchangeLimited(MCX-SX).LKPalongwithitssubsidiariesoffersthemostcomprehensiveavenuesforinvestmentsandisengagedinthebusinessesincludingstockbroking(Institutionalandretail),merchantbanking,commoditybroking,depositoryparticipant,insurancebrokingandservicesrenderedinconnectionwithdistributionofprimarymarketissuesandfinancialproductslikemutualfundsetc.LKPherebydeclaresthatithasnotdefaultedwithanystockexchangenoritsactivitiesweresuspendedbyanystockexchangewithwhomitisregisteredinlastfiveyears.However,SEBIandStockExchangeshaveconductedtheroutineinspectionandbasedontheirobservationshaveissuedadvicelettersorleviedminorpenaltyonLKPforcertainoperationaldeviationsinordinary/routinecourseofbusiness.LKPhasnotbeendebarredfromdoingbusinessbyanyStockExchange/SEBIoranyotherauthorities;norhasitscertificateofregistrationbeencancelledbySEBIatanypointoftime.LKPoffersresearchservicestoclients.Theanalystforthisreportcertifiesthatalloftheviewsexpressedinthisreportaccuratelyreflecthisorherpersonalviewsaboutthesubjectcompanyorcompaniesanditsortheirsecurities,andnopartofhisorhercompensationwas,isorwillbe,directlyorindirectlyrelatedtospecificrecommendationsorviewsexpressedinthisreport.OtherdisclosuresbyLKPanditsResearchAnalystunderSEBI(ResearchAnalyst)Regulations,2014withreferencetothesubjectcompany(s)coveredinthisreport-:ResearchAnalystorhis/herrelative’sfinancialinterestinthesubjectcompany.(NO)LKPoritsassociatesmayhavefinancialinterestinthesubjectcompany.LKPoritsassociatesandResearchAnalystorhis/herrelative’sdoesnothaveanymaterialconflictofinterestinthesubjectcompany.TheresearchAnalystorresearchentity(LKP)hasnotbeenengagedinmarketmakingactivityforthesubjectcompany.LKPoritsassociatesmayhaveactual/beneficialownershipof1%ormoresecuritiesofthesubjectcompanyattheendofthemonthimmediatelyprecedingthedateofpublicationofResearchReport.ResearchAnalystorhis/herrelativeshaveactual/beneficialownershipof1%ormoresecuritiesofthesubjectcompanyattheendofthemonthimmediatelyprecedingthedateofpublicationofResearchReport:(NO)LKPoritsassociatesmayhavereceivedanycompensationincludingforinvestmentbankingormerchantbankingorbrokerageservicesfromthesubjectcompanyinthepast12months.LKPoritsassociatesmayhavereceivedcompensationforproductsorservicesotherthaninvestmentbankingormerchantbankingorbrokerageservicesfromthesubjectcompanyinthepast12months.LKPoritsassociatesmayhavereceivedanycompensationorotherbenefitsfromtheSubjectCompanyorthirdpartyinconnectionwiththeresearchreport.SubjectCompanymayhavebeenclientofLKPoritsassociatesduringtwelvemonthsprecedingthedateofdistributionoftheresearchreportandLKPmayhaveco-managedpublicofferingofsecuritiesforthesubjectcompanyinthepasttwelvemonths.ResearchAnalysthasservedasofficer,directororemployeeofthesubjectcompany:(NO)LKPand/oritsaffiliatesmayseekinvestmentbankingorotherbusinessfromthecompanyorcompaniesthatarethesubjectofthismaterial.Oursalespeople,traders,andotherprofessionalsmayprovideoralorwrittenmarketcom-mentaryortradingstrategiestoourclientsthatreflectopinionsthatarecontrarytotheopinionsexpressedherein,andourproprietarytradingandinvestingbusinessesmaymakeinvestmentdecisionsthatmaybeinconsistentwiththerecommendationsexpressedherein.Inreviewingthesematerials,youshouldbeawarethatanyoralloftheforegoing,amongotherthings,maygiverisetorealorpotentialconflictsofinterestincludingbutnotlimitedtothosestatedherein.Additionally,otherimpor-tantinformationregardingourrelationshipswiththecompanyorcompaniesthatarethesubjectofthismaterialisprovidedherein.Thisreportisnotdirectedto,orintendedfordistributiontooruseby,anypersonorentitywhoisacitizenorresidentoforlocatedinanylocality,state,countryorotherjurisdictionwheresuchdistribution,publication,availabilityorusewouldbecontrarytolaworregulationorwhichwouldsubjectLKPoritsgroupcompaniestoanyregistrationorlicensingrequirementwithinsuchjurisdiction.Specifically,thisdocumentdoesnotconstituteanoffertoorsolicitationtoanyU.S.personforthepurchaseorsaleofanyfinancialinstrumentorasanofficialconfir-mationofanytransactiontoanyU.S.person.Unlessotherwisestated,thismessageshouldnotbeconstruedasofficialconfirmationofanytransaction.NopartofthisdocumentmaybedistributedinCanadaorusedbyprivatecustomersinUnitedKingdom.Alltrademarks,servicemarksandlogosusedinthisreportaretrademarksorregisteredtrademarksofLKPoritsGroupCompanies.Theinformationcontainedhereinisnotintendedforpublicationordistributionorcirculationinanymannerwhatsoeverandanyunauthorizedreading,dissemination,distributionorcopyingofthiscommunicationisprohibitedunlessotherwiseexpresslyauthorized.Pleaseensurethatyouhaveread“RiskDisclosureDocumentforCapitalMarketandDerivativesSegments”asprescribedbySecuritiesandExchangeBoardofIndiabeforeinvestinginIndianSecuritiesMarket.Insofarasthisreportincludescurrentorhistoricinformation,itisbelievedtobereliable,althoughitsaccuracyandcompletenesscannotbeguaranteed.Allmaterialpresentedinthisreport,unlessspecificallyindicatedotherwise,isundercopyrighttoLKP.Noneofthematerial,noritscontent,noranycopyofit,maybealteredinanyway,transmittedto,copiedordistributedtoanyotherparty,withoutthepriorexpresswrittenpermissionofLKP.

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