tyre sector initiating coverage - 140617 (1)

8/12/2019 Tyre Sector Initiating Coverage - 140617 (1)

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IND IA RESEARCH

INIT IAT ING COVERAGE

AUTO ANCI L L AR I ES

June 2014

Basudeb Banerjee+91 22 4031 [email protected]

Indian Tyre Sector FCF cycle set to peak out amid a strongdemand recovery

Saksham Kaushal+91 22 4031 [email protected]



T IQUE STOCK BROKING L IMITED 17 June 201FROM THE RESEARCH DESK

SECTOR REPORT

India Tyre Sector FCF cycle set to peak out amid a strong demand recovery

After delivering stellar returns in FY14, Indian tyre stocks have fairly factoredinto their valuations the free cash flow upcycle that they are undergoing sinceFY13, thus giving limited upsides from present levels. Courtesy favourable rawmaterial basket (RMB) costing and nominal capex needs, majority of the tyremakers are on a deleveraging spree presently. We expect this to persist tillFY15e, beyond which uptick in RMB costing and start of the next big capex cycleis set to push the FCF cycle into the negative zone. Thus despite visibility of ademand recovery from FY16e, it would be tough for tyre stocks to see a furtherre-rating from our target levels. We prefer Balkrishna Industries (BIL IN) andCEAT (CEAT IN) over Apollo Tyres (APTY IN) on back of superior revenue CAGRalong with visibility of FCF generation.

Salient investment arguments:

Domestic tyre market expected to grow at a 13% CAGR in FY14-16e to INR530bn. CVcycle recovery from FY16 the prime driver of growth ahead.

Post undergoing deleveraging in FY13-15e, most of the players have a much cleanebalance sheet now and are well equipped to face the next big capex cycle starting offrom FY15 end, with BIL being the sole exception.

Expecting mean reversion in RMB costing from FY16e, post being in the favourableterritory for past couple of years thus posing a risk to gross margin. Despite this, we do nosee major decline in operating margin with decent scope left in terms of operating leveragefor most. Domestic facilities of BIL, CEAT and APTY are running at close to 50%, 80%,and 75% respectively.

Led by entry of foreign Truck Bus Radial makers on a larger scale, we expect pricingdiscipline in TBR segment to improve going ahead across players, justifying higher capitacosts involved in setting up capacities.

Rising focus on export markets to improve overall volume CAGR for the industry in thelonger run. With ~22% of CEAT's revenue coming from exports and Apollo Tyres (APTYIN) too focusing newer markets, we expect exports to push mix and scale for the industryas a whole. For BIL exports anyhow contribute 88% of its overall revenue.

With visibility of demand recovery and stronger balance sheet health for most we expecgradual convergence of valuation multiples for Indian tyre makers with global players.

Valuation and outlook We initiate coverage on CEAT and BIL with a Buy rating and on APTY with a Hold rating, withprice targets of INR597, INR822, and INR212 per share, based on 6x, 12x, and 9x FY16eearnings respectively. Though we are confident of APTY reaching its long-term target P/E, whichis close to global levels of 12x due to rising mix of earnings from EU, we believe it is too early tofactor that in currently, as the new plant is expected to go operational only by FY17-end. Led by

visibility of BIL generating robust FCF in coming 3-4 yrs along with benefitting from economicrecofery in key developed markets we are assigning our target 12x earnings multiple in syncwith global peers. For CEAT, we are assigning 6x multiple factoring a 30% discount toleaders APTY and MRF.



RecommendationsCompany Mcap Reco CMP Target price Return FY15e FY16e

(INRbn) (INR) (INR) (%) P/E (x) RoCE (%) P/E (x) RoCE (%

Apollo Tyres 100 HOLD 198 212 7 8.9 29.5 8.4 24.4

Ceat ltd. 17 BUY 458 597 30 4.8 25.8 4.6 23.6

Balkrishna Industries 70 BUY 725 822 13 11.6 18.9 10.6 19.9

Source: Company, Antique




Expect Indian tyre industry to grow at 13% CAGR toINR530bn over FY14-16eCV cycle recovery to propel domestic demand; Radialisation expected to take-off afterremaining static

We expect the domestic tyre market to grow at 13% CAGR to INR530bn over FY14-16eGrowth will be driven by a recovery in the CV cycle, along with steady 12-13% CAGR frompassenger car radials, and two and three-wheeler tyres. With the domestic medium andheavy commercial vehicle market being in a massive contraction mode for the past couple oyears, the unused CV population has also impacted replacement tyre demand in the recenpast. Thus, a systemic demand recovery will lead to a two-fold demand push, with CV tyrescontributing close to 50% of the tyre market. Led by resumption in the rise of CV tyre radialisationpost a consolidation over FY13-14, and incremental supply from Michelin and JK Tyres in thecoming years to keep the demand-supply gap under control, thus improving the pricingdiscipline to some extent. As capex per tonne per day (TPD) for TBR is almost 75-80% highethan bias tyres, for improvement in overall capital efficiency of the tyre industry, marginimprovement in TBRs would be a welcome move.

Recovery in CV cycle to propel industry growth over FY14-16e CV tyres continue to contribute bulk of the market demand (%)

Source: ATMA, Company, Antique

Huge scope for radialisation to move up from the presentMRF is the market leader followed by APTY (%) 22-24% levels


286 286

337369 385 400 415

460

530

100

200

300

400

500

600

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15eFY16e

(5)

0

5

10

15

20

India tyre market size (INRbn) Growth (%) (RHS)

M&HCV, 50

2/3W, 16

PCR, 13

Exports, 12

Others, 9

CEAT, 12.9

APTY, 20.8

MRF, 29.2

JK Tyres,

14.3

Others, 22.8

24 27

52

65 68 72

95 96 100

0

20

40

60

80

100

120

I n d i a

E a s t e r n E u r o p e

S o u t h E a s t A s i a

S o u t h A m e r i c a

W o r l d

M E N A

C e n t r a l E u r o p e

N o r t h A m e r i c a

W e s t e r n E u r o p e




Led by contraction in the growth of the area under natural rubber plantations from CY08, we expect supply to be impactedfrom CY15-end, pushing up prices in turn

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Total planted area (Ha) 168,500 177,700 223,200 327,300 441,200 507,700 533,100 415,500 328,900 332,000

Growth (%) 4.5 5.5 25.6 46.6 34.8 15.1 5.0 (22.1) (20.8) 0.9

Total tapped area (Ha) 6,105,020 6,188,200 6,396,400 6,613,400 6,785,800 6,853,900 6,894,800 6,779,600 6,986,000 7,859,000

Growth (%) 1.2 1.4 3.4 3.4 2.6 1.0 0.6 (1.7) 3.0 12.5

Yield (Thailand) (kg/Ha) 1,775 1,796 1,800 1,736 1,800 1,723 1,698 1,704 1,720 1,720Global PV+CV market (mn) 59.0 60.7 64.5 66.5 68.5 73.3 70.5 61.8 77.7 84.5

Growth (%) 5 2.9 6.3 3.1 3.0 7.0 (3.8) (12.3) 25.7 8.8

Average NR price (INR/kg) 46.2 54.3 63.0 75.8 94.5 96.6 123.8 106.4 169.3 185.0

Source: ANRPC, Antique

Low growth in tapped area in CY09-11, along with demand surge, led to rise in natural rubber prices('000 Hectares) FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15e FY16e

Cambodia 27 24 21 20 17 16 35 45 55

China 661 696 741 776 875 932 971 1,002 1,030

India 576 584 598 615 635 662 687 712 737

Indonesia 3,290 3,262 3,279 3,346 3,414 3,424 3,435 3,445 3,455

Malaysia 1,326 1,279 1,271 1,264 1,248 1,247 1,032 1,029 1,026

Philippines 81 81 82 94 111 123 128 130 153

Sri Lanka 115 115 116 118 120 122 124 126 128

Thailand 2,019 2,072 2,190 2,297 2,458 2,675 2,761 2,800 2,850

Vietnam 441 454 482 522 556 632 674 715 743

Total 8,536 8,567 8,780 9,052 9,434 9,833 9,847 10,004 10,177

Growth (%) 1.2 0.4 2.5 3.1 4.2 4.2 0.1 1.6 1.7


Average tapping yield across various markets


Quarters with surplus natural rubber supplies are higher than supply deficit quarters in recent times('000 tonnes) 1QCY10 2QCY10 3QCY10 4QCY10 1QCY11 2QCY11 3QCY11 4QCY11 1QCY12 2QCY12 3QCY12 4QCY12 1QCY13 2QCY13 3QCY13

World NR prod. 2,336 2,291 2,899 2,865 2,594 2,485 2,997 2,907 2,672 2,734 3,157 3,039 2,687 2,671 3,214

World NR usage 2,457 2,656 2,792 2,801 2,555 2,731 2,890 2,744 2,694 2,732 2,762 2,838 2,664 2,869 2,890

Surplus/ (deficit) (121) (365) 107 64 39 (246) 107 163 (22) 2 395 201 23 (198) 324

Source: IRSG

1,100

1,771

1,143

1,4801,550

1,685 1,695

1,029

1,000

1,100

1,200

1,300

1,400

1,500

1,600

1,700

1,800

1,900

C a m b o d i a

I n d i a

C h i n a

M a l a y s i a

T h a i l a n d

V i e t n a m

P h i l i p p i n e s

I n d o n e s i a

Average annual yield (Kg/Ha of tapped area)




Capex cycle to start for most tyre companies by FY15-end itself; Deleveraging to come to ahalt

We expect the capex cycle for both APTY and CEAT to start from FY15-end itself, after beingon the lower side in FY13-14. This is on the back of an expected demand recovery fromFY16e, along with utilisation reaching close to 90% levels. For APTY, it will be the EastEuropean facility capex of EUR500m in addition to domestic capacity addition, which wilimpact cash flows. For CEAT, the INR5bn capex for brownfield expansion of its Hallol plant

investments in its Bangladesh and Sri Lanka joint ventures, and maintenance capex will pushits capital expenditure needs higher in FY15e itself.

Capex for CEAT to resume from FY15e itself, led by Hallol APTY's capex seen close to INR20bn in FY16e brownfield expansion


BIL being the exception to the pack with no capex needs ahead CEAT's net debt-to-equity ratio to broadly remain ~ 0.9x


102

81

71

6461

45

55

65

75

85

95

105

FY12 FY13 FY14 FY15e FY16e

Capacity utilisation (%)

0.8 0.80.7

1.5

1.8

1.1

0.9 0.90.9

0.4

0.8

1.2

1.6

2.0

F Y 0 8

F Y 0 9

F Y 1 0

F Y 1 1

F Y 1 2

F Y 1 3

F Y 1 4

F Y 1 5 e

F Y 1 6 e

Net debt/Equity (x)

2,470

228

5,151

10,313

12,990

7,829

5,314 4,239

10,000

20,000

-

5,000

10,000

15,000

20,000

25,000

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14FY15eFY16e

Capex (INRm)

946

358

2,366

5,637

3,516

479

1,155

5,750

5,000

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000


Capex (INRm)




0.7

0.30.4

0.7

0.9 0.9

0.6

0.10.0

0.1

0.0

0.1

0.2

0.3

0.40.5

0.6

0.7

0.8

0.9

1.0

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15eFY16e

Net debt/equity (x)

0.7

1.1 1.21.1

0.7

0.4

0.2

0.4

0.6

0.8

1.0

1.2

1.4

FY11 FY12 FY13 FY14 FY15e FY16e

Net debt/equity (x)

(USD/INR)

4244

46485052

545658

6062646668

70

M a y - 0 9

A u g - 0 9

N o v - 0 9

F e b - 1 0

M a y - 1 0

A u g - 1 0

N o v - 1 0

F e b - 1 1

M a y - 1 1

A u g - 1 1

N o v - 1 1

F e b - 1 2

M a y - 1 2

A u g - 1 2

N o v - 1 2

F e b - 1 3

M a y - 1 3

A u g - 1 3

N o v - 1 3

F e b - 1 4

M a y - 1 4

(RSS4 INR/quintal)

5,000

9,000

13,000

17,000

21,000

25,000

29,000

M a

y - 0 9

O c t - 0 9

M a

r - 1 0

A u g - 1 0

J a

n - 1 1

J u

n - 1 1

N o

v - 1 1

A p

r - 1 2

S e p - 1 2

F e

b - 1 3

J u l - 1 3

D e

c - 1 3

M a

y - 1 4

APTY's net debt-to-equity ratio to remain ~0.1x, with high capex, despite strong cash flows BIL to aggressively reduce debt on its books ahead


Expecting natural rubber prices to bottom out in CY15 Stronger INR to cushion margin for the overall industry

Source: Bloomberg, Antique

Valuation comparablesMkt Cap Revenue (USDm) EBITDA (USDm) EBITDA Margin (%) P/E (x) EV/EBITDA (x) ROE (%)

(USDm) FY15e FY16e FY15e FY16e FY15e FY16e FY15e FY16e FY15e FY16e FY15e FY16e

Michelin 23,196 28,865 30,346 5,223 5,607 18.1 18.5 10.3 9.4 4.6 4.3 15.4 14.8

Goodyear 6,502 19,657 20,530 2,538 2,736 12.9 13.3 8.0 7.5 5.2 4.8 30.0 24.9

Bridgestone 29,373 38,857 40,463 6,871 7,243 17.7 17.9 9.0 8.4 4.6 4.3 14.6 13.7

Nokian 5,428 2,182 2,395 690 757 31.6 31.6 12.7 11.2 7.8 7.1 21.6 22.1

Pirelli 8,217 8,883 9,445 1,716 1,853 19.3 19.6 11.9 10.8 5.9 5.5 16.8 17.2

Continental 46,931 52,116 55,279 8,434 9,027 16.2 16.3 12.0 11.0 6.5 6.1 23.4 22.0Global average 10.7 9.7 5.8 5.4 20.3 19.1

MRF 1,613 2,492 2,875 304 330 12.2 11.5 11.0 10.0 5.2 4.6 18.0 16.6

Apollo Tyres 1,663 2,171 2,473 325 350 15.0 14.2 8.9 8.4 5.1 5.0 22.4 19.8

CEAT 274 1,039 1,197 130 138 12.5 11.5 4.8 4.6 3.8 3.7 28.9 24.1

Balkrishna 1,168 645 751 177 194 27.5 25.8 11.6 10.6 8.3 7.1 27.7 23.8

Domestic average 9.1 8.4 5.6 5.1 24.2 21.1

Source: Company, Bloomberg, Antique




Key financials Year ended March (INRm) 2012 2013 2014 2015e 2016e

Revenues 121,533 127,946 133,190 130,252 148,391

EBITDA 11,662 14,569 17,825 19,497 21,007

EBITDA Magins (%) 9.6 11.4 13.4 15.0 14.2

Profit after tax 4,416 5,972 9,588 11,205 11,871

EPS 8.8 11.8 19.0 22.2 23.5

P/E 22.6 16.7 10.4 8.9 8.4

RoE 15.6 17.6 21.0 20.6 18.0


INITIATING COVERAGE

Apollo TyresEntering the next big capex cycle Apollo Tyres (APTY IN) is the second largest tyre manufacturer in India, witha focus on the CV and PV segments. It also has a presence in the European

and South African markets through Vredestein BV and Dunlop SA respectivelyCurtailed by capacity constraints and partial exit from Dunlop SA, we expectforeign subsidiary revenue to remain flat in FY14-16e. APTY is planning aEUR500m capex on a East European greenfield project, with a capacity of~~300 tonne per day as against the present Vredestein capacity of ~200TPDIt is expected to go on stream by FY17-end. A 6% consolidated revenue CAGRover FY15-16e, margins peaking out on the back of expected uptick in rawmaterial basket costing, and beginning the next big capex cycle from FY16e,we expect free cash flow generation to have peaked out in FY14 and set toturn negative from FY16e. After being in de-leveraging mode in FY13-15e,we expect that to halt for a couple of years, on the back of capex needs forboth domestic and international expansion plans. In the longer run, the risingmix of the European business would enhance the quality and stability inearnings, and push valuation multiple towards global peer levels of 10-12xas against domestic peer range of 6-9x. But with visibility of FCF turning

negative from FY16e, we initiate a Hold on APTY with a target price of INR212per share, based on 9x FY16e earnings. We expect soft Natural rubber pricesin the near term to keep the standalone margins in forthcoming quartersabove 13% levels thus pushing APTY to trade at higher multiple levels.

Domestic CV recovery to drive FY16e standalone business; Global revenues to remain flat

After remaining flat in FY13-15e, we expect growth in standalone revenues to return to thedouble-digit trajectory from FY16e, led by domestic CV cycle recovery. With incremental focustowards setting up TBR capacity and shifting the CV tyre capacity to off-the-road tyre capacitywe believe APTY is strategically in the right direction, with immense potential for radialisationimprovement in India from the present paltry levels of 24%. APTY would aptly utilise its carradial capacity in Chennai to cater to EU demand till there is a capacity constraint in Vredestein

Capacity constraints in EU & partial exit from the South Africa will keep consol growth muted

With the EU facility running close to full capacity and APTY selling off one of its South African

facilities, revenues, excluding India, will remain broadly flat in FY15-16e. Minor debottlenecking at its Vredestein facility by ~5-8% will only protect ex-standalone revenue frommajor contraction. We do not see price hikes at Vredestein to be sufficient to compensate fothe revenue loss through the partial exit from Dunlop SA. As per the management, the EasEuropean greenfield capacity of close to 300TPD is set to be operational by FY17-end,giving a fillip to growth from FY18.

Margins and FCF set to peak out in FY15e for the time being

We expect RMB costing to start inching up from FY16 end, on back of expected bottomingout of natural rubber prices by CY15. We are factoring in standalone and subsidiary levelmargin at of 12.5% and 16.4%, leading to consolidated margins of 14.1% for FY16e asagainst FY14 and FY15e levels of 13.4% and 15%, respectively.

Valuation and outlook We initiate a Hold on APTY with a target price of INR212 per share, based on 9x FY16e

earnings. With a rising mix of non-India higher quality earnings, blended RoCE for APTY isset to move towards the 22-25% range from 15-18% earlier, thus providing scope for valuationmultiple to move in sync with global majors, i.e. towards 10-12x P/E from present 6-9x.

Reco : HOLD

CMP : INR198

Target Price : INR212

Potential Return : 7%

Market dataSensex : 25,190

Sector : Anto Ancillaries

Market Cap (INRbn) : 99.9

Market Cap (USDbn) : 1.66

O/S Shares (m) : 504.0

52-wk HI/LO (INR) : 213/55

Avg Daily Vol ('000) : 4,636

Bloomberg : APTY IN

Returns (%)1m 3m 6m 12m

Absolute 15 49 134 206

Relative 10 29 92 133

Source: Bloomberg

Shareholding patternPromoters : 50%

FII : 4%

DII : 11%

Others : 34%

Source: Bloomberg

ValuationFY14 FY15e FY16e

EPS (INR) 19.0 22.2 23.5

PE (x) 10.4 8.9 8.4

P/BV (x) 2.0 1.7 1.4

EV/EBITDA (x) 5.8 5.1 5.0

Dividend Yield (%) 0.4 0.4 0.4

Source: Bloomberg

Price performance vs Nifty

Source: Bloomberg

Source: Bloomberg



80130180230280330

Jun-13 Oct-13 Feb-14 Jun-14

Apollo Tyres NIFTY




Set to benefit from a domestic CV cycle recovery

APTY, promoted by the Kanwar family, is the second largest tyre manufacturer in India, witha presence across EU and South Africa. At present, Neeraj Kanwar is its vice-chairman andmanaging director. After acquiring Dutch tyre maker Vredestein in FY10, domestic revenuemix of APTY is presently within the 65-70% range. In the standalone business, the CV segmencontributes ~63% of revenues, with PVs contributing ~22%. With a CV cycle recovery in theoffing from FY16e, we expect standalone volume growth to rise towards 15-20% levels, poslanguishing over FY13-15e. At present, APTY is operating with at a standalone capacity o1,500TPD, with the newly added Chennai facility, which is primarily into passenger car andtruck-bus radials, contributing 500TPD capacity. With utilisation levels at this plant close to85%, and incremental demand in India coming in from the radial segment, we expect APTYto spruce up the domestic radial capacity soon and start replacing bias capacities into OTRunits. With capacity constraints at its EU facility, APTY is set to increase supply of Apollobranded tyres to EU to 10% of its sales from 5% now.

With an increase in competitive intensity through new entrants like Michelin, pricing disciplineis set to improve in the domestic tyre market, both in the PCR and TBR segments. This will acas a positive driver for the long-term structural margin outlook. With radialisation set to improvefrom the present lows of ~24-25%, demand and pricing power for TBRs is set to increase

tremendously in the coming years, thus benefitting APTY.Expect a brisk standalone demand recovery in FY16e, led by higher exposure to CV segmen

Forecast 16% volume growth in FY16e, post a lull in FY13-15e Realisation to remain stable with favourable RMB costing


CV segment contributes ~63% of standalone revenues (%) Replacement CV demand to pick-up in sync with cycle recovery(%


100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

F Y 0 4

F Y 0 5

F Y 0 6

F Y 0 7

F Y 0 8

F Y 0 9

F Y 1 0

F Y 1 1

F Y 1 2

F Y 1 3

F Y 1 4

F Y 1 5 e

F Y 1 6 e

(10)

(5)

0

5

10

15

20

25

30

Tonnage Sold Growth y-y (%) (RHS)

9 4 . 6

9 9 . 4

1 0 4 . 2 1

4 1 . 1

1 2 9 . 6

1 4 7 . 6

1 5 2 . 6 1

8 1 . 5 2

0 9 . 5

2 1 4 . 8

2 1 4 . 3

2 1 4 . 0

2 1 7 . 0

25

65

105

145

185

225

F Y 0 4

F Y 0 5

F Y 0 6

F Y 0 7

F Y 0 8

F Y 0 9

F Y 1 0

F Y 1 1

F Y 1 2

F Y 1 3

F Y 1 4

F Y 1 5 e

F Y 1 6 e

NRV (Rs/kg)

CV, 63

PV, 22

Others, 5

Exports, 10

OEM, 25

Replacement,

75




Forecast FY15-16e consolidated revenue CAGR of only 6% despite a domesticrecovery

Led by capacity constraints at Vredestein and partial exit from Dunlop SA, we expecconsolidated revenue CAGR at a meagre 6% in FY15-16e, despite factoring in a strongdomestic recovery in our numbers. After emerging from a weak CY13-14 phase, we doexpect some pricing uptick in the EU business, though revenue growth, excluding India, islikely to remain muted in FY15-16e. With a capex plan of USD500m for its East European

greenfield capacity, in addition to the domestic capacity expansion, we do not foresee anylarge scale inorganic growth prospects in the near-term. We expect standalone revenuecontribution to move to ~70% in FY15-16e from ~65%, led by flattish revenue in Vredesteinand domestic demand recovery.

By setting up the East European capacity, APTY will be aiming to replicate the business modeof Nokian Tyres, an East European-based entity generating revenues ~EUR1.5bn, which isoperating at an EBIT margin of ~25% and capital efficiency levels of ~20-25%. With thisfacility operating at full capacity by FY18-19e, revenue mix, excluding India, will improvesignificantly, pushing up blended margins further.

Standalone revenue mix to rise on the back of flat EU sales Standalone revenues to pick-up in FY16e, led by a CV cycle recovery


Subsidiary revenues to remain flattish due to capacity constraints Expect 6% consolidated revenue CAGR over FY15-16e


10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000110,000

F Y 0 4

F Y 0 5

F Y 0 6

F Y 0 7

F Y 0 8

F Y 0 9

F Y 1 0

F Y 1 1

F Y 1 2

F Y 1 3

F Y 1 4

F Y 1 5 e

F Y 1 6 e

Standalone revenue (INRm)

67.166.5

64.7

70.1

72.3

63

64

65

66

67

68

69

70

71

7273


Standalone revenue mix (%)

30,000

60,000

90,000

120,000

150,000


(5)

5

15

25

35

45

55

65

Net consol Sales (INRmn) YoY Grow th % (RHS

30,872

34,173

41,437

44,930

47,268

42,997

45,552

25,000

30,000

35,000

40,000

45,000

50,000

FY10 FY11 FY12 FY13 FY14 FY15e FY16e

Subsidiary revenue (INRm)




Recovery in EU demand getting reflected in Vredesteinsales in 2HFY14 South African revenues declining on sale of one facility


Volume remaining largely flattish led by muted demand Vredestein continue to show strong margins


2,000

3,000

4,000

5,0006,000

7,000

8,000

9,000

10,000

11,000

12,000

1 Q F Y 1 0

2 Q F Y 1 0

3 Q F Y 1 0

4 Q F Y 1 0

1 Q F Y 1 1

2 Q F Y 1 1

3 Q F Y 1 1

4 Q F Y 1 1

1 Q F Y 1 2

2 Q F Y 1 2

3 Q F Y 1 2

4 Q F Y 1 2

1 Q F Y 1 3

2 Q F Y 1 3

3 Q F Y 1 3

4 Q F Y 1 3

1 Q F Y 1 4

2 Q F Y 1 4

3 Q F Y 1 4

4 Q F Y 1 4

Vredestein revenue (INRm)

1,200

1,700

2,200

2,700

3,200

3,700

4,200

1 Q F Y 1 0

2 Q F Y 1 0

3 Q F Y 1 0

4 Q F Y 1 0

1 Q F Y 1 1

2 Q F Y 1 1

3 Q F Y 1 1

4 Q F Y 1 1

1 Q F Y 1 2

2 Q F Y 1 2

3 Q F Y 1 2

4 Q F Y 1 2

1 Q F Y 1 3

2 Q F Y 1 3

3 Q F Y 1 3

4 Q F Y 1 3

1 Q F Y 1 4

2 Q F Y 1 4

3 Q F Y 1 4

4 Q F Y 1 4

Dunlop SA revenue (INRm)

40,000

50,000

60,000

70,000

80,000

90,000

100,000

110,000

1 Q F Y 1 0

2 Q F Y 1 0

3 Q F Y 1 0

4 Q F Y 1 0

1 Q F Y 1 1

2 Q F Y 1 1

3 Q F Y 1 1

4 Q F Y 1 1

1 Q F Y 1 2

2 Q F Y 1 2

3 Q F Y 1 2

4 Q F Y 1 2

1 Q F Y 1 3

2 Q F Y 1 3

3 Q F Y 1 3

4 Q F Y 1 3

1 Q F Y 1 4

2 Q F Y 1 4

3 Q F Y 1 4

4 Q F Y 1 4

Standalone volume (MT)

0 . 9

6 . 8

1 8

. 1

1 1 . 1 1 1 . 7

8 . 2

1 3 . 6

1 8

. 4

9 . 8 1 0 . 6

1 5 . 7 1 7

. 6

1 4 . 3

1 4 . 2 1 7

. 2

1 1 . 7 1 2 . 2

1 8

. 5

1 3 . 3

1 2 . 3

0

2

4

6

8

10

12

14

16

18

20

1 Q F Y 1 0

2 Q F Y 1 0

3 Q F Y 1 0

4 Q F Y 1 0

1 Q F Y 1 1

2 Q F Y 1 1

3 Q F Y 1 1

4 Q F Y 1 1

1 Q F Y 1 2

2 Q F Y 1 2

3 Q F Y 1 2

4 Q F Y 1 2

1 Q F Y 1 3

2 Q F Y 1 3

3 Q F Y 1 3

4 Q F Y 1 3

1 Q F Y 1 4

2 Q F Y 1 4

3 Q F Y 1 4

4 Q F Y 1 4

Vredestein EBIT margin (%)




Standalone margins set to peak in FY15e; Strong margins in EU to continue

We expect standalone operating margins to peak in FY15e, led by mean reversion in grossmargins. On the back of our expectation of natural rubber prices bottoming out by CY15, webelieve gross margin levels for domestic tyre players are set to peak in FY15e. On the positiveside, we expect volume recovery from FY16e to protect overall margin erosion, led by improvedscale and margin recovery in the TBR segment, on the back of a gradual improvement inpricing power. We are factoring in standalone margins at 13.3% and 12.5% as against

FY14 margins of 11.7%. Led by strong pricing discipline in the industry, APTY gross profit/kgunderwent a structural upward shift since FY13, amid a favourable RMB costing environment,despite weak demand. With competitive intensity set to increase due to the large scale entryof Michelin by CY15, we expect sales and marketing expenses to inch-up, thus keeping atab on operating margins. Going forward, we do not expect this level of pricing discipline topersist on account of rising competition by global players, due to lack of ability of domesticplayers to pass on cost inflation ahead to protect market share.

At the Vredestein level, we expect margins to remain fairly strong and stable ~18%, withpricing scenario improving along with the plant running at full capacity. In its South Africanoperations, with the lower margin generating plant getting sold off to Sumitomo, we expecmargin to remain stable ~5-6%. With the East European facility coming on-stream by FY17

end, the margin structure for APTY's consolidated business is set to strengthen further, thusimproving the overall earnings quality and reduce the element of earnings cyclicality.

Standalone realisation to remain flat, led by risingmachining mix vs stronger INR Standalone gross profit/tonne to remain flat over FY15-16e


Margin to cool off post FY15e on the back of expected rise Higher scale to partly compensate the decline in gross profit inRMB cost margin


35.6 35.5

30.8

44.0 45.6 45.9

60.0

46.2

55.0

63.5

69.1 72.1

69.3

20

30

40

50

60

70

80

F Y 0 4

F Y 0 5

F Y 0 6

F Y 0 7

F Y 0 8

F Y 0 9

F Y 1 0

F Y 1 1

F Y 1 2

F Y 1 3

F Y 1 4

F Y 1 5 e

F Y 1 6 e

Gross profit/kg (INR) Mean gross profit/kg (INR)

59.0 63.9

73.4

97.0

83.9

101.792.7

135.3

147.7154.4151.3145.1141.9

40

60

80

100

120

140

160

F Y 0 4

F Y 0 5

F Y 0 6

F Y 0 7

F Y 0 8

F Y 0 9

F Y 1 0

F Y 1 1

F Y 1 2

F Y 1 3

F Y 1 4

F Y 1 5 e

F Y 1 6 e

RM basket/kg (INR)

8.0 7.4 8.8

13.316.3

11.8

23.7

17.6 17.1

22.725.0

28.4 27.227.6 28.1

21.9

30.829.4

34.1 36.2

28.5

37.940.8 44.1 43.742.1

5

10

15

20

25

30

35

40

45

F Y 0 4

F Y 0 5

F Y 0 6

F Y 0 7

F Y 0 8

F Y 0 9

F Y 1 0

F Y 1 1

F Y 1 2

F Y 1 3

F Y 1 4

F Y 1 5 e

F Y 1 6 e

EBITDA/kg (INR) Fixed cost/kg (INR)

8.2

10.6

11.7

13.312.5

9.6

11.4

13.4

15.014.2

10.2

12.4

16.4 17.1 16.6

6

8

10

12

14

16

18


Standalone EBITDA margin (%) Consolidated EBITDA margin %)Subsidiary level margin (%)




Asset turn remains steady in FY12-14, led by flat demand and APTY trading at 1.5x book, with RoE in 20-24% range nominal capex


Valuation and outlook

We initiate a Hold on APTY with a target price of INR212 per share, based on 9x FY16eearnings. With a rising mix of non-India higher quality earnings, blended RoCE for APTY isset to move towards the 22-25% range from 15-18% earlier, thus providing scope for valuationmultiple to move in sync with global majors, i.e. towards 10-12x forward earnings from thedomestic peer range of 6-9x. Though the East Europe facility will start yielding results onlyfrom FY18e, we expect the market to discount the improving business mix in advance.

Against a six-year mean traded daily rolling forward P/E of 6x, we are factoring in a significanpremium to arrive at our target multiple of 9x on back of visibility of sustainability of strongcapital efficiency ahead across business cycles. Our target multiple factors in cleansing of thebalance sheet undertaken in the past couple of years, providing visibility on organic growthrather than a large ticket acquisition and demand recovery in India. We expect 10% earningsCAGR over FY15-16e as against 6% revenue CAGR in the same period. APTY has thepotential to trade ~12x earnings multiples, in sync with global majors, in the longer run, withrising mix of earnings from the EU through the recently proposed East European facility.

Factoring in target P/E at upcycle levels of 9x from mid-cyclelevels of 7-8x APTY will be trading at 5.5x FY16e EV/EBITDA at our PT


20.1 24.2 26.8

39.047.9

56.267.5

90.8

107.8

130.5

15

30

45

60

75

90

105

120

135


Book value/share (INR)

1.3

1.5

1.8

2.0


Asset turn (x)

(X)

0

2

46

8

10

12

14

16

J u n - 0 8

D e c - 0 8

J u n - 0 9

D e c - 0 9

J u n - 1 0

D e c - 1 0

J u n - 1 1

D e c - 1 1

J u n - 1 2

D e c - 1 2

J u n - 1 3

D e c - 1 3

J u n - 1 4

1

2

3

4

5

6

7

J u n - 0 8

D e c - 0 8

J u n - 0 9

D e c - 0 9

J u n - 1 0

D e c - 1 0

J u n - 1 1

D e c - 1 1

J u n - 1 2

D e c - 1 2

J u n - 1 3

D e c - 1 3

J u n - 1 4




RisksEarlier and higher-than-anticipated increase in RMB cost inflation

We expect RMB cost structure to move up from FY16e, leading to a 200bps decline in grossmargins over FY15e. In case natural rubber and crude oil prices start inching up at a rapidpace in 2HFY15e itself, cash flows would change and impact FY16e FCF further.

Delay in a domestic CV cycle recovery

With ~70% of consolidated revenues accruing from the standalone entity, and ~60% ostandalone revenues coming in from domestic CVs, we believe a revival in standalone revenuesis heavily hinged towards a domestic CV cycle recovery. As we are factoring in that recoveryfrom FY16e, any delay will impact our FY16e standalone revenue growth estimate of 18%significantly.

Tendency to go for large ticket acquisitions to reach revenue target of USD10bn

On the back of expected FY16e consolidated revenue of close to USD2.5bn and East Europeanfacility coming on stream by FY17-end, we believe the ever lingering risk of a large tickeacquisition would always hover on APTY, especially looking at the cleaner balance sheetnow. We would not be surprised to see APTY tap the buoyant equity markets by goingthrough a qualified institutional placement to fund any such deal.




Financials

Profit and loss account (INRm) Year ended 31 Mar 2012 2013 2014 2015e 2016e

Revenues 121,533 127,946 133,190 130,252 148,391

Expenses 109,871 113,378 115,365 110,754 127,384

EBITDA 11,662 14,569 17,825 19,497 21,007

Depreciation & amortisation 3,256 3,966 4,109 4,223 4,373EBIT 8,406 10,603 13,717 15,275 16,634

Interest expense 2,873 3,128 2,838 583 1,156

Other income 326 945 978 450 350

Profit before tax 5,859 8,420 11,857 15,141 15,828

Taxes incl deferred taxation 1,444 2,448 2,269 3,937 3,957

Profit after tax 4,416 5,972 9,588 11,205 11,871

Adjusted PAT 4,416 5,972 9,588 11,205 11,871

Recurring EPS (INR) 8.8 11.8 19.0 22.2 23.5

Balance sheet (INRm) Year ended 31 Mar 2012 2013 2014 2015e 2016e

Share Capital 504 504 504 504 504

Reserves & Surplus 27,831 33,504 45,242 53,838 65,267Networth 28,335 34,008 45,746 54,342 65,771

Debt 28,720 22,816 9,889 3,889 8,889

Capital Employed 57,055 56,824 55,635 58,231 74,659

Gross Fixed Assets 80,344 85,963 91,202 98,202 118,202

Accumulated Depreciation 40,106 44,071 48,180 52,403 56,776

Capital work in progress 3,305 3,000 2,000 5,000 5,000

Net Assets 43,544 44,892 45,022 50,799 66,426

Investments 158 546 637 637 637

Current Assets, Loans & Advances

Inventory 19,991 20,311 20,664 19,741 22,490

Debtors 11,458 9,908 10,427 9,635 10,977

Cash & Bank balance 1,730 3,347 6,541 2,811 2,571

Loans & advances and others 7,039 6,230 6,454 7,043 7,815

Current Liabilities & Provisions

Liabilities 17,811 17,598 21,905 20,785 23,679

Provisions 5,028 5,884 6,963 6,651 7,577

Net Current Assets 17,379 16,314 15,217 11,794 12,596

Deferred expenses 4,025 4,928 5,241 5,000 5,000

Application of Funds 57,055 56,824 55,635 58,231 74,659

Per share data Year ended 31 Mar 2012 2013 2014 2015e 2016e

No. of shares (m) 504.1 504.1 504.1 504.1 504.1

BVPS (INR) 64.2 77.2 101.1 117.7 140.4

CEPS (INR) 15.2 19.7 27.2 30.6 32.2

DPS (INR) 0.5 0.5 0.8 0.8 0.8

Margins (%) Year ended 31 Mar 2012 2013 2014 2015e 2016e

EBITDA 9.6 11.4 13.4 15.0 14.2

EBIT 6.9 8.3 10.3 11.7 11.2

PAT 3.6 4.7 7.2 8.6 8.0


Key Assumptions Year ended 31 Mar 2012 2013 2014 2015e 2016e

Standalone volume (tonne) 388,600 395,983 402,286 426,423 494,65

Standalone NRV (INR/kg) 209 215 214 214 217

Standalone gross profit/kg (INR) 55 63 69 72 69

Subsidiary EBITDA margin (%) 10.2 12.4 16.4 17.1 16.6Standalone EBITDA margin (%) 8.2 10.6 11.7 13.3 12.5

Cash flow statement (INRm) Year ended 31 Mar 2012 2013 2014 2015e 2016e

PBT 5,859 8,420 11,857 15,141 15,828

Depreciation & amortisation 3,256 3,966 4,109 4,223 4,373

Interest expense 2,873 3,128 2,838 583 1,156

(Inc)/Dec in working capital (4,455) 2,779 4,231 (182) (1,042

Tax paid (1,444) (2,448) (2,269) (3,937) (3,957

CF from operating activities 6,090 15,844 20,766 15,829 16,358

Capital expenditure (7,829) (5,314) (4,239) (10,000) (20,000

Inc/(Dec) in investments (46) (388) (91) -

CF from investing activities (7,875) (5,701) (4,330) (10,000) (20,000Inc/(Dec) in debt 3,918 (5,904) (12,928) (6,000) 5,000

Dividends paid/Other charges (2,311) (2,623) (313) (3,559) (1,598

CF from financing activities 1,607 (8,527) (13,241) (9,559) 3,402

Net cash flow (179) 1,616 3,194 (3,730) (240

Opening balance 1,909 1,730 3,347 6,541 2,811

Closing balance 1,730 3,347 6,541 2,811 2,571

Growth indicators (%) Year ended 31 Mar 2012 2013 2014 2015e 2016e

Revenue 37.1 5.3 4.1 (2.2) 13.9

EBITDA 19.2 24.9 22.4 9.4 7.7

PAT 3.6 35.2 60.6 16.9 5.9

EPS 3.6 35.2 60.6 16.9 5.9

Valuation (x) Year ended 31 Mar 2012 2013 2014 2015e 2016e

P/E 22.6 16.7 10.4 8.9 8.4

Cash P/E 13.0 10.0 7.3 6.5 6.1

P/BV 3.1 2.6 2.0 1.7 1.4

EV/EBITDA 10.9 8.1 5.8 5.1 5.0

EV/Sales 1.0 0.9 0.8 0.8 0.7

Dividend Yield (%) 0.3 0.3 0.4 0.4 0.4

Financial ratios Year ended 31 Mar 2012 2013 2014 2015e 2016e

RoE 15.6 17.6 21.0 20.6 18.0

RoCE 16.2 21.5 27.4 29.5 24.4

Debt/Equity (x) 0.8 0.6 0.1 0.0 0.1

EBIT/Interest (x) 2.9 3.4 4.8 26.2 14.4

Source: Company Antique




INITIATING COVERAGE

CEAT LimitedBecoming self-sufficient to fund capex needsCEAT (CEAT IN) is among the top five Indian tyre makers, with a well diversifiedrevenue mix, leading to lower dependency on CV tyres. With a focus on two/

three-wheeler tyres (2/3-W), UV tyres, and exports, CEAT has very wellmanaged the downturn of the past couple of years to emerge with strongcash flows. By adding 150 tonne per day capacity at Hallol, CEAT has enteredthe TBR segment, besides expanding its PCR capacity. The company has apresence in Sri Lanka (CEAT Kelani Holdings) via a 54% stake in its JV. Withstructural improvements in the product mix and visibility of high utilisation inthe coming years, CEAT margins are set to be in the 10-12% range instead ofthe 6-8% levels it used to operate at earlier. This provides us comfort of steadycash flows, thus ensuring any major capex funding whenever needed.

Focus segments to remain as two/ three-wheeler tyres and UV tyresCEAT has been delivering industry leading revenue growth in the past couple of years, on theback of higher exposure to 2/3-W tyres and rising exports, thus keeping CV tyre exposure toa low ~40% levels. In the coming years, on the back of an expected CV cycle revival, inaddition to steady demand for 2/3-W tyres and PCR segment, we expect a 13.5% volumeCAGR over FY14-16e. CEAT has also been aiming at raising its export revenue contributionto 30% from the present 22%, by utilizing its bias tyre capacities, which is anyways going tosee a decline in demand in the domestic market going forward. With the company operatingclose to 85% utilisation levels, we expect near-term growth to be driven by the Hallol facilityreaching full utilisation from ~70% levels currently, along with rising export and 2/3-W tyrevolumes, which CEAT outsources. From the present 750TPD capacity, we expect CEAT toreach 900TPD by FY16-end, led by higher outsourced capacity (200TPD overall) and 100TPDbrownfield expansion at Hallol. Recently, CEAT announced an INR6.5bn project to expandTBR capacity at its Sri Lanka JV. This is expected to be operational by CY16-end.

Margins set to remain rangebound ~11-12% over FY15-16eDespite risk of an adverse raw material price movement, initial losses at its operations inBangladesh, and worsening mix on account of a CV cycle recovery, we expect CEAT tomaintain its margins ~11-12% levels over FY15-16e, led by improving operating leveragerising mix of 2/3-W tyres and exports, besides maintaining robust 17-18% margins in SrLanka. CEAT has undergone a structural margin improvement over FY13-14, led by shift in itsproduct mix towards the branded personal mobility-led segments, in addition to better margingenerating exports. By exporting the bias CV tyres in an otherwise dull domestic market,CEAT has been aptly utilising its capacity, thus generating decent margins.

Capex to pick-up from FY15e itself; Do not foresee much increase in debt We expect FY15-16e capex of close to INR5.5bn/annum in order to fund its 100TPD Hallobrownfield expansion, incremental investments in its Bangladesh and Sri Lanka JVs, and annuamaintenance capex. After a couple of years of subdued capex, we expect an increase in cashoutflow to impact FCF generation negatively, leading to a minor debt addition of INR1bn/annum

Valuation We initiate coverage on CEAT with a Buy rating and price target of INR597 per share, basedon 6x FY16e earnings. We expect earnings CAGR of 13% over FY14-16e as against 14%revenue CAGR on the back of flattish margins, higher depreciation, and interest outgo on

account of higher capex. CEAT has positioned itself nicely to face a capex cycle, primarilythrough internal accruals. It is avoiding the higher leveraging route, thus providing strength toits balance sheet on a structural basis. This calls for a better valuation multiple as comparedto its past four-year forward traded mean of 4x and against 7-10x for MRF and Apollo Tyres

Reco : BUY

CMP : INR458








52-wk HI/LO (INR) : 492/97

Avg Daily Vol ('000) : 266

Bloomberg : CEAT IN


Absolute 11 17 46 321

Relative 6 2 19 220

Source: Bloomberg


FII : 9%

DII : 6%

Others : 28%

Source: Bloomberg


EPS (INR) 78.1 94.5 99.5

PE (x) 5.9 4.8 4.6

P/BV (x) 1.4 1.2 1.0

EV/EBITDA (x) 4.1 3.8 3.7

Dividend Yield (%) 2.1 2.1 2.1

Source: Bloomberg


Source: Bloomberg

Source: Bloomberg




Revenues 46,527 50,522 55,540 62,329 71,809

EBITDA 2,735 4,544 6,578 7,771 8,266

EBITDA Margins (%) 5.9 9.0 11.8 12.5 11.5

PAT 180 1,198 2,808 3,398 3,577

EPS 5.3 35.0 78.1 94.5 99.5

P/E 87.1 13.1 5.9 4.8 4.6

RoE 2.7 15.3 27.3 25.6 21.8Source: Company, Antique

80140200260320380440


CEAT NIFTY




Set to benefit from a domestic CV cycle recovery; Expect 14% revenueCAGR over FY14-16e

Expect 13.5% volume CAGR over FY14-16e Sri Lankan volumes not that substantial in overall scheme of things


CEAT has substantially increased its market share in the twoand three-wheeler segment over the past three years CV segment contribution is much lower than the industry mean(%


Capacity set to expand by another 150TPD; Two andthree-wheeler capacity to increase 30% Exports growing at a robust 20% CAGR


187,000

203,000

214,500

238,224

266,811

306,833

180,000

200,000

220,000

240,000

260,000

280,000

300,000

320,000

FY11 FY12 FY13 FY14 FY 15e FY 16e

Sales tonnage India

13,000

15,000 15,000

16,60016,900

17,300

12,000

13,000

14,000

15,000

16,000

17,000

18,000


Sales tonnage Sri Lanka

12

7

16

22

12

5

10

15

20

25

T&B PCR LCV 2-3/W Farm/OTR

Market share (%)

T&B, 42

2/3-W, 23

PCR, 7

Others, 6

Exports, 22

250

200

150 150

100

150

200

250

300

Bhandup

(Mainly T&B

bias)

Nashik (PCR

and T&B)

Hallol (~55%

TBR and rest

PCR)

Outsourced for

2-W tires

Capacities (TPD)

4.8 4.9 4.8

6.3

10.011.0

12.3

14.5

17.4

3

6

9

12

15

18

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15e FY16e

CEAT exports (INRb)




Operating margins to remain stable ~11-12%; Further upside limited

Gross profit/kg to peak out in FT15e, thus capping further margin gains See limited scope for a further uptick in EBITDA/kg


Rising utilisation to partly counter margin dilutive forces Strong pricing discipline in the tyre industry, led to static pricingdespite lower raw material costs


Sri Lankan margin likely to remain strong ~18-20% Mix of high margin two and three-wheeler segment to remain strong


46.3

52.8

66.8

78.0 77.875.0

40

45

50

55

60

65

70

75

80


2

3

4

5

6

7

8

9

10

11

12

13

GP/kg (INR) EBITDA margin (%) (RHS)

5.7

12.5

19.8

27.6 27.4

25.5

5

10

15

20

25

30


EBITDA/kg (INR)

85.4 85.6

84.0

87.0

91.4

93.4

80

82

84

86

88

90

92

94

96


Capacity utilisation (%)

180.1

211.6 218.3 218.0 218.0 220.0

133.8

158.8151.4

139.9 140.2 145.0

100

125

150

175

200

225


NRV (INR/kg) RM/kg (INR)

12.9 12.7

16.6

23.9

20

18

10

12

14

16

18

20

22

24

26


Sri Lanka JV margin (%)

11

12

1415

16 16

5

8

11

14

17

20


2/3-W volume mix (%)




Capex set to rise from FY15e, thus keeping a tab on deleveraging

Expansion in Hallol, Bangladesh, and Sri Lanka to add to capex FY14 FCF impacted by high year-end raw material inventory


Expect CEAT to sustain strong RoEs of ~ 24-28% over FY15-16e Net debt-to-equity ratio to remain static ~ 0.9x


Capital efficiency to remain ~17-18% levels Higher raw material inventory in 2HFY14 impacting cash flows


1,145779

(4,714)

(2,660)

3,616

(2,294)

(1,324)(1,246)(535)

(5,000)

(4,000)

(3,000)

(2,000)

(1,000)

0

1,000

2,000

3,000

4,000

FY0 8 FY0 9 FY1 0 FY1 1 FY1 2 FY1 3 FY1 4 FY1 5e FY1 6e

FCF (INRm)

0.8 0.80.7

1.5

1.8

1.1

0.9 0.90.9

0.4

0.8

1.2

1.6

2.0

F Y 0 8

F Y 0 9

F Y 1 0

F Y 1 1

F Y 1 2

F Y 1 3

F Y 1 4

F Y 1 5 e

F Y 1 6 e

Net debt/Equity (x)

20.1

0.8

15.4

3.7

8.1

13.9

18.2 18.216.6

0

5

10

15

20

25

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15e FY16e

ROCE (%)

37.7

51.5

33.6

52.6

59.5

47.3

40.4

48.345.6 45.7

20

25

30

35

40

45

50

55

60


Inventory days

33.8

28.6

5.52.7

16.4

31.028.9

24.1

(3.7)

(4)

1

6

11

16

21

26

31

36


100

150

200

250

300

350

400

450

500

ROE (%) BVPS (INR) (RHS)

946

358

2,366

5,637

3,516

479

1,155

5,750

5,000

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000


Capex (INRm)





We initiate coverage on CEAT with a Buy rating and price target of INR597 per share, basedon 6x FY16e earnings. Against a target P/E range of 8-10x for MRF and APTY, we areallotting it a target multiple of 6x. There is no point in looking at the historical traded multiplesof CEAT as earnings and capital efficiency have improved only in the past couple of years.

We expect earnings CAGR of 13% over FY14-16e as against 14% revenue CAGR on theback of flattish margins, higher depreciation, and interest outgo on account of higher capex

In the longer run, CEAT can catch up with its larger peers, in terms of target multiples of 810x, by showcasing its ability to sustain margins and capital efficiency, in addition to retainingor improving its market share.

Factoring target P/E at 6x as against a target level of CEAT will be trading at 4.5x FY16e EV/EBITDA at our target8-10x for larger peers price


RisksEarlier and higher-than-anticipated increase in raw material basket cost inflation

We expect the RMB cost structure to move up from FY16e, leading to a 170bps decline ingross margins over FY15e. In case natural rubber and crude oil prices start inching up at arapid pace in 2HFY15e itself, the cash flow scenario would change and impact FY16e FCFfurther.

Delay in a domestic CV cycle recovery

With ~40% of revenues coming in from domestic CVs, a standalone revenue revival is heavilyhinged towards a domestic CV cycle recovery. As we are factoring in higher volume growthin FY16e, any delay in that recovery will impact our FY16e volume growth estimate of 15%

Larger-than-expected capex or sudden acquisition plans can impact cash flows

Any unprecedented sudden spurt in capex plans or an inorganic deal would lead to anegative surprise on cash flows, impacting balance sheet health and interest outgo in turn.

0

5

10

15

20

25

A p r - 1 0

J u n - 1 0

A u g - 1 0

O c t - 1 0

D e c - 1 0

F e b - 1 1

A p r - 1 1

J u n - 1 1

A u g - 1 1

O c t - 1 1

D e c - 1 1

F e b - 1 2

A p r - 1 2

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D e c - 1 2

F e b - 1 3

A p r - 1 3

J u n - 1 3

A u g - 1 3

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P/E Mean P/E

1

3

5

7

9

11

13

15

A p r - 1 0

J u n - 1 0

A u g - 1 0

O c t - 1 0

D e c - 1 0

F e b - 1 1

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O c t - 1 1

D e c - 1 1

F e b - 1 2

A p r - 1 2

J u n - 1 2

A u g - 1 2

O c t - 1 2

D e c - 1 2

F e b - 1 3

A p r - 1 3

J u n - 1 3

A u g - 1 3

O c t - 1 3

D e c - 1 3

F e b - 1 4

A p r - 1 4

J u n - 1 4

EV/EBITDA Mean EV/EBITDA




Financials


Revenues 46,527 50,522 55,540 62,329 71,809

Expenses 43,792 45,978 48,961 54,558 63,543

EBITDA 2,735 4,544 6,578 7,771 8,266

Depreciation & amortisation 728 806 865 997 1,132EBIT 2,007 3,737 5,713 6,774 7,134

Interest expense 1,958 1,976 1,720 1,929 2,069

Other income 191 (100) 140 80 120

Profit before tax 240 1,661 4,133 4,925 5,184

Taxes incl deferred taxation 60 463 1,324 1,527 1,607

Profit after tax 180 1,198 2,808 3,398 3,577

Adjusted PAT 180 1,198 2,808 3,398 3,577

Recurring EPS (INR) 5.3 35.0 78.1 94.5 99.5


Share Capital 342 342 360 360 360

Reserves & Surplus 6,436 7,512 9,925 12,902 16,059Networth 6,778 7,855 10,284 13,262 16,418

Debt 13,112 10,378 12,282 13,782 14,782



Accumulated Depreciation 5,994 6,719 7,585 8,582 9,714

Capital work in progress 176 274 449 449 449

Net Assets 15,837 15,786 16,425 21,178 25,046

Investments 309 6 - - -


Inventory 6,027 5,588 7,356 7,795 8,987

Debtors 6,383 6,629 7,545 8,303 9,573

Cash & Bank balance 397 1,121 1,679 827 325



Liabilities 10,408 11,623 10,419 11,865 13,677

Provisions 307 828 964 1,081 1,246


Deferred expenses 153 571 1,284 559 559



No. of shares (m) 34.2 34.2 36.0 36.0 36.0

BVPS (INR) 202.4 246.1 321.7 384.3 472.1

CEPS (INR) 26.5 58.5 102.2 122.2 131.0

DPS (INR) 1.0 4.0 9.5 9.5 9.5


EBITDA 5.9 9.0 11.8 12.5 11.5

EBIT 4.3 7.4 10.3 10.9 9.9

PAT 0.4 2.4 5.1 5.5 5.0



Standalone volume (tonne) 203,000 214,500 238,224 266,811 306,833

Sri Lanka JV volume (tonne) 15,000 15,000 16,600 16,900 17,300

Blended realisation (INR/kg) 212 218 218 218 220

Gross profit/kg (INR) 53 67 78 78 75


PBT 240 1,661 4,133 4,925 5,184

Depreciation & amortisation 728 806 865 997 1,132

Interest expense 1,958 1,976 1,720 1,929 2,069

(Inc)/Dec in working capital (172) 1,787 (4,819) 31 (956

Tax paid (60) (463) (1,324) (1,527) (1,607

CF from operating activities 2,694 5,768 575 6,355 5,824

Capital expenditure (3,516) (479) (1,155) (5,750) (5,000

Inc/(Dec) in investments 120 303 6 -

CF from investing activities (3,395) (176) (1,149) (5,750) (5,000

Inc/(Dec) in share capital - - 227 - Inc/(Dec) in debt 2,607 (2,734) 1,904 1,500 1,000

Dividends paid/Other charges (1,997) (2,134) (1,000) (2,958) (2,326

CF from financing activities 610 (4,868) 1,131 (1,458) (1,326

Net cash flow (92) 724 558 (852) (502

Opening balance 489 397 1,121 1,679 827

Closing balance 397 1,121 1,679 827 325


Revenue (75.8) 8.6 9.9 12.2 15.2

EBITDA (88.0) 66.1 44.8 18.1 6.4

PAT (99.1) 565.4 134.3 21.0 5.3

EPS (94.8) 565.4 123.1 21.0 5.3


P/E 87.1 13.1 5.9 4.8 4.6

Cash P/E 17.3 7.8 4.5 3.7 3.5

P/BV 2.3 1.9 1.4 1.2 1.0

EV/EBITDA 10.3 5.5 4.1 3.8 3.7

EV/Sales 0.6 0.5 0.5 0.5 0.4

Dividend Yield (%) 0.2 0.9 2.1 2.1 2.1


RoE 2.7 15.3 27.3 25.6 21.8

RoCE 11.2 20.3 26.5 25.8 23.6

Debt/Equity (x) 1.8 1.1 0.9 0.9 0.9

EBIT/Interest (x) 1.0 1.9 3.3 3.5 3.4





INITIATING COVERAGE

Balkrishna Industries LimitedOn the verge of a deleveraging spreeBalkrishna Industries (BIL IN) is a niche, global tyre manufacturer, catering to theoff-the-road segments of industrial and agricultural applications. The global OTR

market is pegged ~USD10bn, and BIL is operating at a market share of ~6%, with~88% of its revenue coming from exports. Against industry leaders like Michelin,Goodyear, Pirelli, Continental, among others, BIL is operating in the EU and USmarkets by leveraging its cost competitiveness through its manufacturing facilitiesin India. After getting the new Bhuj facility operational, BIL is currently operating~50% of its peak capacity. This gives it leeway to operate with basic maintenancecapex, at least till FY19, leading to visibility on robust free cash flow generationahead. From the present 1x net debt-to-equity, we expect that to reduce to 0.3x byFY16e, along with ~200bps improvement in RoCE to ~21%.

Demand revival in key markets and rising focus towards industrial and OEM segments topropel revenues ahead

After being impacted by the US drought and economic slowdown in the EU in CY12-13, weexpect the global OTR tyre market to revive from CY14. On the back of a gradual pick-up in EUmining and agricultural output, along with a recovery in US farm output, we expect the globa

OTR market to return to the ~6% growth CAGR trajectory from CY14 itself. In this backdrop, weexpect BIL to continue to outperform the global OTR market, growing its revenues ~16% CAGRin FY15-16e, similar to the revenue CAGR it delivered in FY08-12. With ~63% of revenuescoming from the stable agricultural segment, unlike ~34% for the overall industry, revenuegrowth has been much stable in the past for BIL. With rising focus towards the relatively untappedmining and industrial markets in the US and EU, BIL is well poised to continue to outperform theoverall market in coming years, though at the slight cost of facing higher cyclicality in its revenuesahead. We expect BIL's revenues to grow ~16% CAGR in FY15-16e to INR45.7bn by FY16eled by volume growth.

Margins to remain above 25% on improving operating leverageThe company's margins are set to benefit immensely from an improvement in operating leverageover FY15-19e, along with an improvement in productivity, through a rise in output from itsnewly installed facility at Bhuj. As BIL is currently operating ~50% of its peak capacity, weexpect it to reach ~61% utilisation by FY16e. This will enable BIL to maintain its margins above

25%, despite risk of stronger INR and RMB inflation. Led by our assumption of higher RMBalong with no incremental support from currency, we assume a 150bps dip in its gross marginin FY15-16e. Proximity of the Bhuj facility to the port and higher productivity from the new planshould cushion operating margins too. We are factoring in operating margins of 26.9% and25% in FY15e and FY16e as against an FY14 margin of 25.6%, respectively.

Deleveraging set to accelerate from FY16On back of limited need for capex, post FY15 onwards and at least till FY19, we expect BIL togenerate strong free cash flow every year, amid improving demand and strong margins, resultingin accelerated deleveraging of its balance sheet. We expect BIL to generate a cumulative FCFof INR10bn in FY15-16e, resulting in its net debt-to-equity ratio dropping to ~0.3x by FY16efrom 1.3x in FY13. We expect capital efficiency to improve ~200bps on account of improvingasset turn in FY15-16e to ~21%.


We initiate a Buy on BIL with a target price of INR822 per share, based on 12x FY16e earningsCompared to the past eight-year's forward traded rolling P/E of 8x, we are aligning our targemultiple with global average, as the export oriented company is entering a period of robust FCFgeneration, benefitting from improving operating leverage and accelerated deleveraging, thusjustifying our case for a premium multiple. We expect earnings CAGR of 16.5% in FY14-16e.

Reco : BUY

CMP : INR725








52-wk HI/LO (INR) : 729/199

Avg Daily Vol ('000) : 83

Bloomberg : BIL IN


Absolute 30 69 151 211

Relative 24 47 106 137

Source: Bloomberg


FII : 4%

DII : 11%

Others : 34%

Source: Bloomberg


EPS (INR) 50.5 62.3 68.5PE (x) 14.3 11.6 10.6

P/BV (x) 4.1 3.1 2.4

EV/EBITDA (x) 10.5 8.3 7.1

Source: Bloomberg


Source: Bloomberg

Source: Bloomberg




Revenues 28,200 31,906 34,857 38,689 45,034

EBITDA 5,059 6,644 8,938 10,639 11,627

EBITDA Margins (%) 17.9 20.8 25.6 27.5 25.8

Profit after tax 2,686 3,558 4,884 6,019 6,622

EPS 27.8 36.8 50.5 62.3 68.5

P/E 26.1 19.7 14.3 11.6 10.6

RoE (%) 28.0 28.4 29.5 27.7 23.8Source: Company, Antique

80120160200240280320


Balkr ishna NIFTY




Business background

BIL, promoted by the Poddar family, is into tyre manufacturing for OTR application vehicles inthe industrial and agriculture segments. At present, Arvind Poddar is its MD and chairmanOperating from four plants - two in Bhiwadi in Rajasthan; one in Aurangabad, Maharashtraand the newly added Bhuj facility in Gujarat, BIL will have a peak capacity of 300,000MTby FY16e as against an FY14e volume of 140,000MT. Operating at a market share of ~6%in the global OTR tyre market, ~88% of its revenues accrue from exports, with EU being thelargest revenue contributor ~49% followed by the US ~23%. In terms of segmental revenuesBIL's revenues are dominated by the stable agricultural segment ~63%, unlike the overalOTR market, in which agricultural tyres contribute ~36%. BIL sells its products through locadistributors, which contribute ~77% of its revenues, with original equipment manufacturerscontributing ~20%. Following a third-party distribution model, BIL is saving on last mile salesand distribution expenses, and is in a position to sell products at rates ~25-30% lower than itsprime competitors. Besides its stronghold in the agricultural tyre segment, BIL is increasing itsfocus towards the industrial and mining segments, along with focusing on OEM customerslike Caterpillar, Hitachi, John Deere etc. From an all bias tyre capacity a few years back, BILwill have ~ 45% of its peak capacity ready to produce radial OTR tyres by FY16e, thuspropelling the revenue mix up.

Industry trend and driversGlobal OTR industry expected to recover in CY14e, post contracting in CY12-13

2008 2009 2010 2011 2012 2013 2014e 2015e 2016e

Farm tyre 3.1 3.5 3.7 4.0 3.7 3.4 3.5 3.6 3.8

Industrial tyre 7.3 7.4 7.6 7.8 7.8 6.7 7.2 7.6 8.0

Global OTR market in USD bn 10.4 10.8 11.3 11.8 11.5 10.1 10.7 11.2 11.8

Growth (%) 4.0 3.9 4.2 4.8 (3.0) (12.0) 6.0 5.0 5.0

BIL Sales Mix (%)

Farm tyre 70 69 68 65 62 64 63 62 61

Industrial tyre 30 31 32 35 38 36 37 38 39

Industry Sales Mix (%)

Farm tyre 30 32 33 34 32 34 33 32 32

Industrial tyre 70 68 67 66 68 66 67 68 68

BIL blended market share (%) 1.9 2.2 3.6 4.9 5.1 5.8 5.4 5.8 6.5

Farm tyre share (%) 4.4 4.8 7.5 9.4 9.8 10.8 10.0 10.2 10.8

Industrial tyre share (%) 0.8 1.0 1.7 2.6 2.8 3.1 2.9 2.9 3.3

Source: Company, Michelin, Titan International, media reports

Rising trend of MSCI Europe Agriculture and Industrials indices, signifying recovering trend for OTR

Source: Bloomberg

500

1,000

1,500

2,000

2,500

3,000

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4,000

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MSCI EU agri index

50

70

90

110

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170

190210

230

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MSCI EU Industrial index




US agricultural output recovering post suffering a drought in CY13 Titan International outperforming industry led by inorganic route

Source: Bloomberg, Titan International annual report

BIL revenue segmentation; Volume CAGR pegged at 14.5% in FY15-16e

Agri. segment dominating over industrials and mining (%) EU BIL's prime market; Targets a further ramp-up in the US (%)

Source: Company

Post low growth in FY13-14, a demand recovery is expectedUtilising local distributors helps BIL save on SG&A expenses (%) from FY15e


220

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US corn production (mn tonnes)

728

882

1,487

1,821

2,164

500

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900

1,100

1,300

1,500

1,700

1,900

2,100

2,300

CY09 CY10 CY11 CY12 CY13

10

20

30

40

50

60

70

Titan International revenue (USD mn) Grow th (%) (RHS)

Agri, 63

Industrials,

34

Others, 3

EU, 49

US, 23

India, 12

Asia ex-India,

4

ROW, 12

Distributors,

77

OEM, 20

Take-offs, 3

133138

143

160

184

125

140

155

170

185

200


0

5

10

15

20

25

Volume ('000 tonne) Volume grow th (%) (RHS)




Margin set to remain above 25% till FY16e

Led by favourable drivers in the form of rising scale, higher productivity from the newlyadded plant, closer proximity of the new plant to the port, and improving mix of highermargin radial OTR tyres, BIL's margins would stay above 25%, despite any risk of adversemoves in RMB costing. We are factoring in 10% inflation in the landed price of naturarubber in FY16e to INR170/kg, along with USD/INR at 60, for our profitability calculationsPost price cuts to the extent of 6-8% in the past couple of years, in sync with the global peers,

we are factoring a mild 2-3% recovery in pricing over FY15-16e.Despite a gradual increase in achievable capacity from 160,000MT in FY13 to 300,000MTin FY16e, BIL is managing its incremental fixed costs efficiently, via contract workers insteadof adding permanent workers in advance for the new plant. Despite utilisation not picking upon the back of continuous capacity additions, we expect BIL to manage its fixed costs tightlyand keep its margin intact amid rising volumes.

Expect margins to stay above 25% over FY15-16e Utilisation to remain low on the back of massive capacity additions


Expect gross profit/kg to peak out in FY15e Quarterly EBITDA/kg currently at an all-time high


130

170

200

250

300

100

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300


45

55

65

75

85

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105

Achievable capacity ('000 tonne) Capacity utilisation (%)

4,387

4,215

4,0504,100

4,150

3,800

3,900

4,000

4,100

4,200

4,300

4,400

4,500

FY12 FY13 FY14 FY15e FY16e70

80

90

100

110

120

130

NRV (US$/tonne) GP/kg ( INR) (RHS)

16.1

20.4

25.3

27.5

25.8

15

17

19

21

23

25

27

29


30

40

50

60

70

EBITDA (%) EBITDA/kg (INR) (RHS)

6 7 . 8

6 0 . 7

5 9 . 5 6 9 . 4 7 7 . 6 8 4 . 5

7 5 . 4

7 2 . 1

6 8 . 5

6 9 . 2

6 7 . 7 7 3 . 8

6 8 . 9 7 8 . 7 9 8 . 5

8 9 . 2 1

0 3 . 3 1 1 1 . 5

1 2 2 . 7

2 6 . 8

2 5 . 4 3 3 . 4 4 6 . 9

4 7 . 2

4 0 . 9 4 3 . 8

3 4 . 3

3 3 . 8

3 1 . 2

3 0 . 2

3 2 . 2 3 8 . 5 4 0 . 1

3 4 . 9 4 2 . 5 5 0 . 4

4 5 . 8 5 1 . 2 6 1 . 0 6 7 . 5

1 2 9 . 1

9 7 . 4 1 0 2 . 7 1 0 5 . 4

3 6 . 0

5 1 . 7

2030

4050

6070

8090

100110

120130

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GP/kg (INR) EBITDA/kg (INR)




Margins to remain ~27-28% at least till 1HFY15e Rising mix and scale from Bhuj helping BIL manage fixed costs


Deleveraging to accelerate from FY16e

Led by visibility of limited need for capex to take care of plant maintenance at least till FY19e(assuming a 12-15% volume CAGR), we expect BIL to generate an annual robust FCF oINR5.5-6bn in FY15-16e. This will make BIL a net debt free entity by FY18e from ~1.3x ne

debt-to-equity ratio in FY13. BIL is nicely placed to take care of the next major capex cycle, interms of balance sheet health, while reducing the risk of earnings getting impacted from arise in interest outgo. We expect RoCE to improve ~200bps in FY15-16e, led by improvingasset turn and minimal incremental capital allocation.

Deleveraging in FY15-16e to pare net debt-to-equity ratio to 0.3x FCF generation to rev up from FY15e on limited capex needs


Capital efficiency to improve gradually, led by rising asset turn Book value/share to touch INR300 by FY16e vs RoE of ~22%


10

15

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25

30

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EBITDA margin (%)

10%

12%14%

16%

18%

20%

22%

24%

26%

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M a r - 1 4

Other expenses/ net sales

0.90.9

0.7

1.0

1.2

0.9

0.60.7

1.1 1.21.1

0.7

0.4

0.1

0.3

0.5

0.7

0.9

1.1

1.3

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F Y 1 5 e

F Y 1 6 e

500

2,500

4,500

6,500

8,500

10,500

12,500

Net Debt/Equity (x) Capex (INRm) (RHS)

14 20 26 31 38 4363

80106

137

177

237

303

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110

160

210

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F Y 1 6 e

BVPS (INR)

27.2

19.6

17.4 18.3

18.9 19.9

10

14

18

22

26

30


ROCE (%)

5,4566,411

(518)

(6,774)(4,758) (1,678)

(7,000)

(5,000)

(3,000)

(1,000)

1,000

3,000

5,000

7,000

9,000

11,000


Free cash flow





We initiate a Buy on BIL with a target price of INR822 per share, based on 12x FY16eearnings. Compared to the past eight-year's forward traded rolling P/E of 8x, we assign apremium to our target valuation multiple, as the company is poised to benefit from an operatingleverage and accelerated deleveraging in FY15-19e, thus getting valued in sync with globapeers.

Expecting BIL to trade ~7-8x forward EV/EBITDA ahead Factoring in 12x FY16e earnings at our target valuation


RisksRecurrence of drought in near-term target markets

Recurrence of a drought-type situation in the US/EU would dampen the demand recoverypotential for the global OTR market, impacting BIL in turn. At present, since BIL's portfolio is

tilted towards the agricultural segment, a recovery in the mining and industrial segment won'be good enough for BIL to grow its volume at 15% CAGR.

Major appreciation in INR

Though 88% of BIL's revenues accrue from exports, the company is a net exporter to the extenof ~45% of its revenues, primarily in EUR terms, as majority of its USD exports are naturallyhedged through its imports. Any major appreciation in the INR vs EUR would potentiallyimpact realisations and margins of BIL, in an environment where pricing power in the industryis not strong.

Rise in raw material basket costing

We expect the domestic spot price of natural rubber to remain within INR140-160/kg til

FY16e, on the back of our demand-supply analysis. Any deviation from our thought processled by brisk global automotive growth, any natural disaster led supply constraint, or anyregulatory norm changes in various rubber producing markets, can impact our gross profiassumptions. An increase in crude prices would also negatively impact our gross marginassumption as ~40-45% of its overall RMB is linked to crude and its derivatives.

Rise in competition from new emerging market players

With the global OTR market expected to grow at 5% CAGR, entry of large ticket OTR makersfrom emerging markets, with technological expertise and distribution reach, along with scale,can be a potential risk to BIL long-term growth opportunities.

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Financials


Revenues 28,200 31,906 34,857 38,689 45,034

Expenses 23,141 25,262 25,919 28,050 33,407

EBITDA 5,059 6,644 8,938 10,639 11,627

Depreciation & amortisation 831 1,077 1,650 1,988 2,182EBIT 4,260 5,609 7,427 9,051 10,045

Interest expense (net) 278 257 250 328 448

Other Income 33 42 138 400 600

Exceptional Items — — — — —

Profit before tax 3,983 5,352 7,177 8,723 9,597

Tax (incl deferred) 1,297 1,794 2,293 2,704 2,975

Profit after tax 2,686 3,558 4,884 6,019 6,622

Adjusted profit after tax 2,686 3,558 4,884 6,019 6,622

Adjusted EPS (INR) 27.8 36.8 50.5 62.3 68.5


Share Capital 193 193 193 193 193Reserves & Surplus 10,642 14,030 18,655 24,448 30,787

Networth 11,461 15,222 20,570 26,363 32,702

Debt 16,732 20,636 23,440 20,940 14,940



Accumulated Depreciation (3,985) (5,062) (6,712) (8,699) (10,881)

Capital work in progress 4,499 9,500 3,000 1,000 800

Net Assets 12,780 22,233 28,058 29,071 28,389

Investments 355 329 4,265 4,265 4,265


Inventory 4,811 4,326 5,292 5,505 6,408

Debtors 4,796 5,045 6,185 5,676 6,607

Cash & Bank balance 3,574 2,693 98 2,499 2,179



Liabilities 2,996 4,061 4,730 5,512 6,205




No. of shares (m) 97 97 97 97 97

BVPS (INR) 105.6 136.8 177.2 237.1 302.7

CEPS (INR) 36.4 48.0 67.6 82.8 91.1

DPS (INR) 1.5 1.5 2.0 2.0 2.5


EBITDA 17.9 20.8 25.6 27.5 25.8

EBIT 15.0 17.4 20.9 22.4 21.0

PAT 9.5 11.2 14.0 15.6 14.7



Volume ('000 tonne) 133 138 143 160 184

Realisation/tonne (USD) 4,387 4,215 4,050 4,100 4,150

Gross profit/kg (INR) 79 100 122 126 122

USD/INR 48 54 60 59 59Natural Rubber (Rs/kg) 186 166 159 148 162


PBT 3,983 5,352 7,177 8,723 9,597

Depreciation & amortisation 831 1,077 1,650 1,988 2,182

Interest expense 278 257 250 328 448

(Inc)/Dec in working capital (5,295) 880 (986) 121 (1,341

Tax paid (1,297) (1,794) (2,293) (2,704) (2,975

CF from operating activities (1,501) 5,772 5,797 8,456 7,911

Capital expenditure (5,273) (10,530) (7,475) (3,000) (1,500

Inc/(Dec) in investments - 26 (3,936) -

CF from investing activities (5,273) (10,504) (11,411) (3,000) (1,500Inc/(Dec) in debt 10,664 3,904 2,804 (2,500) (6,000

Others (427) (54) 215 (554) (731

CF from financing activities 10,237 3,850 3,019 (3,054) (6,731

Net cash flow 3,463 (881) (2,595) 2,401 (320

Opening balance 110 3,574 2,693 98 2,499

Closing balance 3,573 2,693 98 2,499 2,179


Revenue 40.8 13.1 9.2 11.0 16.4

EBITDA 15.4 31.3 34.5 19.0 9.3

PAT 0.8 32.5 37.2 23.2 10.0

EPS 0.8 32.5 37.2 23.2 10.0

Adj PAT 0.8 32.5 37.2 23.2 10.0


P/E 26.1 19.7 14.3 11.6 10.6

P/BV 6.9 5.3 4.1 3.1 2.4

EV/EBITDA 16.5 13.2 10.5 8.3 7.1

EV/Sales 3.0 2.8 2.7 2.3 1.8


RoE (%) 28.0 29.8 24.9 22.7 22.2

RoCE (%) 19.6 20.0 20.3 20.5 22.0

Net Debt/Equity (x) 1.2 0.9 0.4 0.3 0.1

Interest Coverage (x) 15.5 22.0 30.3 28.8 23.8




Antique Stock Broking LimitedN l 2 d Fl N P M b 400 021

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