Bajaj Auto (BAAUTO) | 2815content.icicidirect.com/mailimages/IDirect_BajajAuto_Q1FY18.pdf · Bajaj...

July 24, 2017

ICICI Securities Ltd | Retail Equity Research

Result Update

Weak performance continues…

Bajaj Auto reported its Q1FY18 results, which were below our

estimates on the operational front. Revenues were at | 5442 crore

(down 5.3% YoY, up 11.1%QoQ) vs. our estimate of | 5378 crore.

The beat is attributable to higher than estimated domestic & export

realisations

Total volumes for Q1FY18 were at 888434 units (down 10.7% YoY,

up 12.8% QoQ). Domestic volumes declined 23.3% YoY, up 3.3%

QoQ to 478909 units. Domestic realisations grew 8.2% YoY against

our estimate of 7.1%. Export volumes increased 10.5% YoY, 26.4%

QoQ to 324051 units. Export realisations grew 9.1% QoQ vs. our

estimate of 4.6%. In export markets, the sales mix of high end

motorcycles improved to 30% vs. 26% in Q1FY17

Reported EBITDA margins were at 17.2% (down 322 bps YoY, 126

bps QoQ) against our estimate of 19.5%. The miss is mainly

attributable to lower than estimated gross margins. Of the ~210 bps

decline in gross margins, renewal of contract with steelmakers has

had ~110 bps impact. Margins in the domestic motorcycle segment

declined as the company reduced prices of entry level bikes and

increased marketing expense in the premium segment

Reported PAT declined 5.7% YoY, up 15.1% QoQ to | 923 crore vs.

our estimate of | 916.6 crore. The beat is attributable to higher than

estimated other income, which increased 56% QoQ to | 457 crore

due to one-time dividend of | 135 crore from KTM

Struggling in domestic business

BAL’s domestic volumes grew 5.4% in FY17, outpacing industry growth

of ~3.7%. This was mainly on account of new launches like the Dominar,

V series & Avengers. However, volumes from these new models have

come off sharply (Avenger: Q1FY17-56391 units, Q1FY18-23583 units;

V12/V15: Q1FY17-82387 units, Q1FY18-40937 units). The market share

has fallen across segments in the motorcycle segment, with CT 100 &

Platina losing share in economy segment, single digit share in executive

segment reducing further to sub 5% while in the premium segment the

company has lost its dominance with the likes of Royal Enfield’s market

share now equal to BAL. With no new launches expected in the near

term, we expect domestic volumes to grow at 5% CAGR in FY17-19E.

One positive that could emerge is the possible tie-up with a global

company in the motorcycle segment in the next few weeks.

Export growth on low base and geography diversification

BAL is cautiously optimistic on the export market. The company expects

to offset the expected decline in Nigeria with growth in markets like

Turkey, Iran and South-East Asia. In 3W, BAL has already reduced its

dependence on Sri-Lanka by increasing exports to Bangladesh, Peru etc.

We expect export volumes to grow at 12.8% CAGR in FY17-19E.

Margins to be under pressure

BAL continues to focus on profitability, with ~60% of the business

operating at ~20%+ EBITDA margin. However, margins in domestic

motorcycle segment will be under pressure, due to commodity cost

pressure & customer acquisition costs. We value BAL on an SOTP basis,

valuing the core business at 16x FY19E EPS and investment in KTM to

arrive at a target price of | 2780. We have a HOLD recommendation on

the stock.

Rating matrix

Rating : Hold

Target : | 2780

Target Period : 12 months

Potential Upside : -1%

What’s Changed?

Target changed from | 3000 to | 2780

EPS FY18E Changed from |155.4 to 137.7

EPS FY19E Changed from |181 to |164.7

Rating Unchanged

Quarterly Performance

Q1FY18 Q1FY17 YoY (%) Q4FY17 QoQ (%)

Revenue 5,442.4 5,748.0 -5.3 4,897.3 11.1

EBITDA 938.4 1,176.3 -20.2 906.0 3.6

EBITDA (%) 17.2 20.5 -322 bps 18.5 -126 bps

PAT 923.0 978.4 -5.7 801.8 15.1

Key Financials

| Crore FY16 FY17 FY18E FY19E

Net Sales 22,587 21,767 23,961 27,749

EBITDA 4,782 4,422 4,409 5,333

Net Profit 3,930 3,828 3,951 4,767

EPS (|) 135.8 132.3 136.6 164.7

Valuation summary

FY16 FY17 FY18E FY19E

Core P/E (x) 20.7 21.3 20.4 17.1

Tgt Core P/E (x) 20.5 21.0 20.4 16.9

EV/EBITDA(x) 16.6 17.0 16.5 13.3

P/BV (x) 6.1 4.8 4.3 3.8

RoNW (%) 29.6 22.5 21.1 22.2

RoCE (%) 40.7 30.3 29.0 30.9

Stock data

Particular Amount

Market Capitalization (| crore) 81,457.7

Total Debt (FY17) (| crore) |119.9crore

Cash & Liquid Invests (FY17) (| crore) |6349.7Crore

EV (| crore) |75227.8crore

52 week H/L (|) 3120 / 2510

Equity capital (|) 289.4

Face value (|) | 10

Price performance (%)

1M 3M 6M 12M

Bajaj Auto Ltd -0.1 -0.3 4.2 1.6

Hero MotoCorp Ltd -2.3 14.9 20.7 12.7

TVS Motor Company Ltd 4.8 18.7 50.9 90.5

Bajaj Auto (BAAUTO) | 2815

Research Analyst

Nishit Zota

[email protected]

Vidrum Mehta

[email protected]

ICICI Securities Ltd | Retail Equity Research Page 2

Variance analysis- Standalone

Q1FY18 Q1FY18E Q1FY17 YoY (%) Q4FY17 QoQ (%) Comments

Total Operating Income 5,442 5,378 5,748 -5.3 4,897 11.1 Higher than estimates due to higher-than-expected domestic/export realisations

Raw Material Expenses 3,809 3,679 3,863 -1.4 3,320 14.7 Renewal of contracts with steelmakers led to rise in raw material prices

Employee Expenses 273 236 268 1.6 227 19.9

Other Expenses 427 417 445 -4.1 451 -5.5

EBITDA 938.4 1,050.8 1,176.3 -20.2 906.0 3.6

EBITDA Margin (%) 17.2 19.5 20.5 -322 bps 18.5 -126 bps EBITDA margins came in lower due to lower than estimated gross margins

Other Income 457.3 342.0 267.1 71.2 293.6 55.7 Other income came in higher due to to one-time dividend of | 135 crore from KTM

Depreciation 75.3 82.1 77.5 -2.9 75.7 -0.6

Interest 0 0 0 9.1 0 NA

Total Tax 364 393 387 -6.0 322 13.2

Reported PAT 923.0 916.6 978.4 -5.7 801.8 15.1 Beat on profit attributable to higher than estimated other income

EPS (|) 27.7 27.7 31.9 -13.1 27.7 0.0

Key Metrics

Revneue (| crore)

Domestic 3,261 3,210 3,927 -17.0 3,343 -2.4 Higher than estimates on account of higher ASPs

Exports 2,479 2,377 2,057 20.5 1,778 39.4 Higher than estimates on account of higher ASPs

Blended ASP (|/ unit)

Domestic 68,099 67,036 62,931 8.2 72,103 -5.6

Exports 60,534 58,035 55,497 9.1 54,868 10.3 ASPs higher due to higher share of premium motorcycles

Source: Company, ICICIdirect.com Research

Change in estimates

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

Revenue 25,501 23,961 -6.0 29,739 27,749 -6.7 Downward revision as we have revised volume estimates downwards post Q1FY18 volume

performance

EBITDA 5,179 4,409 -14.9 6,176 5,333 -13.6

EBITDA Margin (%) 20.3 18.4 -191 bps 20.8 19.2 -155 bps Margin estimates reduced post management guidance

PAT 4,497 3,951 -12.1 5,237 4,767 -9.0 PAT estimates reduced to reflect reduction in revenue & margin estimates

EPS (|) 155.4 136.6 -12.1 181.0 164.7 -9.0

FY18E FY19E


Assumptions

Current Earlier Comments

Units (mn) FY16 FY17E FY18E FY19E FY18E FY19E

Motorcycle volumes 3.4 3.2 3.4 3.7 3.5 3.9 Downward revision of estimates considering weak Q1FY18 performance

Three-Wheeler volumes 0.5 0.4 0.4 0.5 0.5 0.5

Quadricycle volumes 0.01 0.02 0.02 0.02 0.02

Export volumes 1.7 1.4 1.6 1.8 1.6 1.8

Domestic revenues (| crore) 13,774 14,816 15,617 17,916 17,102 19,787

Export revenues ($ mn) 1,492 1,134 1,417 1,688 1,382 1,618

US$INR Realisation rate 66 67 67 67 67 67

Export ASP ($/unit) 856 830 903 941 870 906 Increased estimates due to better mix

Blended ASP (|/unit) 60,475 61,907 65,287 68,438 65,705 69,171

RM/Vehicle (|/unit) 32,318 38,919 40,821 42,821 40,821 42,821

EBIDTA/Vehicle (|/unit) 12,320 11,260 12,445 10,415 12,028 10,043



Key conference call takeaways

In Q1FY18, rise in commodity prices had a ~110 bps adverse

impact on gross margins. In May 2017, the company raised prices

by | 500 on motorcycles & | 1000 on 3-W. Going ahead, the

company expects raw material to sales to be in the range of

68.7%-69% in FY18 (~70% in Q1FY18)

Volume of V12 & Avenger family has come off sharply in the past

few quarters (Avenger: Q1FY17-56391 units, Q1FY18-23583 units;

V12/V15: Q1FY17-82387 units, Q1FY18-40937 units). Going ahead

company has guided for a monthly run rate of 12000-15000 units

for Avenger & pickup in V series volumes from festive season

onwards to ~25000 units a month

The company is hopeful of achieving total export volumes of 1.6

million

The exceptional item of | 32 crore related to GST transition: a)

compensation to dealers & b) adjustment to GST price from June

15 onwards

Dealer inventory was reduced by ~50000 units (retail-~155000

units, wholesale- ~105000 units) in anticipation of GST

The company attributes the 30% YoY fall in domestic 3W to high

base of 75204 units in Q1FY17 (Maharashtra permit). Going

ahead, the management expects a monthly run rate of ~20,000+

units in domestic 3W due to removal of restriction on new permits

in Maharashtra, ~10,000 new permits in Delhi & proposed

replacement of 2 stroke 3-W with 4-stroke 3-W in Bangalore

Domestic spare part revenues were at | 460 crore with export at

| 190 crore. Total spare part revenue was at | 650 crore vs. | 637

crore YoY

The company is in talks with a global motorcycle company for a

possible tie-up

The Pulsar brand has witnessed market share erosion as the

competitor brand Apache is doing well in states like Odisha, UP

and Bihar

In FY18, BAL expects total KTM sales from India at 1.1 lakh units,

of which ~50,000 units will be sold in India

The US$:INR realisation in the export market is expected to be

66.7-66.8 for the balance period in FY18


Company Analysis

Export volumes to recover

BAL’s domestic volumes grew 5.4% in FY17, outpacing industry growth

of ~3.7%. This was mainly on account of new launches like the Dominar,

V series & Avengers. However, volumes from these new models have

come off sharply (Avenger: Q1FY17-56391 units, Q1FY18-23583 units;

V12/V15: Q1FY17-82387 units, Q1FY18-40937 units). The market share

has fallen across segments in the motorcycle segment, with CT 100 &

Platina losing share in economy segment, single digit share in executive

segment reducing further to sub 5%. In the premium segment, the

company has lost its dominance with the likes of Royal Enfield’s market

share now equal to BAL. With no new launches expected in the near

term, we expect domestic volumes to grow at 5% CAGR in FY17-19E.

One positive that may emerge is the possible tie-up with a global

company in the motorcycle segment in the next few weeks. Overall, we

expect revenues to grow at 12.9% CAGR in FY17-19E to | 27,749 crore.

Exhibit 1: Revenue growth at 13.4% CAGR in FY17-19E

19,5

29

21,6

12

22,5

87

21,7

67

23,9

61

27,7

49

16,3

98

19,9

97

20,1

50

39

16

10

19

2

1

7

5

-4

-

5,000

10,000

15,000

20,000

25,000

30,000

FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E

(|

crore)

-10

-5

-

5

10

15

20

25

30

35

40

45

(%

)

Revenue % increase


The company is cautiously optimistic on the export market. BAL expects

to offset the expected decline in Nigeria with growth in markets like

Turkey, Iran and South-East Asia. In 3W, the company has already

reduced its dependence on Sri Lanka by increasing exports to

Bangladesh, Peru, etc. We expect export volumes to grow at 12.8%

CAGR in FY17-19E.


Exhibit 2: Revenue mix trend

13,2

23

13,9

05

12,5

27

12,2

55

13,7

74

14,8

16

15,6

17

17,9

16

6,6

04

6,7

13

8,2

00

9,7

58

9,7

72

7,8

79

9,6

26

11,3

08

33.332.6

39.6

44.3

41.5

34.7

38.138.7

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E

20

25

30

35

40

45

50

Domestic Exports % share of exports


EBITDA margin to be under pressure in near term!

Looking at BAL’s financial performance, we can clearly see that the

company is almost synonymous with strong consistency. However, BAL

expects EBITDA margins to drop due to commodity price pressure and

customer acquisition cost. We estimate EBITDA margin of 18.4% and

19.2% for FY18E and FY19E, respectively.

Exhibit 3: EBITDA margins to decline!

3,7

20

4,1

17

4,7

82

4,4

22

4,4

09

5,3

33

3,1

71

3,6

35

4,1

06

19.319.0

18.4

19.2

18.2

20.4

19.0

21.2

20.3

-

1,000

2,000

3,000

4,000

5,000

6,000


(|

crore)

16

17

18

19

20

21

22

(%

)

EBITDA EBITDA margin



Exhibit 4: Per vehicle metrics and estimates

42,155

39,735

40,498

38,842

65,012

61,796

64,775

60,953

22,000

27,000

32,000

37,000

42,000

47,000

52,000

57,000

62,000

67,000

Q2FY14

Q3FY14

Q4FY14

Q1FY15

Q2FY15

Q3FY15

Q4FY15

Q1FY16

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18

(|

)

Avg RM Cost Avg realisation

Source: Company press release, ICICIdirect.com Research

Return ratios to remain strong as company continues its profit growth!

BAL remains a cash generating franchise, which has an annual CFO of

~| 4066 crore and CFO/EBITDA ratios of ~76% (five year average). The

company has extremely tight control on working capital and has already

worked towards reducing the system inventory. We believe the cash

accumulated in BAL’s balance sheet could be better utilised via higher

dividend payout as capex requirements are just ~7% of CFO generated

annually.

Exhibit 5: CFO continues to remain strong

3,8

99

2,2

07

4,1

16

2,5

27

3,1

36

4,0

70

3,9

70

5,3

30

104.8

60.7

100.2

61.465.6

92.0 90.1

99.9

-

1,000

2,000

3,000

4,000

5,000

6,000

FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E

| c

rore

-

20.0

40.0

60.0

80.0

100.0

120.0

%

CFO CFO/EBITDA



Exhibit 6: Trend in profitability

3,0

04

2,8

14 3,9

30

3,8

28

3,9

52

4,7

67

3,3

40

3,0

44

3,2

43

20.4

15.4

16.517.2

15.216.1

13.0

17.417.6

-

1,000

2,000

3,000

4,000

5,000

6,000


(|

crore)

-

5

10

15

20

25

(%

)

PAT PAT margin

Source: Company press release, ICICIdirect.com Research


Key takeaways from annual report

The domestic motorcycle market continued to remain sluggish, with

domestic growth of 3.7% in FY17, after de-growth 0.4% in previous

year. Compared to FY15, growth in FY17 was a mere 1.6% per annum

— from 10.7 million units two years earlier to 11.1 million in the

current year. The muted performance is attributable to increasing

share of scooter (~30% of total 2-W sales)

In the last two years, BAL’s domestic motorcycle sales have outpaced

industry growth. In FY17, BAL’s domestic motorcycle volumes grew

by 5.4% vs. market growth of 3.7%. The outperformance is

attributable to launch of V series that sold 234000 units

BAL has captured major market shares in sport segment but lost

share in entry segment. In entry segment, where the company has

presence through CT100 & Platina, its market share has reduced from

35% in FY16 to 32% in FY17. In the sports (Pulsar, Avenger) segment,

market share has increased from 43% last year to 45%. In the super

sports segment (KTM, Pulsar RS 200 & Dominar 400), sales were at

63,575 units. KTM sale of 34,970 units in India was higher 15% YoY

The industry domestic 3-W volumes declined 5% where BAL’s

corresponding volumes declined just 0.7%. In the domestic 3-W

(passenger + goods) market share increased from 47.4% in FY16 to

49.5% in FY17. In the domestic passenger segment, market share

increased from 57.5% to 59.7% in FY17. BAL has recently entered the

goods segment, where its volumes increased from 1325 units in FY16

to 13162 (12% market share) units in FY17.

In export 3-w, BAL saw a drop in volumes from 280,000 units last year

to 191,236 units in FY17. The reason of decline was economic

difficulty and currency constraint in several importing countries.

Motorcycle exports de-grew 16.5%. In export market, of the 18

markets that contribute 85% of the motorcycle exports, BAL gained

market share in 16, reaching a healthy 40%+ in South Asia & Middle-

East & 25% in 25% in Latin America. In FY17, company has entered

four new markets each for motorcycle & 3W, of which three were in

the Asean region

In FY17, Waluj – the export hub of Bajaj Auto, produced 1.64 million

motorcycles of which over 1.03 million were exported; and 445,563

three-wheelers of which 191,000 were shipped abroad. The Chakan

plant has used its core competencies in developing and

manufacturing the high end sports bikes, and manufactured 608,974

units in FY17. The Pantnagar plant manufactured 960,686 motorbikes

As of FY17, BAL’s employee strength was at 9509 employees

Bajaj Auto International Holdings BV is a 100% Netherlands based

subsidiary of Bajaj Auto. Over the years, through this subsidiary, Bajaj

Auto has invested a total of € 198.1 million (H 1,219 crore), and holds

approximately 48% stake in KTM AG of Austria (KTM). In CY16, KTM

sold 203,423 motorcycles, growth of 11% and achieved a turnover of

€1.14 billion, growth of 12%. Profit after tax was at €72.1 million

(| 531 crore), growth of 13%. The proportionate profit to Bajaj Auto is

€34.56 million (| 255 crore)


Outlook and valuation

On the financials front, ~60% of the business operates at ~20% EBITDA

margin. However, margins will be under pressure due to commodity cost

pressure and customer acquisition costs. We value BAL on an SOTP

basis, valuing the core business at 16x FY19E EPS and investment in KTM

to arrive at a target price of | 2780. We have a HOLD recommendation on

the stock.

Exhibit 7: Valuation

Revenues Growth EPS Growth PE EV/EBITDA RoNW RoCE

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

FY16 22,586.5 6.3 135.8 30.5 20.7 16.6 29.6 40.7

FY17 21,766.7 (3.6) 132.3 (2.6) 21.3 17.0 22.5 30.3

FY18E 23,960.8 10.1 136.6 3.2 20.6 16.5 21.1 29.0

FY19E 27,749.1 15.8 164.7 20.6 17.1 13.3 22.2 30.9

Exhibit 8: SOTP valuation

SOTP Valuation Estimated value Per share (|) Remark

Core Business

FY19E EPS (|) 164.7

Multiple (x) 16 Long-term average valuation multiple

Value per share (|) 2,640

Stake in KTM (48%)

Total valuation (| crore) 10657

Value towards BAL 5115

47.99% stake via Bajaj Auto International

Holdings

Value per share post 20% holdco disc 140 20% holding company discount

Total Value per Share (|) 2,780




Recommended history vs. consensus

0.0

10.0

20.0

30.0

40.0

50.0

60.0

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Jul-17May-17Mar-17Jan-17Dec-16Oct-16Aug-16Jun-16Apr-16Feb-16Dec-15Oct-15Aug-15

(%

)(|)

Price Idirect target Consensus Target Mean % Consensus with BUY

Source: Bloomberg, Company, ICICIdirect.com Research

Key events

Date Event

Apr-09 Unveils going global strategy aided by KTM (stake raised to 30% from 14.5% initially in 2007)

May-09 Unveils all new 150/180 cc Pulsar DTS-I to enhance market leadership position in premium segment

Nov-09 Bajaj Auto's export strategy bears strong fruit as volumes rise 46% YoY to ~98,000 odd units (35% of overall share)

Jan-10 Takes historic decision to exit scooter business completely and become a pure play motorcycle manufacturer

Jul-10 Bajaj Auto shuns JV with Nissan for small car venture to continue alone with RE-60

Dec-10 Auto stocks slide as oil firms hike petrol prices steeply by ~| 3/ litre

Feb-11 Bajaj Auto crosses 1 million units in the exports markets

May-11 Rising input cost pressures cause automakers to raise prices; Bajaj hikes prices further as DEPB tax benefits reduced by government

Oct-11 US$INR skids touching 50 causing market preference towards exporters; Bajaj stands out in the same

Mar-12 Bajaj Auto raises stake in KTM to ~48%, first product launch KTM Duke 200 cc receives strong response

Mar-13 Bajaj Auto reports lowest March volumes since FY10 on account of weak domestic motorcycle sales as scooter sales shares rise

Oct-13 Exceptionally strong Q2FY14 margin performance makes it stand head and shoulders above any domestic & global OEM

May-14 Bajaj Auto reports lowest overall market share drop in the 2-W space to below 15%

Mar-15 Bajaj Auto reports a market share of 18% in Q4FY15


Top 10 Shareholders Shareholding Pattern

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

1 Bajaj Group of Industries 31-Mar-17 0.47 135.7 44.42

2 Life Insurance Corporation of India 31-Mar-17 0.0539 15.6 1.05

3 Firodia Group of Industries 31-Mar-17 0.0348 10.1 -0.17

4 Norges Bank Investment Management (NBIM) 31-Mar-17 0.0138 4.0 0.00

5 Lazard Asset Management, L.L.C. 30-Jun-17 0.0137 4.0 0.00

6 Bajaj (Niraj) 31-Mar-17 0.0126 3.7 0.00

7 Bajaj (Rahulkumar) 31-Mar-17 0.0103 3.0 0.00

8 BlackRock Institutional Trust Company, N.A. 30-Jun-17 0.0087 2.5 0.02

9 The Vanguard Group, Inc. 30-Jun-17 0.0079 2.3 0.02

10 J.P. Morgan Asset Management (Hong Kong) Ltd. 31-May-17 0.0079 2.3 -0.01

(in %) Jun-16 Sep-16 Dec-16 Mar-17 Jun-17

Promoter 49.3 49.3 49.3 49.3 49.3

FII 17.1 18.1 18.0 17.8 17.8

DII 8.8 8.2 8.4 7.9 7.3

Others 24.8 24.4 24.3 25.0 25.6

Source: Reuters, ICICIdirect.com Research

Recent Activity

Investor name Value Shares Investor name Value Shares

Bajaj Group of Industries +1,921.85M +44.42M PineBridge Investments Asia Limited -41.06M -1.06M

Life Insurance Corporation of India +45.48M +1.05M Lyxor Asset Management -13.11M -0.30M

Bajaj (Sanjivnayan) +26.17M +0.63M Firodia Group of Industries -7.18M -0.17M

Caisse de Depot et Placement du Quebec +6.57M +0.17M Fidelity Management & Research Company -4.32M -0.10M

City of London Investment Management Co. Ltd. +4.90M +0.13M Tata Asset Management Limited -2.72M -0.06M

Buys Sells

Source: Reuters, ICICIdirect.com Research


.

Financial summary

Profit and loss statement | Crore

(Year-end March) FY16 FY17 FY18E FY19E

Total operating Income 22587 21767 23961 27749

Growth (%) 1.8 -3.6 10.1 15.8

Raw Material Expenses 15,056.9 14,624.2 16,575.3 18,964.2

Employee Expenses 917.1 997.1 1,088.7 1,289.4

Other expenses 1,847.6 1,745.4 1,911.5 2,189.7

Total Operating Expenditure 17,804.6 17,344.3 19,551.9 22,415.9

EBITDA 4781.9 4422.4 4408.9 5333.2

Growth (%) 8.1 -7.5 -0.3 21.0

Depreciation 307.2 307.3 311.5 333.0

Interest 1.1 1.4 1.2 1.2

Other Income 1,073.6 1,222.0 1,551.4 1,811.2

PBT 5,547.3 5,335.6 5,647.6 6,810.2

Total Tax 1,617.7 1,508.1 1,663.2 2,043.1

PAT 3929.7 3827.6 3951.4 4767.1

Growth (%) 39.7 -2.6 3.2 20.6

EPS (|) 135.8 132.3 136.6 164.7


Cash flow statement | Crore


Profit after Tax 3,929.7 3,827.6 3,951.4 4,767.1

Add: Depreciation 307.2 307.3 311.5 333.0

(Inc)/dec in Current Assets 593.8 -339.9 -290.9 -214.4

Inc/(dec) in CL and Provisions -1,569.3 91.4 224.9 348.5

CF from operating activities 3135.9 4070.2 3970.2 5329.6

(Inc)/dec in Investments 4,480.6 -4,730.1 -2,000.0 -2,000.0

(Inc)/dec in Fixed Assets -212.9 -251.4 -250.0 -250.0

Others -5,719.6 492.0 616.3 -804.9

CF from investing activities -1451.8 -4489.5 -1633.7 -3054.9

Inc/(dec) in loan funds 6.1 2.0 0.0 0.0

Dividend paid & dividend tax -3,464.6 -174.1 -2,066.1 -2,238.3

Inc/(dec) in Sec. premium 0.0 0.0 0.0 0.0

CF from financing activities -1410.7 -140.6 -2067.3 -2239.5

Net Cash flow 273.4 -559.9 269.2 35.2

Opening Cash 586.2 859.5 299.6 568.8

Closing Cash 859.5 299.6 568.8 604.0


Balance sheet | Crore


Liabilities

Equity Capital 289.4 289.4 289.4 289.4

Reserve and Surplus 12,977.2 16,744.8 18,630.1 21,158.9

Total Shareholders funds 13,266.6 17,034.1 18,919.5 21,448.3

Total Debt 117.9 119.9 119.9 119.9

Deferred Tax Liability 202.8 313.6 313.6 313.6

Other non-current liabilities 29.8 127.2 127.2 127.2

Total Liabilities 13705.5 17722.2 19558.3 22087.0

Assets

Gross Block 4,361.4 4,457.8 4,707.8 4,957.8

Less: Acc Depreciation 2,364.6 2,500.7 2,812.2 3,145.1

Net Block 1,996.8 1,957.1 1,895.6 1,812.7

Capital WIP 26.9 10.6 10.6 10.6

Total Fixed Assets 2,023.7 1,967.8 1,906.3 1,823.3

Investments 10,260.6 14,731.5 16,731.5 19,531.5

Inventory 719.1 689.7 759.2 879.2

Debtors 717.9 902.6 993.6 1,140.4

Loans and Advances 7.1 6.2 6.8 7.9

Other current assets 216.3 295.6 212.3 417.1

Cash 859.5 299.6 568.8 604.0

Total Current Assets 3,399.9 3,185.4 3,745.5 3,995.0

Creditors 2,027.0 2,116.9 2,330.3 2,660.9

Provisions 113.0 114.5 126.0 143.9

Other current liabilities 0 477.1 604.3 546.2

Total Current Liabilities 2,781.0 3,054.9 3,051.9 3,494.5

Net Current Assets -751.1 618.9 130.5 693.6

Deferred Tax asset 0.0 0.0 0.0 0.0

Application of Funds 13705.5 17722.2 19558.3 22087.0


Key ratios


Per share data (|)

EPS 135.8 132.3 136.6 164.7

Cash EPS 146.4 142.9 147.3 176.2

BV 458.5 588.7 653.8 741.2

DPS 119.7 6.0 71.4 77.4

Cash Per Share 29.7 10.4 19.7 20.9

Operating Ratios (%)

EBITDA Margin 21.2 20.3 18.4 19.2

PBT / Net sales 19.8 18.9 17.1 18.0

PAT Margin 14.4 15.2 15.7 16.0

Inventory days 11.6 11.6 11.6 11.6

Debtor days 11.6 15.1 15.1 15.0

Creditor days 32.8 35.5 35.5 35.0

Return Ratios (%)

RoE 40.7 30.3 29.0 30.9

RoCE 29.6 22.5 21.1 22.2

RoIC 40.5 38.3 38.3 44.7

Valuation Ratios (x)

Core P/E 20.7 21.3 20.4 17.1

EV / EBITDA 16.6 17.0 16.5 13.3

EV / Net Sales 3.5 3.5 3.0 2.6

Market Cap / Sales 3.6 3.7 3.4 2.9

Price to Book Value 6.1 4.8 4.3 3.8

Solvency Ratios

Current Ratio 1.0 1.0 1.0 1.0

Quick Ratio 0.7 0.8 0.8 0.7



ICICIdirect.com coverage universe (Auto & Auto Ancillary)

CMP M Cap

(|) TP(|) Rating (| Cr) FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E

Amara Raja (AMARAJ) 845 930 Hold 14439 28.0 33.2 40.4 30.2 25.4 20.9 17.3 14.9 12.4 25.8 27.4 28.0 18.5 19.3 19.6

Apollo Tyre (APOTYR) 253 280 Buy 12776 21.7 21.8 19.7 11.7 11.6 12.9 6.5 7.9 8.6 19.9 13.6 11.0 17.1 15.0 12.2

Ashok Leyland (ASHLEY) 104 105 Buy 29239 2.5 4.3 4.7 40.8 24.1 21.9 12.3 11.6 10.8 22.8 21.2 21.6 17.4 21.2 16.5

Bajaj Auto (BAAUTO) 2825 2780 Hold 81748 132.3 136.6 164.7 21.3 20.6 17.1 17.0 16.5 13.3 30.3 29.0 30.9 22.5 21.1 22.2

Balkrishna Ind. (BALIND) 1620 1670 Buy 15657 58.7 74.0 81.4 25.1 19.9 18.1 13.9 12.8 10.6 20.4 23.0 24.0 20.3 23.0 24.0

Bharat Forge (BHAFOR) 1130 1300 Buy 26324 29.9 40.1 47.6 37.7 28.1 23.7 20.8 13.9 11.7 16.1 22.2 26.9 14.6 17.9 21.2

Bosch (MICO) 24031 26400 Buy 75458 410.2 570.5 564.0 57.7 41.5 42.0 37.7 35.8 30.1 15.1 16.9 16.4 22.5 24.8 24.1

Eicher Motors (EICMOT) 28866 30500 Buy 77966 655.9 833.2 1019.4 44.0 34.6 28.3 24.8 18.4 14.7 39.2 41.1 39.1 36.0 33.6 30.9

Exide Industries (EXIIND) 215 270 Buy 18258 7.3 8.2 9.4 29.3 26.3 22.8 19.0 17.7 14.4 19.4 18.7 20.4 14.0 14.1 14.8

Hero Mototcorp (HERHON) 3694 3975 Buy 73773 156.9 169.1 199.6 23.6 21.8 18.5 15.2 14.3 11.9 53.6 43.5 49.0 39.4 33.0 36.3

JK Tyre & Ind (JKIND) 161 215 Buy 3640 21.0 16.6 18.1 7.6 9.7 8.8 5.8 8.1 6.5 20.1 11.2 11.8 29.1 15.8 18.2

Mahindra CIE (MAHAUT) 248 280 Buy 8022 4.5 10.3 13.5 55.6 24.0 18.3 16.8 11.5 9.1 5.4 10.8 12.6 6.9 11.1 13.2

Maruti Suzuki (MARUTI) 7546 7200 Buy 228051 151.3 242.9 280.1 49.9 31.1 26.9 21.4 18.6 15.8 23.9 26.3 26.5 16.9 20.3 20.4

Motherson (MOTSUM) 326 450 Hold 45749 11.1 16.7 22.9 29.4 19.5 14.2 15.1 10.5 7.8 16.0 22.2 28.4 19.6 23.1 25.0

Tata Motors (TELCO) 467 560 Buy 141031 22.3 42.9 52.6 21.5 11.2 9.1 6.6 4.8 4.2 11.6 16.8 17.1 15.0 22.0 21.1

Wabco India (WABTVS) 5390 6610 Buy 10241 107.7 112.5 144.7 50.0 47.9 37.2 35.9 31.8 25.5 19.4 16.9 18.2 25.5 23.6 25.2

Sector / Company

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



RATING RATIONALE

ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns

ratings to its stocks according to their notional target price vs. current market price and then categorises them

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

target price is defined as the analysts' valuation for a stock.

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

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

Hold: Up to +/-10%;

Sell: -10% or more;

Pankaj Pandey Head – Research [email protected]

ICICIdirect.com Research Desk,

ICICI Securities Limited,

1st

Floor, Akruti Trade Centre,

Road No. 7, MIDC,

Andheri (East)

Mumbai – 400 093

[email protected]


ANALYST CERTIFICATION

We /I, Nishit Zota, MBA & Vidrum Mehta, MBA Research Analyst, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately

reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this

report.

Terms & conditions and other disclosures:

ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities

Limited is a Sebi registered Research Analyst with Sebi Registration Number – INH000000990. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India’s largest private sector bank and has

its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which

are available on www.icicibank.com.

ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking

and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts

and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.

The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and

meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without

prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current.

Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended

temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this

company, or in certain other circumstances.

This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This

report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial

instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their

receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific

circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment

objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate

the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any

loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the

risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to

change without notice.

ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment

in the past twelve months.

ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in

respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.

ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned

in the report in the past twelve months.

ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its associates or its analysts did not receive any

compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts

and their relatives have any material conflict of interest at the time of publication of this report.

It is confirmed that Nishit Zota, MBA & Vidrum Mehta, MBA Research Analyst, of this report have not received any compensation from the companies mentioned in the report in the preceding twelve

months.

Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.

ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month

preceding the publication of the research report.

Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject

company/companies mentioned in this report.

It is confirmed that Nishit Zota, MBA & Vidrum Mehta, MBA Research Analyst, do not serve as an officer, director or employee of the companies mentioned in the report.

ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.

Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.

We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.

This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution,

publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities

described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and

to observe such restriction.

Date post:	01-Aug-2020
Category:	Documents
Upload:	others
View:	9 times
Download:	0 times

Bajaj Auto (BAAUTO) | 2815content.icicidirect.com/mailimages/IDirect_BajajAuto_Q1FY18.pdf · Bajaj...

Documents