Ashok Leyland, 1Q FY 2014

7/28/2019 Ashok Leyland, 1Q FY 2014

1/13

Please refer to important disclosures at the end of this report 1

Quarterly highlights (Standalone)Y/E March (` cr) 1QFY14 1QFY13 % chg (yoy) 4QFY13 % chg (qoq)Net Sales 2,364 3,027 (21.9) 3,728 (36.6)EBITDA 23 241 (90.3) 198 (88.3)

EBITDA margin (%) 1.0 8.0 (697)bp 5.3 (433)bp

Adj. PAT (135) 67 - 16 -Source: Company, Angel Research

Ashok Leyland (AL) reported an extremely disappointing performance for1QFY2014 as its EBITDA margins collapsed to 1% (a severe decline of 697bp yoyand 433bp qoq) which led to a bottom-line loss of `135cr. The margincontraction was on account of a significant decline in volumes (down 21.3% yoyand 37.2% qoq) and also due to higher discounts and an inferior product-mix(absence of revenue from defense supplies). Additionally, a higher interest cost(up 20.8% yoy and 21.6% qoq) due to higher working capital requirements alsoimpacted the bottom-line. Given the sluggish demand environment, we revise ourvolume estimates marginally downwards, leading to a 3.2%/3.6% downwardrevision in revenues for FY2014/15. We also lower our EBITDA margin estimatesby 146bp/40bp for FY2014/15 to account for continued margin pressure.Consequently, we revise downwards our earnings estimates by 55.1%/10.4% forFY2014/15. Notwithstanding the sharp correction of ~30% in the stock price overthe last one month, we believe that the company would benefit immensely with arevival in the commercial vehicle cycle which we expect to start gradually from2HFY2014. We thus maintain our Buy rating on the stock.1QFY2014 results surprise negatively: ALs top-line registered a steep decline of21.9% yoy (36.6% qoq) to `2,364cr which is broadly in-line with our estimates.The top-line declined primarily on account of a 21.3% yoy (37.3% qoq) decline involumes, following a slowdown in industrial activity. At the operating level,EBITDA margins registered a sharp contraction of 697bp yoy (433bp qoq) to ameager 1% as against our estimates of 4.5%, largely on account of higherdiscounts, lower utilization levels and also due to an inferior product-mix.Consequently, other expenditure and staff costs as a percentage of sales surged170bp yoy (120bp qoq) and 210bp yoy (330bp qoq) respectively. Additionally,raw-material expenditure as a percentage of sales too increased 320bp yoy (flatqoq) to 75.5% although in value terms it declined 22.4% yoy (36.8% qoq).

Outlook and valuation: At `16, AL is trading at 8.6x FY2015E earnings. Wemaintain our Buy rating on the stock with a target price of `22.

Key financials (Standalone)Y/E March (` cr) FY2012 FY2013E FY2014E FY2015ENet Sales 12,904 12,481 13,450 15,853% chg 13.0 (3.3) 7.8 17.9

Adjusted net Profit 562 163 102 496% chg (10.7) (71.0) (37.6) 387.5

EBITDA (%) 8.5 6.7 6.5 8.4

EPS (`) 2.1 0.6 0.4 1.9P/E (x) 7.6 26.3 42.1 8.6

P/BV (x) 1.5 1.4 1.4 1.3

RoE (%) 13.8 3.8 2.3 11.0

RoCE (%) 10.6 5.7 5.5 10.4

EV/Sales (x) 0.4 0.4 0.4 0.3

EV/EBITDA (x) 4.7 6.5 6.5 4.0

Source: Company, Angel Research

BUYCMP `16

Target Price `22

Investment Period 12 Months

Stock Info

Sector

Market Cap (`cr)

Net Debt (`cr)

Beta

52 Week High / Low

Avg. Daily Volume

Face Value (`)

BSE Sensex

Nifty

Reuters Code

Bloomberg Code

Shareholding Pattern (%)

Promoters 38.6

MF / Banks / Indian Fls 19.3

FII / NRIs / OCBs 31.5Indian Public / Others 10.6

Abs. (%) 3m 1yr 3yr

Sensex 6.5 16.6 11.1

Ashok Leyland (27.2) (32.9) (54.4)

AL@IN

Automobile

1.0

19,949

5,973

ASOK.BO

4,284

0.9

29/16

889,393

3,491

Yaresh Kothari022-3935 7800 Ext: 6844

[email protected]

Ashok LeylandPerformance Highlights

1QFY2014 Result Update | Automobile

July 17, 2013


2/13

Ashok Leyland | 1QFY2014 Result Update

July 17, 2013 2

Exhibit 1:Quarterly financial performance (Standalone)Y/E March (` cr) 1QFY14 1QFY13 % chg (yoy) 4QFY13 % chg (qoq) FY2013 FY2012 % chg (yoy)Net Sales 2,364 3,027 (21.9) 3,728 (36.6) 12,481 12,904 (3.3)Consumption of RM 1,501 1,935 (22.4) 2,378 (36.8) 7,811 8,954 (12.8)

(% of sales) 63.5 63.9 63.8 62.6 69.4

Staff costs 258 268 (3.6) 282 (8.5) 1,076 1,020 5.4

(% of sales) 10.9 8.8 7.6 8.6 7.9

Purchase of traded goods 282 253 11.5 447 (36.9) 1,312 507 158.5

(% of sales) 11.9 8.4 12.0 10.5 3.9

Other expenses 299 330 (9.4) 423 (29.5) 1,406 1,166 20.6

(% of sales) 12.6 10.9 11.4 11.3 9.0

Total Expenditure 2,341 2,786 (16.0) 3,530 (33.7) 11,605 11,648 (0.4)Operating Profit 23 241 (90.3) 198 (88.3) 876 1,256 (30.2)OPM (%) 1.0 8.0 5.3 7.0 9.7

Interest 101 83 20.8 83 21.6 377 255 47.7

Depreciation 95 89 6.6 100 (4.8) 381 353 7.9Other income 12 13 (4.7) 12 6.4 62 40 54.5

PBT (excl. Extr. Items) (160) 81 - 27 - 181 688 (73.7)Extr. income/expense 7 0 - (134) - (290) (2) -

PBT (incl. Extr. Items) (167) 81 - 161 - 471 690 (31.8)(% of sales) (7.1) 2.7 4.3 3.8 5.3

Provision for taxation (25) 14 - 11 - 37 124 (70.2)

(% of PBT) 15.0 17.3 7.1 7.9 18.0

Reported PAT (142) 67 - 150 - 434 566 (23.4)Adj PAT (135) 67 - 16 - 144 564 (74.5)

Adj. PATM (6.0) 2.2 4.0 3.5 4.4

Equity capital (cr) 266 266 266 266 266

Reported EPS (`) (0.5) 0.3 - 0.1 - 0.5 2.1 (74.5)Source: Company, Angel Research

Exhibit 2:1QFY2014 Actual vs Angel estimatesY/E March (` cr) Actual Estimates Variation (%)Net Sales 2,364 2,432 (2.8)EBITDA 23 110 (78.9)

EBITDA margin (%) 1.0 4.5 (355)bp

Adj. PAT (135) (74) -Source: Company, Angel Research

Exhibit 3:Quarterly volume performance(units) 1QFY14 1QFY13 % chg (yoy) 4QFY13 % chg (qoq) FY2013 FY2012 % chg (yoy)MHCV passenger 5,878 7,035 (16.4) 6,909 (14.9) 24,285 27,108 (10.4)

MHCV goods 9,019 13,302 (32.2) 16,646 (45.8) 55,503 67,425 (17.7)

Total volume (ex. Dost) 14,897 20,337 (26.7) 23,555 (36.8) 79,788 94,533 (15.6)Dost 6,824 7,248 (5.8) 11,024 (38.1) 34,918 7,593 359.9

Total volume (incl. Dost) 21,721 27,585 (21.3) 34,579 (37.2) 114,706 102,126 12.3Exports (inc. above ) 2,334 3,003 (22.3) 2,211 5.6 8,999 12,954 (30.5)



3/13


July 17, 2013 3

Top-line broadly in-line with estimates: ALs top-line for the quarter registered asteep decline of 21.9% yoy (36.6% qoq) to `2,364cr which was broadly in-line with

our estimates. The top-line declined primarily on account of a 21.3% yoy (37.3%

qoq) decline in volumes, following a slowdown in industrial activity. While mediumand heavy commercial vehicle (MHCV) sales declined by 26.7% yoy (36.8% qoq);

Dost too registered a drop in sales by 5.8% yoy (38.1% qoq).

Exhibit 4:Volumes continue to slide downwards


Exhibit 5:Net average realization down 0.8% yoy


Exhibit 6:Net sales down sharply by 21.9% yoy


Exhibit 7:Domestic market share trend

Source: Company, SIAM, Angel Research

EBITDA margin pressure continues: At the operating level, EBITDA marginsregistered a sharp contraction of 697bp yoy (433bp qoq) to a meager 1% as

against our estimates of 4.5%, largely on account of higher discounts, an inferior

product-mix (absence of revenue from defense supplies) and lower utilization

levels. Consequently, other expenditure and staff cost as a percentage of sales

surged 170bp (120bp qoq) and 210bp yoy (330bp qoq) respectively. Further,

raw-material expenditure as a percentage of sales too increased 320bp yoy (flat

qoq) to 75.5% although in value terms it declined 22.4% yoy (36.8% qoq). As a

result, the operating profit declined substantially by 90.3% yoy (88.3% qoq) to `23cr.

According to the Management, a foreign exchange gain of `40cr (included in

other expenditure), control over employee expenses due to lesser working days,and a salary cut of 5% across the executive level, enabled the company to remain

EBITDA positive. Additionally, the Management is targeting to bring down the

breakeven level from ~6,000units/ month currently to ~5,000units/ month.

19,2

77

23,6

59

23,2

15

35,6

88

27,5

85

29,8

40

22,6

61

34,6

27

21,7

21

(9.9)(3.8)

25.920.2

43.1

26.1

(2.4) (3.0)

(21.3)

(30.0)

(20.0)(10.0)

0.0

10.0

20.0

30.0

40.0

50.0

0

5,00010,000

15,000

20,000

25,000

30,000

35,000

40,000

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

(%)(units) Total volumes yoy chg (%)

1,3

03,

468

1,3

16,

545

1,2

50,

684

1,2

13,

161

1,0

97,

296

1,1

04,

573

1,0

61,

899

1,0

76,

750

1,0

88,

261

18.8 19.3

3.5

(6.4)(15.8)

(16.1) (15.1)

(11.2)

(0.8)

(20.0)

(15.0)

(10.0)

(5.0)

0.0

5.0

10.0

15.0

20.0

25.0

0

200,000400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

(%)(`) Net average realisation yoy chg (%)

2,5

13

3,1

15

2,9

03

4,3

30

3,0

27

3,2

96

2,4

06

3,7

28

2,3

64

7.0

14.8

30.4

12.5

20.5

5.8

(17.1)(13.9)

(21.9)

(30.0)

(20.0)

(10.0)

0.0

10.0

20.0

30.0

40.0

0

500

1,000

1,500

2,000

2,500

3,000

3,5004,000

4,500

5,000

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

(%)(`cr) Net sales yoy chg (%)

39.7 39.643.8 42.9

39.1

35.2

43.3 43.4

36.8

19.221.1

17.7

22.3 22.7 23.5

19.0

27.8

19.2

22.2 23.7 21.0

25.5 26.0 25.422.6

30.6

23.2

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.040.0

45.0

50.0

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

(%) MHCV passenger MHCV goods Total MHCV


4/13


July 17, 2013 4

Exhibit 8: EBITDA margin down to a meagre 1%


Exhibit 9:Adjusted bottom-line loss of`135cr


Bottom-line surprises negatively: Led by a disappointing operating performanceand a significant increase in interest expense, AL reported a net loss of `135cr as

against our expectations of a loss of `74cr. The Management has stated that the

debt levels have increased from `43bn as of March 2013 to `55bn currently. The

increase has been due to higher working capital requirement of `20bn currently.

9.7 10.6 7.210.9 8.0 10.1

4.3 5.31.0

72.9 74.7 75.3 75.4 72.3 74.5 72.875.8

75.5

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

(%) EBITDA margin Raw material cost/sales

86

154

67 2

57

67 1

43

(81)

16

(135)

3.4

4.9

2.3

5.9

2.2

4.3

(3.4)

0.4

(5.7)(8.0)

(6.0)

(4.0)

(2.0)

0.0

2.0

4.0

6.0

8.0

(200)

(150)

(100)

(50)

0

50

100

150200

250

300

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

(%)(`cr) Net profit Net profit margin


5/13


July 17, 2013 5

Conference call Key highlights

According to the Management, MHCV demand continues to remain subdued;however it is of the opinion that the worst phase for the industry is now behind.

It expects demand to recover from 2HFY2014 following increased focus from

the government in getting the infrastructure projects started. Further, the

company also expects JNNURM orders to begin soon along with pick-up in

orders from the defense sector.

The company has lost market share in 1QFY2014 due to shift from greaterthan 16T segment (where it has strong presence) to 7.5-12T segment (where

its presence is limited). In the heavy commercial vehicle space, AL has lost

market share by ~300bp, primarily due to decline in the South region. AL has

greater than 50% market share in South India.

According to the Management, while the competitors have resorted to heavydiscounting by offering discounts as high as ~`250,000/ vehicle; the averagelevels of discounts for the company stood at ~`145,000/ vehicle. Additionally,

the Management stated that competitors with finance arms are offering 100%

finance against driving license and zero collaterals.

On the exports front, the demand continues to remain weak; the companywitnessed a sharp drop in volumes to Sri Lanka (340 units exported in

1QFY2014 as against 1,294 units in 1QFY2013). However, the Management

remains optimistic about demand improving in other key geographies like the

Middle East, Africa and Bangladesh.

The company expects to incur capital expenditure of `200cr in FY2014 andanother `200cr in investments in other businesses (including John Deere and

Nissan joint venture).

The company has reduced its working capital by`500cr yoy and is targetingreduction of another `500cr in FY2014. However, the working capital

requirement increased sequentially by ~`1,000cr due to increase in

inventories from 6,250 vehicles to 7,200 vehicles.

The Management is targeting to raise `500cr through monetization of assetsin FY2014.

The power solution business of the company reported a sharp drop inrevenues to `84cr as against `110cr in 1QFY2013, as good monsoons have

impacted demand. However, the company expects a revival in demand over

the next 2-3 months. Spare parts revenue for the quarter grew by 5% yoy and

stood at `210cr.

The company reported nil revenues in the defense segment in 1QF2014 dueto lack of orders from the government. However, AL is hopeful of getting

orders in subsequent months, which would aid revenues and operating

margins.

The company has received approval from the Court to merge AshleyInvestments, Ashley Holdings and Ashok Leyland Project Services into a 100%

subsidiary. Consolidated financials will be reported by FY2014 end.


6/13


July 17, 2013 6

Investment arguments

Volume growth to revive with easing of interest rates and recently launchedDost: MHCV demand has witnessed a substantial slowdown in recent timesdue to high interest rates and slowdown in industrial activity; however, we

believe MHCV demand is near its trough. With reversal in interest rates in

CY2013, we expect a pick-up in industrial activity, leading to a gradual revival

in MHCV sales in FY2014. We expect ALs MHCV volumes to register an ~5%

volume CAGR over FY2013-15E. Further, the recently introduced LCV - Dost

[through JV with Nissan]) has been received well by the market and AL expects

to ramp-up its production going ahead. We expect the company to clock sales

of 40,000 units (~15% yoy growth) in FY2014.

EBITDA margin to improve gradually over the next two years: Whileraw-material prices have stabilized and AL expects to benefit from higher

production at the Pantnagar facility (total profitability estimated to be higher

due to cost savings of ~`60,000/vehicle), the companys product-mix has

changed due to increasing proportion of the lower margin LCV - Dost

(contribution to total volumes increased from ~7% in FY2012 to ~30% in

FY2013). AL has indicated that it earns marketing/distribution fees of

`15,000-`18,000/vehicle on Dost sales and has also guided that the margins

should be structurally lower by ~200bp due to Dost sales. While the EBITDA

margins have declined by 270bp in FY2013 led by higher share of Dost and

higher levels of discounting, we expect margins to improve ~200bp over the

next two years, primarily on account of revival in MHCV sales leading to

operating leverage benefits and also due to lower levels of discounts.

Outlook and valuation

Given the sluggish demand environment, we revise our volume estimates

marginally downwards leading to a 3.2%/3.6% downward revision in revenue. We

also lower our EBITDA margin estimates by 146bp/40bp for FY2014/15 to

account for continued margin pressure. Consequently, our earnings estimates are

revised downwards by 55.1%/10.4% for FY2014/15.

Exhibit 10:Change in estimatesY/E March Earlier Estimates Revised Estimates % chg

FY2014E FY2015E FY2014E FY2015E FY2014E FY2015ENet Sales (` cr) 13,901 16,446 13,450 15,853 (3.2) (3.6)OPM (%) 8.0 8.8 6.5 8.4 (146)bp (40)bp

EPS (`) 0.9 2.1 0.4 1.9 (55.1) (10.4)Source: Company, Angel Research

Notwithstanding the sharp correction of ~30% in the stock price over the last one

month, we believe that the company would benefit immensely with a revival in the

commercial vehicle cycle which we expect to start gradually from 2HFY2014. At

`16, AL is trading at 8.6x FY2015E earnings. We maintain our Buy rating on thestock with a target price of `22.


7/13


July 17, 2013 7

Exhibit 11:Key assumptions(units) FY2010 FY2011 FY2012 FY2013 FY2014E FY2015EMHCV passenger 18,481 25,226 26,312 23,472 24,646 26,617

MHCV goods 44,345 68,007 67,425 55,442 54,888 60,376LCV (ex. Dost) 1,100 873 660 780 1,000 1,080

Dost - - 7,593 34,918 40,000 52,000

Total volume (units) 63,926 94,106 101,990 114,612 120,533 140,074% yoy chg 17.4 47.2 8.4 12.4 5.2 16.2Domestic 57,947 83,800 89,138 105,711 110,533 128,874

Exports 5,979 10,306 12,852 8,901 10,000 11,200


Exhibit 12:Angel vs consensus forecastAngel estimates Consensus Variation (%)FY2014E FY2015E FY2014E FY2015E FY2014E FY2015E

Total op. income (` cr) 13,450 15,853 13,313 15,694 1.0 1.0EPS (`) 0.4 1.9 0.6 1.9 (36.3) 0.8

Source: Bloomberg, Angel Research

Exhibit 13:One-year forward EV/EBITDA band


Exhibit 14:One-year forward EV/EBITDA chart


Exhibit 15:One-year forward EV/Sales band


Exhibit 16:One-year forward EV/Sales chart


0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Apr-03

Feb-0

4

Dec-0

4

Oct-05

Aug-0

6

Jun-0

7

May-0

8

Mar-09

Jan-1

0

Nov-1

0

Sep-1

1

Aug-1

2

Jun-1

3

(`cr) EV (` cr) 2.0 4.0 6.0 8.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

Aug-0

5

Mar-06

Nov-0

6

Jul-07

Mar-08

Nov-0

8

Jul-09

Mar-10

Nov-1

0

Jul-11

Feb-1

2

Oct-12

Jun-1

3

(x) One-yr forward EV/EBITDA Five-yr average EV/EBITDA

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

Apr-03

Feb-0

4

Dec-0

4

Oct-05

Aug-0

6

Jun-0

7

May-0

8

Mar-09

Jan-1

0

Nov-1

0

Sep-1

1

Aug-1

2

Jun-1

3

(`cr) EV (` cr) 0.2 0.5 0.8 1.1

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

Aug-0

5

Mar-06

Nov-0

6

Jul-07

Mar-08

Nov-0

8

Jul-09

Mar-10

Nov-1

0

Jul-11

Feb-1

2

Oct-12

Jun-1

3

(x) One-yr f orward EV/Sale s F ive -yr ave rage EV/Sale s


8/13


July 17, 2013 8

Exhibit 17:Automobile - Recommendation summaryCompany Reco. CMP(`) Tgt. price(`) Upside(%)

P/E (x) EV/EBITDA (x) RoE (%) FY13-15E EPSFY14E FY15E FY14E FY15E FY14E FY15E CAGR (%)

Ashok Leyland Buy 16 22 38.9 42.1 8.6 6.5 4.0 2.3 11.0 74.4Bajaj Auto Accumulate 1,910 2,096 9.7 16.1 13.7 11.1 8.9 40.4 37.7 15.3

Hero MotoCorp Accumulate 1,687 1,820 7.8 15.3 12.1 7.9 7.1 39.8 40.7 14.9

Maruti Suzuki Buy 1,422 1,822 28.1 13.3 11.7 6.4 5.5 16.1 15.8 23.8

Mahindra &Mahindra

Buy 893 1,103 23.6 14.1 12.5 7.5 6.2 23.3 21.9 14.1

Tata Motors Buy 286 347 21.4 7.9 6.9 3.9 3.2 24.6 23.2 13.8

TVS Motor Accumulate 32 35 9.8 6.4 5.5 2.1 1.5 18.1 18.5 15.3


Company background

Ashok Leyland (AL) is the country's second largest CV manufacturer. The company

has a strong presence in the MHCV segment, with a domestic market share of

~26% as of FY2013. AL enjoys a dominant position in southern India, with an

~50% market share, and is currently focusing on expanding its presence in

northern India by increasing its touch points in the region. The company, through

its JV with Nissan Motor and John Deere, intends to expand its product portfolio

and has recently launched Dost to tap the growing LCV demand, and a backhoeloaderused in the construction industry.


9/13


July 17, 2013 9

Profit and loss statement (Standalone)

Y/E March (` cr) FY2010 FY2011 FY2012 FY2013 FY2014E FY2015ETotal operating income 7,407 11,417 12,904 12,481 13,450 15,853% chg 21.5 54.1 13.0 (3.3) 7.8 17.9Total expenditure 6,648 10,203 11,807 11,650 12,570 14,513Net raw material costs 5,212 8,175 9,464 9,123 9,818 11,414

Other mfg costs 135 235 276 299 330 357

Employee expenses 667 970 1,036 1,087 1,210 1,427

Other 634 823 1,030 1,140 1,212 1,316

EBITDA 760 1,214 1,098 831 880 1,340% chg 66.6 59.8 (9.6) (24.2) 5.8 52.3

(% of total op. income) 10.3 10.6 8.5 6.7 6.5 8.4

Depreciation & amortization 204 267 353 381 394 406

EBIT 555 946 745 451 486 934% chg 100.1 70.4 (21.3) (39.5) 7.7 92.3


Interest and other charges 102 189 255 377 430 403

Other income 91 44 201 397 69 74

(% of PBT) 18.1 5.6 29.2 198.4 55.3 12.2

Recurring PBT 545 802 690 471 124 605% chg 161.3 47.2 (13.9) (31.8) (73.6) 387.5

Extraordinary income/(exp.) 40 1 4 271 0 0

PBT 505 800 686 200 124 605Tax 121 171 124 37 22 109

(% of PBT) 24.0 21.3 18.1 18.5 18.0 18.0

PAT (reported) 424 631 566 434 102 496ADJ. PAT 384 630 562 163 102 496% chg 114.6 64.2 (10.7) (71.0) (37.6) 387.5


Basic EPS (`) 1.6 2.4 2.1 1.6 0.4 1.9Adj. EPS (`) 1.4 2.4 2.1 0.6 0.4 1.9% chg 114.6 64.2 (10.7) (71.0) (37.6) 387.5


10/13


July 17, 2013 10

Balance sheet statement (Standalone)

Y/E March (` cr) FY2010 FY2011 FY2012 FY2013 FY2014E FY2015ESOURCES OF FUNDSEquity share capital 133 133 266 266 266 266Reserves & surplus 3,536 3,830 3,942 4,189 4,104 4,413

Shareholders Funds 3,669 3,963 4,208 4,455 4,370 4,679Total loans 2,280 2,348 2,395 3,505 4,000 3,750

Deferred tax liability 385 444 490 527 527 527

Other long term liabilities - - 4 2 2 2

Long term provisions - 78 77 79 79 79

Total Liabilities 6,334 6,833 7,174 8,568 8,978 9,037APPLICATION OF FUNDSGross block 6,019 6,692 7,256 7,991 8,269 8,512

Less: Acc. depreciation 1,769 2,058 2,343 2,709 3,103 3,509

Net Block 4,250 4,634 4,914 5,282 5,166 5,003Capital work-in-progress 561 358 548 689 662 681

Goodwill - - - - - -

Investments 326 1,230 1,534 2,338 2,514 2,530Long term loans and advances - 385 608 480 480 480

Other noncurrent assets - 3 7 12 12 12

Current assets 4,152 3,984 4,304 4,297 4,802 5,672Cash 519 180 33 14 84 175

Loans & advances 973 431 810 967 1,076 1,268

Other 2,660 3,373 3,461 3,315 3,642 4,229

Current liabilities 2,961 3,760 4,741 4,529 4,657 5,341

Net current assets 1,191 224 (438) (233) 145 331Misc. exp. not written off 5 - - - - -

Total Assets 6,334 6,833 7,174 8,568 8,978 9,037


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Cash flow statement (Standalone)

Y/E March (` cr) FY2010 FY2011 FY2012 FY2013 FY2014E FY2015EProfit before tax 545 802 690 471 124 605

Depreciation 204 267 353 381 394 406Change in working capital 264 (491) 22 (47) (303) (96)

Others 289 229 407 359

Other income (91) (44) (201) (397) (69) (74)

Direct taxes paid (121) (171) (124) (37) (22) (109)

Cash Flow from Operations 1,090 591 1,147 730 124 732(Inc.)/Dec. in fixed assets (643) (470) (755) (876) (250) (262)

(Inc.)/Dec. in investments (63) (904) (304) (803) (176) (17)

Other income 91 44 201 397 69 74

Cash Flow from Investing (614) (1,329) (859) (1,282) (358) (204)Issue of equity - - - (1) - -

Inc./(Dec.) in loans 322 68 47 1,110 495 (250)

Dividend paid (Incl. Tax) 156 233 309 187 187 187

Others (523) 97 (793) (761)

Cash Flow from Financing (45) 398 (436) 534 304 (437)Inc./(Dec.) in cash 430 (340) (148) (18) 70 90

Opening Cash balances 88 519 180 32 14 84Closing Cash balances 519 180 32 14 84 175


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Key ratios

Y/E March FY2010 FY2011 FY2012 FY2013 FY2014E FY2015EValuation Ratio (x)P/E (on FDEPS) 11.2 6.8 7.6 26.3 42.1 8.6P/CEPS 7.3 4.8 4.7 7.9 8.6 4.8

P/BV 1.8 1.6 1.5 1.4 1.4 1.3

Dividend yield (%) 4.7 6.2 6.2 3.7 3.7 3.7

EV/Sales 0.7 0.4 0.4 0.4 0.4 0.3

EV/EBITDA 7.5 4.3 4.7 6.5 6.5 4.0

EV / Total Assets 0.9 0.8 0.7 0.6 0.6 0.6

Per Share Data (`)EPS (Basic) 1.4 2.4 2.1 0.6 0.4 1.9

EPS (fully diluted) 1.4 2.4 2.1 0.6 0.4 1.9

Cash EPS 2.2 3.4 3.4 2.0 1.9 3.4

DPS 0.8 1.0 1.0 0.6 0.6 0.6

Book Value 8.8 10.0 10.9 11.9 11.6 12.7

Dupont AnalysisEBIT margin 7.5 8.3 5.8 3.6 3.6 5.9

Tax retention ratio 0.8 0.8 0.8 0.8 0.8 0.8

Asset turnover (x) 1.7 2.3 2.3 1.9 1.8 2.1

ROIC (Post-tax) 9.7 15.2 10.9 5.6 5.4 10.1

Cost of Debt (Post Tax) 3.7 6.4 8.8 10.4 9.4 8.5

Leverage (x) 0.4 0.3 0.2 0.2 0.3 0.3

Operating ROE 12.2 17.9 11.4 4.5 4.2 10.5

Returns (%)ROCE (Pre-tax) 9.2 14.4 10.6 5.7 5.5 10.4

Angel ROIC (Pre-tax) 12.4 17.7 12.8 6.2 6.4 12.3

ROE 10.7 16.5 13.8 3.8 2.3 11.0

Turnover ratios (x)Asset Turnover (Gross Block) 1.4 1.8 1.9 1.6 1.7 1.9

Inventory / Sales (days) 73 61 63 60 60 59

Receivables (days) 49 35 34 39 38 38

Payables (days) 110 95 108 123 118 115

WC cycle (ex-cash) (days) 40 11 (6) (10) (3) 2

Solvency ratios (x)Net debt to equity 0.4 0.2 0.2 0.3 0.3 0.2

Net debt to EBITDA 1.9 0.8 0.8 1.4 1.6 0.8

Interest Coverage (EBIT / Int.) 5.5 5.0 2.9 1.2 1.1 2.3


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Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com

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Disclosure of Interest Statement Ashok Leyland

1. Analyst ownership of the stock No

2. Angel and its Group companies ownership of the stock No

3. Angel and its Group companies' Directors ownership of the stock No

4. Broking relationship with company covered No

Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to -15%) Sell (< -15%)

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Documents

Ashok Leyland, 1Q FY 2014