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1QFY2014 Result Update | Automobile

July 17, 2013

Ashok Leyland
Performance Highlights
Quarterly highlights (Standalone)
Y/E March (` cr) Net Sales EBITDA EBITDA margin (%) Adj. PAT
Source: Company, Angel Research

BUY
CMP Target Price
Investment Period
1QFY13 3,027 241 8.0 67 % chg (yoy) (21.9) (90.3) (697)bp 4QFY13 3,728 198 5.3 16 % chg (qoq) (36.6) (88.3) (433)bp -

`16 `22
12 Months

1QFY14 2,364 23 1.0 (135)

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 Automobile 4,284 3,491 0.9 29/16 889,393 1.0 19,949 5,973 ASOK.BO AL@IN

Ashok Leyland (AL) reported an extremely disappointing performance for 1QFY2014 as its EBITDA margins collapsed to 1% (a severe decline of 697bp yoy and 433bp qoq) which led to a bottom-line loss of `135cr. The margin contraction was on account of a significant decline in volumes (down 21.3% yoy and 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 also impacted the bottom-line. Given the sluggish demand environment, we revise our volume estimates marginally downwards, leading to a 3.2%/3.6% downward revision in revenues for FY2014/15. We also lower our EBITDA margin estimates by 146bp/40bp for FY2014/15 to account for continued margin pressure. Consequently, we revise downwards our earnings estimates by 55.1%/10.4% for FY2014/15. 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. We thus maintain our Buy rating on the stock. 1QFY2014 results surprise negatively: ALs top-line registered a steep decline of 21.9% 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 in volumes, following a slowdown in industrial activity. At the operating level, EBITDA margins registered 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, lower utilization levels and also due to an inferior product-mix. Consequently, other expenditure and staff costs as a percentage of sales surged 170bp yoy (120bp qoq) and 210bp yoy (330bp qoq) respectively. Additionally, 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). Outlook and valuation: At `16, AL is trading at 8.6x FY2015E earnings. We maintain our Buy rating on the stock with a target price of `22.

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 38.6 19.3 31.5 10.6

Abs. (%) Sensex Ashok Leyland

3m 6.5

1yr 16.6

3yr 11.1

(27.2) (32.9) (54.4)

Key financials (Standalone)


Y/E March (` cr) Net Sales % chg Adjusted net Profit % chg EBITDA (%) EPS (`) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research

FY2012 12,904 13.0 562 (10.7) 8.5 2.1 7.6 1.5 13.8 10.6 0.4 4.7

FY2013E 12,481 (3.3) 163 (71.0) 6.7 0.6 26.3 1.4 3.8 5.7 0.4 6.5

FY2014E 13,450 7.8 102 (37.6) 6.5 0.4 42.1 1.4 2.3 5.5 0.4 6.5

FY2015E 15,853 17.9 496 387.5 8.4 1.9 8.6 1.3 11.0 10.4 0.3 4.0

Yaresh Kothari
022-3935 7800 Ext: 6844 yareshb.kothari@angelbroking.com

Please refer to important disclosures at the end of this report

Ashok Leyland | 1QFY2014 Result Update

Exhibit 1: Quarterly financial performance (Standalone)


Y/E March (` cr) Net Sales Consumption of RM (% of sales) Staff costs (% of sales) Purchase of traded goods (% of sales) Other expenses (% of sales) Total Expenditure Operating Profit OPM (%) Interest Depreciation Other income PBT (excl. Extr. Items) Extr. income/expense PBT (incl. Extr. Items) (% of sales) Provision for taxation (% of PBT) Reported PAT Adj PAT Adj. PATM Equity capital (cr) Reported EPS (`)
Source: Company, Angel Research

1QFY14 2,364 1,501 63.5 258 10.9 282 11.9 299 12.6 2,341 23 1.0 101 95 12 (160) 7 (167) (7.1) (25) 15.0 (142) (135) (6.0) 266 (0.5)

1QFY13 3,027 1,935 63.9 268 8.8 253 8.4 330 10.9 2,786 241 8.0 83 89 13 81 0 81 2.7 14 17.3 67 67 2.2 266 0.3

% chg (yoy) (21.9) (22.4) (3.6) 11.5 (9.4) (16.0) (90.3) 20.8 6.6 (4.7) -

4QFY13 3,728 2,378 63.8 282 7.6 447 12.0 423 11.4 3,530 198 5.3 83 100 12 27 (134) 161 4.3 11 7.1 150 16 4.0 266

% chg (qoq) (36.6) (36.8) (8.5) (36.9) (29.5) (33.7) (88.3) 21.6 (4.8) 6.4 -

FY2013 12,481 7,811 62.6 1,076 8.6 1,312 10.5 1,406 11.3 11,605 876 7.0 377 381 62 181 (290) 471 3.8 37 7.9 434 144 3.5 266

FY2012 12,904 8,954 69.4 1,020 7.9 507 3.9 1,166 9.0 11,648 1,256 9.7 255 353 40 688 (2) 690 5.3 124 18.0 566 564 4.4 266 2.1

% chg (yoy) (3.3) (12.8) 5.4 158.5 20.6 (0.4) (30.2) 47.7 7.9 54.5 (73.7) (31.8) (70.2) (23.4) (74.5)

0.1

0.5

(74.5)

Exhibit 2: 1QFY2014 Actual vs Angel estimates


Y/E March (` cr) Net Sales EBITDA EBITDA margin (%) Adj. PAT
Source: Company, Angel Research

Actual 2,364 23 1.0 (135)

Estimates 2,432 110 4.5 (74)

Variation (%) (2.8) (78.9) (355)bp -

Exhibit 3: Quarterly volume performance


(units) MHCV passenger MHCV goods Total volume (ex. Dost) Dost Total volume (incl. Dost) Exports (inc. above )
Source: Company, Angel Research

1QFY14 5,878 9,019 14,897 6,824 21,721 2,334

1QFY13 7,035 13,302 20,337 7,248 27,585 3,003

% chg (yoy) (16.4) (32.2) (26.7) (5.8) (21.3) (22.3)

4QFY13 6,909 16,646 23,555 11,024 34,579 2,211

% chg (qoq) (14.9) (45.8) (36.8) (38.1) (37.2) 5.6

FY2013 24,285 55,503 79,788 34,918 114,706 8,999

FY2012 27,108 67,425 94,533 7,593 102,126 12,954

% chg (yoy) (10.4) (17.7) (15.6) 359.9 12.3 (30.5)

July 17, 2013

Ashok Leyland | 1QFY2014 Result Update

Top-line broadly in-line with estimates: ALs top-line for the quarter registered a steep 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 medium and 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


(units) 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0
(9.9) (3.8) (2.4) (3.0) 25.9

Exhibit 5: Net average realization down 0.8% yoy


(%) 50.0 40.0 30.0 20.0 10.0 0.0 (10.0) (20.0) (30.0) (`) 1,400,000 1,200,000 1,000,000 800,000
3.5 (16.1) (15.1) (6.4) (11.2) 18.8

Total volumes
43.1 26.1

yoy chg (%)

Net average realisation


19.3

yoy chg (%)

(%) 25.0 20.0 15.0 10.0 5.0 0.0

(0.8)

20.2

1,303,468

1,316,545

1,250,684

1,213,161

1,097,296

1,104,573

1,061,899

1,076,750

19,277

23,659

23,215

35,688

27,585

29,840

22,661

34,627

21,721

(21.3)

400,000 200,000 0

(15.8)

1,088,261
43.4

600,000

(5.0) (10.0) (15.0) (20.0)

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

Source: Company, Angel Research

Source: Company, Angel Research

Exhibit 6: Net sales down sharply by 21.9% yoy


( ` cr) 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 Net sales
30.4 20.5 14.8 7.0 12.5 5.8 (13.9) (21.9)

Exhibit 7: Domestic market share trend


(%) 40.0 30.0 20.0 10.0 (%) 50.0 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 39.7 MHCV passenger 39.6 43.8 42.9 MHCV goods 39.1 26.0 43.3 35.2 30.6 22.2 23.7 25.5 21.0 22.3 17.7 22.7 23.5 19.0 25.4 22.6 27.8 19.2 23.2 Total MHCV 36.8

yoy chg (%)

(17.1)

0.0 (10.0) (20.0) (30.0)


2,364

2,513

3,115

2,903

4,330

3,027

3,296

2,406

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

3,728

19.2

21.1

1QFY14

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14 1QFY14

Source: Company, Angel Research

Source: Company, SIAM, Angel Research

EBITDA margin pressure continues: At the operating level, EBITDA margins registered 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.

July 17, 2013

Ashok Leyland | 1QFY2014 Result Update

Exhibit 8: EBITDA margin down to a meagre 1%


(%) 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 9.7 10.6 7.2 10.9 8.0 10.1 4.3 5.3 1.0 72.9 74.7 75.3 75.4 72.3 74.5 72.8 75.8 75.5 EBITDA margin Raw material cost/sales

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


( ` cr) 300 250 200 150 100 50 0 (50) (100) (150) (200) 4.9 3.4 2.3 Net profit 5.9 4.3 2.2 0.4 Net profit margin (%) 8.0 6.0 4.0 2.0 0.0 (2.0)

154

257

67

67

143

86

(81)

16

(135)
(5.7)

(4.0) (6.0) (8.0)

(3.4)

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

Source: Company, Angel Research

Source: Company, Angel Research

Bottom-line surprises negatively: Led by a disappointing operating performance and 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.

July 17, 2013

1QFY14

Ashok Leyland | 1QFY2014 Result Update

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 greater than 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 heavy discounting by offering discounts as high as ~`250,000/ vehicle; the average levels 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 company witnessed 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 and another `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 targeting reduction 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 assets in FY2014. The power solution business of the company reported a sharp drop in revenues 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 due to 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 Ashley Investments, Ashley Holdings and Ashok Leyland Project Services into a 100% subsidiary. Consolidated financials will be reported by FY2014 end.

July 17, 2013

Ashok Leyland | 1QFY2014 Result Update

Investment arguments
Volume growth to revive with easing of interest rates and recently launched Dost: MHCV demand has witnessed a substantial slowdown in recent times due 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: While raw-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 estimates


Y/E March Net Sales (` cr) OPM (%) EPS (`) Earlier Estimates FY2014E 13,901 8.0 0.9 FY2015E 16,446 8.8 2.1 Revised Estimates FY2014E 13,450 6.5 0.4 FY2015E 15,853 8.4 1.9 % chg FY2014E (3.2) (146)bp (55.1) FY2015E (3.6) (40)bp (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 the stock with a target price of `22.

July 17, 2013

Ashok Leyland | 1QFY2014 Result Update

Exhibit 11: Key assumptions


(units) MHCV passenger MHCV goods LCV (ex. Dost) Dost Total volume (units) % yoy chg Domestic Exports
Source: Company, Angel Research

FY2010 18,481 44,345 1,100 63,926 17.4 57,947 5,979

FY2011 25,226 68,007 873 94,106 47.2 83,800 10,306

FY2012 26,312 67,425 660 7,593 101,990 8.4 89,138 12,852

FY2013 23,472 55,442 780 34,918 114,612 12.4 105,711 8,901

FY2014E 24,646 54,888 1,000 40,000 120,533 5.2 110,533 10,000

FY2015E 26,617 60,376 1,080 52,000 140,074 16.2 128,874 11,200

Exhibit 12: Angel vs consensus forecast


Angel estimates FY2014E Total op. income (` cr) EPS (`) 13,450 0.4 FY2015E 15,853 1.9 Consensus FY2014E 13,313 0.6 FY2015E 15,694 1.9 Variation (%) FY2014E 1.0 (36.3) FY2015E 1.0 0.8

Source: Bloomberg, Angel Research

Exhibit 13: One-year forward EV/EBITDA band


( ` cr) 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 EV (` cr) 2.0 4.0 6.0 8.0

Exhibit 14: One-year forward EV/EBITDA chart


(x) 14.0 12.0 10.0 8.0 6.0 4.0 2.0 One-yr forward EV/EBITDA Five-yr average EV/EBITDA

Feb-04

May-08

Dec-04

Sep-11

Jun-07

Aug-06

Jan-10

Mar-09

Nov-10

Aug-12

Apr-03

Oct-05

Jun-13

0.0

Feb-12

Jul-07

Jul-09

Jul-11

Aug-05

Mar-06

Mar-08

Nov-06

Nov-08

Mar-10

Nov-10

Source: Company, Angel Research

Source: Company, Angel Research

Exhibit 15: One-year forward EV/Sales band


( ` cr) 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 EV (` cr) 0.2 0.5 0.8 1.1

Exhibit 16: One-year forward EV/Sales chart


(x) 1.0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0 One-yr forward EV/Sales Five-yr average EV/Sales

Feb-04

May-08

Dec-04

Sep-11

Jun-07

Aug-06

Jan-10

Mar-09

Nov-10

Aug-12

Apr-03

Oct-05

Jun-13

Feb-12

Jul-07

Jul-09

Jul-11

Oct-12 Oct-12

Aug-05

Mar-06

Mar-08

Nov-06

Nov-08

Mar-10

Source: Company, Angel Research

Source: Company, Angel Research

July 17, 2013

Nov-10

Jun-13

Jun-13

Ashok Leyland | 1QFY2014 Result Update

Exhibit 17: Automobile - Recommendation summary


Company Ashok Leyland Bajaj Auto Hero MotoCorp Maruti Suzuki Mahindra & Mahindra Tata Motors TVS Motor Reco. Buy Accumulate Accumulate Buy Buy Buy Accumulate CMP Tgt. price (`) (`) 16 1,910 1,687 1,422 893 286 32 22 2,096 1,820 1,822 1,103 347 35 Upside (%) 38.9 9.7 7.8 28.1 23.6 21.4 9.8 P/E (x) FY14E 42.1 16.1 15.3 13.3 14.1 7.9 6.4 FY15E 8.6 13.7 12.1 11.7 12.5 6.9 5.5 EV/EBITDA (x) FY14E 6.5 11.1 7.9 6.4 7.5 3.9 2.1 FY15E 4.0 8.9 7.1 5.5 6.2 3.2 1.5 RoE (%) FY14E 2.3 40.4 39.8 16.1 23.3 24.6 18.1 FY15E 11.0 37.7 40.7 15.8 21.9 23.2 18.5 FY13-15E EPS CAGR (%) 74.4 15.3 14.9 23.8 14.1 13.8 15.3

Source: Company, Angel Research

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 backhoe loader used in the construction industry.

July 17, 2013

Ashok Leyland | 1QFY2014 Result Update

Profit and loss statement (Standalone)


Y/E March (` cr) Total operating income % chg Total expenditure Net raw material costs Other mfg costs Employee expenses Other EBITDA % chg (% of total op. income) Depreciation & amortization EBIT % chg (% of total op. income) Interest and other charges Other income (% of PBT) Recurring PBT % chg Extraordinary income/(exp.) PBT Tax (% of PBT) PAT (reported) ADJ. PAT % chg (% of total op. income) Basic EPS (`) Adj. EPS (`) % chg FY2010 FY2011 FY2012 7,407 21.5 6,648 5,212 135 667 634 760 66.6 10.3 204 555 100.1 7.5 102 91 18.1 545 161.3 40 505 121 24.0 424 384 114.6 5.2 1.6 1.4 114.6 11,417 54.1 10,203 8,175 235 970 823 1,214 59.8 10.6 267 946 70.4 8.3 189 44 5.6 802 47.2 1 800 171 21.3 631 630 64.2 5.5 2.4 2.4 64.2 12,904 13.0 11,807 9,464 276 1,036 1,030 1,098 (9.6) 8.5 353 745 (21.3) 5.8 255 201 29.2 690 (13.9) 4 686 124 18.1 566 562 (10.7) 4.4 2.1 2.1 (10.7) FY2013 FY2014E FY2015E 12,481 (3.3) 11,650 9,123 299 1,087 1,140 831 (24.2) 6.7 381 451 (39.5) 3.6 377 397 198.4 471 (31.8) 271 200 37 18.5 434 163 (71.0) 1.3 1.6 0.6 (71.0) 13,450 7.8 12,570 9,818 330 1,210 1,212 880 5.8 6.5 394 486 7.7 3.6 430 69 55.3 124 (73.6) 0 124 22 18.0 102 102 (37.6) 0.8 0.4 0.4 (37.6) 15,853 17.9 14,513 11,414 357 1,427 1,316 1,340 52.3 8.4 406 934 92.3 5.9 403 74 12.2 605 387.5 0 605 109 18.0 496 496 387.5 3.1 1.9 1.9 387.5

July 17, 2013

Ashok Leyland | 1QFY2014 Result Update

Balance sheet statement (Standalone)


Y/E March (` cr) SOURCES OF FUNDS Equity share capital Reserves & surplus Shareholders Funds Total loans Deferred tax liability Other long term liabilities Long term provisions Total Liabilities APPLICATION OF FUNDS Gross block Less: Acc. depreciation Net Block Capital work-in-progress Goodwill Investments Long term loans and advances Other noncurrent assets Current assets Cash Loans & advances Other Current liabilities Net current assets Misc. exp. not written off Total Assets 6,019 1,769 4,250 561 326 4,152 519 973 2,660 2,961 1,191 5 6,334 6,692 2,058 4,634 358 1,230 385 3 3,984 180 431 3,373 3,760 224 6,833 7,256 2,343 4,914 548 1,534 608 7 4,304 33 810 3,461 4,741 (438) 7,174 7,991 2,709 5,282 689 2,338 480 12 4,297 14 967 3,315 4,529 (233) 8,568 8,269 3,103 5,166 662 2,514 480 12 4,802 84 1,076 3,642 4,657 145 8,978 8,512 3,509 5,003 681 2,530 480 12 5,672 175 1,268 4,229 5,341 331 9,037 133 3,536 3,669 2,280 385 6,334 133 3,830 3,963 2,348 444 78 6,833 266 3,942 4,208 2,395 490 4 77 7,174 266 4,189 4,455 3,505 527 2 79 8,568 266 4,104 4,370 4,000 527 2 79 8,978 266 4,413 4,679 3,750 527 2 79 9,037 FY2010 FY2011 FY2012 FY2013 FY2014E FY2015E

July 17, 2013

10

Ashok Leyland | 1QFY2014 Result Update

Cash flow statement (Standalone)


Y/E March (` cr) Profit before tax Depreciation Change in working capital Others Other income Direct taxes paid Cash Flow from Operations (Inc.)/Dec. in fixed assets (Inc.)/Dec. in investments Other income Cash Flow from Investing Issue of equity Inc./(Dec.) in loans Dividend paid (Incl. Tax) Others Cash Flow from Financing Inc./(Dec.) in cash Opening Cash balances Closing Cash balances FY2010 FY2011 FY2012 545 204 264 289 (91) (121) 1,090 (643) (63) 91 (614) 322 156 (523) (45) 430 88 519 802 267 (491) 229 (44) (171) 591 (470) (904) 44 (1,329) 68 233 97 398 (340) 519 180 690 353 22 407 (201) (124) 1,147 (755) (304) 201 (859) 47 309 (793) (436) (148) 180 32 FY2013 FY2014E FY2015E 471 381 (47) 359 (397) (37) 730 (876) (803) 397 (1,282) (1) 1,110 187 (761) 534 (18) 32 14 304 70 14 84 (437) 90 84 175 (69) (22) 124 (250) (176) 69 (358) 495 187 (74) (109) 732 (262) (17) 74 (204) (250) 187 124 394 (303) 605 406 (96)

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Ashok Leyland | 1QFY2014 Result Update

Key ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Dupont Analysis EBIT margin Tax retention ratio Asset turnover (x) ROIC (Post-tax) Cost of Debt (Post Tax) Leverage (x) Operating ROE Returns (%) ROCE (Pre-tax) Angel ROIC (Pre-tax) ROE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) WC cycle (ex-cash) (days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Interest Coverage (EBIT / Int.) 0.4 1.9 5.5 0.2 0.8 5.0 0.2 0.8 2.9 0.3 1.4 1.2 0.3 1.6 1.1 0.2 0.8 2.3 1.4 73 49 110 40 1.8 61 35 95 11 1.9 63 34 108 (6) 1.6 60 39 123 (10) 1.7 60 38 118 (3) 1.9 59 38 115 2 9.2 12.4 10.7 14.4 17.7 16.5 10.6 12.8 13.8 5.7 6.2 3.8 5.5 6.4 2.3 10.4 12.3 11.0 7.5 0.8 1.7 9.7 3.7 0.4 12.2 8.3 0.8 2.3 15.2 6.4 0.3 17.9 5.8 0.8 2.3 10.9 8.8 0.2 11.4 3.6 0.8 1.9 5.6 10.4 0.2 4.5 3.6 0.8 1.8 5.4 9.4 0.3 4.2 5.9 0.8 2.1 10.1 8.5 0.3 10.5 1.4 1.4 2.2 0.8 8.8 2.4 2.4 3.4 1.0 10.0 2.1 2.1 3.4 1.0 10.9 0.6 0.6 2.0 0.6 11.9 0.4 0.4 1.9 0.6 11.6 1.9 1.9 3.4 0.6 12.7 11.2 7.3 1.8 4.7 0.7 7.5 0.9 6.8 4.8 1.6 6.2 0.4 4.3 0.8 7.6 4.7 1.5 6.2 0.4 4.7 0.7 26.3 7.9 1.4 3.7 0.4 6.5 0.6 42.1 8.6 1.4 3.7 0.4 6.5 0.6 8.6 4.8 1.3 3.7 0.3 4.0 0.6 FY2010 FY2011 FY2012 FY2013 FY2014E FY2015E

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Ashok Leyland | 1QFY2014 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

DISCLAIMER
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Pvt. Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Pvt. Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Pvt. Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Pvt. Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Pvt. Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Pvt. Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Pvt. Limited and its affiliates may have investment positions in the stocks recommended in this report.

Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

Ashok Leyland No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%) Reduce (-5% to -15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

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