ASHOK LEYLAND LTD.

Company Analysis

6 sep 2008
Ashok Leyland – Business Overview

 5000 Crore Company in Indian CV Industry

 No. 2 Manufacturer or Commercial Vehicles
 Market Share 28 % and No 1 in bus segment
 Current capacity of 84000 Vehicles which
would be doubled by 2010.
 6 plants and another 1 coming up at
Uttaranchal
PRODUCT SEGMENTS
Buses
TRUCKS
DEFENCE VEHICLES, Spares
Entering into Design & OEM services
Indian Automobile Industry - overview

Auto companies continue to reel under pressure on the back of

turbulent macro economic factors

BSE Auto Index turned in a relatively better performance in

FY2008 underperformed the broader markets by 6.8% while the
Sensex lost ground by almost 14%.

However, during first quarter of 2009, the Auto Index declined

another 20.8% after the 20.2% fall witnessed during 4QFY2008
Growth Divers

 Strong Performance of Indian Economy

 Regulations on overloading and over-aged vehicles

will be Tightened

 Private bus demand will continue to grow with better

road connectivity

 Efficient Infrastructure Investments

• Golden Quadrilateral Project 5864 Kms
• NSEW corridor Project 7300 Kms
• Port Connectivity & others 1016 Kms
• 48 New Project covering more than 10000 Kms coming up
source : NHAI
 Concern Areas

 Inflation, Interest Rates & Liquidity

• RBI hiked CRR by 125 bps & Repo by 75 bps in last 3 months so financing
rates gone up by 300 bps YTD
• Conversion Ratio dropped by 45 % in last 4-5 months

 Fuel Price Hike

• Fuel Accounts for 25 % & 50% for total ownership cost of PV’s & CV’s
• Almost 15% Hike in Fuel Prices In 2008
• direct impact on the ownership cost, freight operator's profitability and
volume growth of the Auto sector

 Soaring Raw Material Prices

• Accounts for 70 % of total cost for Manufacturers
• Prices on a upward trend since last 2 years
• Badly affecting the margins as these costs cannot be passed on to
customers due to high competition
Impact of Interest Rates
Ashok Leyland – Shareholding Pattern
Ashok Leyland Capacity Expansion plan
Financial Performance

FY07 FY08 Change

Revenues Rs. Cr 8514 9179 7.81%
EBITDA 708 895 26.48%
EBIT 555 721 29.75%
PAT 364 469 29.11%
EPS 3.33 3.53 6.01%
ROCE 16.87 20.11 19.20%
DPS 1.5 1.5

Margins
Operating Profit margin 9.32 10.09
Gross Profit margin 7.27 7.86
Net Profit margin 5.94 5.83
 Peer Comparison

Ashok Leyland Tata Motors Swaraj

Mazda
CMP 34 (Face Value = 1) 420 296

P/E 9.61 8.64 10.83

NPM % 5.83 6.96 3.75

Last Dividend 150 % 150 % 55 %

EPS 3.53 49.65 24

ROE 22.3 25.98 27

ROCE 20.11 19.8 21.50

Valuation CMP = 34

 FCFF Valuation 44.44 (Undervalued)

 Weighted Average Method 52.78 (Undervalued)

 PV method 30 (Over Valued)

Valuation - FCFF
 THANK YOU

 Enquires & comments

R S Raghav
ICFAI Business School
raghav777@gmail.com