IndiaAutosPreview ARathi 090713

Autos
India I Equities
Result Preview
910
July 2013
India Autos
BSE Auto: 10818

Sensex: 19496
Nifty: 5868
Stuck in first gear

Key takeaways
PV companies do better. Auto companies are expected to report subdued
3.2% revenue growth, as volumes were lower in most segments. We expect a
10bps yoy reduction in EBITDA margins. On lower profitability at twowheeler and CV companies, we expect net profit to be lower 3% yoy. The
standout auto companies would be Tata Motors, Maruti Suzuki and M&M.
Revenue growth subdued. We expect sector revenues to grow just 3.2%,
led by higher realisations, while auto volumes declined in most segments.
Two-wheeler volumes and M&H CVs were particularly under pressure.
Passenger vehicle growth was also subdued, but tractor sales surprised
positively. Three-wheelers were decent, while LCVs which performed well in
FY13, also witnessed lower demand.
Stagnant EBITDA margins. An increase in operating costs, lower
operating leverage and continued competition are key challenges for the
sector, though we could see tailwinds on this front. We expect 12.9%
EBITDA margin for the sector (lower just 6bps yoy).
Net profit likely to decline. In 1QFY14, we expect profit to be lower just
3% yoy, driven mainly by Tata Motors, Maruti Suzuki and M&M. Among
auto component companies, Motherson Sumi and Swaraj Engines could be
the standout performers.
Our take. We are underweight on the sector as we expect valuations to
correct in the near term. Top picks. Tata Motors and Motherson Sumi
Systems. We also like M&M and Wabco India from a long-term perspective.
Among the smaller companies, we prefer VST Tillers and Suprajit
Engineering. We have a Sell on Maruti Suzuki and Bajaj Auto on fair
valuations. We are negative on Ashok Leyland due to the CV cycle, and on
Hero MotoCorp on weak two-wheeler demand. Risks. Faster than expected
recovery in volumes, lower commodity costs.
Rohan Korde
+9122 6626 6733
rohankorde@rathi.com
Girish Solanki
+9122 6626 6712
girishsolanki@rathi.com
India Autos: June 13 quarter, forecasts

Revenues
EBITDA
PAT
`m
yoy chg (%)
Margin (%)
yoy chg (bps)
`m
yoy chg (%)
Tata Motors
464,170
7.1
13.2
(115.9)
24,325
(9.4)
Bajaj Auto
102,792
9.7
13.0
115.6
8,859
22.1
47,420
(2.5)
18.0
(68.0)
7,131
(3.2)
Company
Mahindra & Mahindra

Maruti Suzuki
102,536
(4.9)
11.5
420.5
5,846
37.9
61,143
(2.1)
14.0
(99.6)
5,152
(16.3)
Hero MotoCorp
Eicher Motors*
16,600
4.7
9.3
49.7
772
1.6
Ashok Leyland
23,214
(22.8)
5.3
(267.3)
(352)
(152.6)
TVS Motors
18,229
0.2
5.7
(19.8)
439
(14.1)
Source: Company, Anand Rathi Research
* Estimates for 2QCY13
Anand Rathi Shares and Stock Brokers Limited (hereinafter ARSSBL) is a full service brokerage and equities research firm and the views expressed therein are solely of
ARSSBL and not of the companies which have been covered in the Research Report. This report is intended for the sole use of the Recipient and is to be circulated only within
India and to no countries outside India. Disclosures and analyst certifications are present in Appendix.
Anand Rathi Research
India Equities
9 July 2013
India Autos Stuck in first gear
Fig 1 Snapshot: Quarterly result estimates

Sales
Company Name
EBITDA
OPM
PAT
Jun'13
YoY %
QoQ %
Jun'13
YoY %
QoQ %
Jun'13
YoY bps
Jun'13
YoY %
QoQ %
Tata Motors
464,170
7.1
(17.1)
61,417
(1.5)
(26.3)
13.2
(115.9)
24,325
(9.4)
(38.0)
Mahindra & Mahindra
102,792
9.7
(2.0)
13,363
20.4
6.5
13.0
115.6
8,859
22.1
9.4
47,420
(2.5)
(0.1)
8,524
(6.1)
1.9
18.0
(68.0)
7,131
(3.2)
(6.9)
102,536
(4.9)
(22.9)
11,792
50.0
(39.5)
11.5
420.5
5,846
37.9
(51.4)
Hero MotoCorp
61,143
(2.1)
(0.5)
8,560
(8.6)
0.7
14.0
(99.6)
5,152
(16.3)
(10.3)
Eicher Motors*
16,600
4.7
(3.7)
1,544
10.6
(9.5)
9.3
49.7
772
1.6
(21.2)
Ashok Leyland
23,214
(22.8)
(37.7)
1,237
(48.6)
(37.6)
5.3
(267.3)
(352)
(152.6)
(221.0)
TVS Motors
18,229
0.2
4.3
1,041
(3.2)
11.0
5.7
(19.8)
439
(14.1)
(10.5)
1,448
12.1
3.0
225
6.8
5.2
15.5
(77.8)
152
8.9
0.9
Motherson Sumi Systems
67,185
5.2
0.6
4,929
8.3
(13.4)
7.3
21.0
1,342
20.7
(21.8)
Exide Industries
16,313
5.0
5.9
2,204
(9.3)
8.5
13.5
(213.4)
1,486
(6.8)
2.1
Bharat Forge
6,857
(26.8)
1.6
1,417
(39.7)
(0.1)
20.7
(444.3)
532
(49.4)
6.3
Amara Raja Batteries
7,979
15.0
(0.7)
1,196
0.0
6.9
15.0
(224.0)
747
(1.9)
25.6
Apollo Tyres
30,381
(4.0)
0.0
3,485
(0.9)
(2.1)
11.5
36.3
1,309
(5.1)
4.8
Wabco India
2,290
(8.1)
(6.3)
443
(22.3)
(4.3)
19.4
(352.4)
308
(26.5)
10.0
SKF India
5,318
(8.0)
(1.2)
511
(14.8)
(13.9)
9.6
(77.1)
402
(13.9)
(1.3)
Swaraj Engines
1,446
22.4
26.3
222
23.2
35.2
15.4
9.8
162
18.6
16.6
Balkrishna Industries
8,180
(1.6)
5.0
1,606
2.2
3.0
19.6
72.8
888
2.2
7.7
Gabriel India
3,000
2.6
(3.6)
182
(11.2)
(8.0)
6.1
(94.1)
76
(16.2)
(40.1)
Bajaj Auto
Maruti Suzuki
VST Tillers & Tractors
Mahindra Forgings
Ceat
Munjal Showa
JK Tyres & Industries
NRB Bearings
Setco Auto
Phillips carbon
Suprajit engineering
Total
1,108
5.5
1.2
174
47.0
(12.7)
15.7
442.4
99
118.6
(36.7)
12,895
8.4
(1.6)
1,286
20.3
(7.6)
10.0
98.5
422
64.0
(30.6)
3,989
(5.0)
0.4
212
(8.4)
(34.5)
5.3
(19.6)
108
(20.1)
(51.6)
14,529
0.7
5.0
1,370
8.8
0.5
9.4
70.6
305
(19.9)
(11.1)
1,406
(0.8)
(1.0)
236
(8.0)
17.8
16.8
(132.0)
94
(13.3)
(7.2)
706
(5.0)
(32.3)
92
(17.3)
(14.1)
13.1
(194.6)
40
(35.8)
(21.2)
5,508
(11.3)
2.9
311
(13.0)
5.1
5.6
(11.0)
26
(59.8)
(46.5)
996
3.9
(12.2)
159
(3.6)
(14.4)
15.9
(124.2)
89
(34.7)
(24.2)
1,027,636
2.7
(12.0)
127,737
1.7
(19.1)
12.4
(12.5)
60,761
(3.6)
(27.3)
* Estimates for 2QCY13
Autos
India I Equities
Result preview
9 July 2013
Tata Motors
Rating: Buy
Target Price: `348
Share Price: `296
Domestic weakness, JLR strong; Buy

Key takeaways
1Q to be good. In 1Q, we expect Tata Motors consolidated profits to
register 9.4% yoy decline; while JLRs good performance constinues, the
Indian operations are expected to continue to be a drag due to the slump in
CV sales and lower PV sales. We expect consolidated sales to grow 7.1% yoy
to `464.2bn, with a 13.2% EBITDA margin and 9.4% profit decline to
`24.3bn.
4Q performance was good. The companys consolidated performance was
impressive, boosted chiefly by the robust performance at JLR. Income
growth was ~ 10%, driven chiefly by better-than-expected JLR realizations,
which contributed to the better-than-expected EBITDA margin.
JLR to be the growth driver. JLRs 1Q volumes are estimated to have
grown 9.7%. Unlike FY13 however, Jaguar is the key growth driver, not Land
Rover. Backed by good volume growth, we expect JLR to report 11.9% yoy
revenue growth to 4.1bn. We expect an EBITDA margin of 15%, with a
16.8% rise in profit to 334m.
Key data
TTMT IN / TAMO.BO
`337 / `203
19496 / 5868
US$54.1m
`770.1bn / US$12.8bn
3189.9m
52-week high / low

Sensex / Nifty
3-m average volume
Market cap
Shares outstanding
Shareholding pattern (%)
Mar 13 Dec 12
Promoters
- of which, Pledged
Free Float
- Foreign Institutions
- Domestic Institutions
- Public
34.71
7.55
65.29
28.38
10.50
26.41
34.72
7.55
65.28
29.01
11.50
24.77
Sep12
34.74
6.38
65.26
28.47
11.91
24.88
M&H CVs under pressure. The cyclical slowdown in M&H CVs would
continue to heap pressure on the Indian operations. Other segments too are
not displaying a lower trajectory. We expect the standalone entity to record a
third quarter of losses on the weak sales performance.
Financials (YE Mar)
EPS (`)
38.9
46.3
Our
` take. The demand context for M&H CVs would be challenging, at least
in 1HCY13. An improved performance in the standalone operations is likely
only in 2HFY14 and FY15. For JLR, good volume growth and continuing
demand are the clearest positives at present, with the margin expected to
improve ~30bps in FY14. We maintain a Buy with a price target of `348.
Risks. Currency fluctuations, dip in European demand, negative surprises at
JLR, longer-than-expected M&H CV slowdown.
Growth (%)
23.3
19.0
Quarterly results (YE Mar)
Sales (`m)
EBITDA (`m)
EBITDA margin (%)
Interest (`m)
Depreciation (`m)
1QFY13
1QFY14e
% yoy
FY12
FY13
% yoy
433,236
464,170
62,346
61,417
-1.5
7.1 1,656,545 1,888,176

237,005
265,689
14.0
12.1
14.4
13.2
-116bps
14.3
14.1
-24bps
8,044
9,250
15.0
29,822
35,533
19.2
20,456
22,262
8.8
70,146
95,909
36.7
FY14e
Sales (`m)
FY15e
2,148,862 2,468,905
129,444
Net profit (`m)
153,996
PE (x)
7.6
6.4
PBV (x)
1.9
1.5
RoE (%)
26.0
24.2
RoCE (%)
25.7
25.8
Dividend yield (%)

Net gearing (%)
0.8
1.4
54.4
48.7
Source: Anand Rathi Research
2,386
2,220
-6.9
6,618
8,115
22.6
PBT (`m)
31,827
32,125
0.9
153,275
136,335
-11.1
Rohan Korde
Tax (`m)
8,688
8,000
-7.9
17,536
37,710
115.0
27.3
24.9
-240bps
11.4
27.7
1,622bps
+9122 6626 6733

26,854
24,325
-9.4
125,544
104,953
-16.4
Other income (`m)
Tax rate (%)

Adjusted Profit (`m)
Source: Company
India Equities
9 July 2013
Tata Motors Domestic weakness, JLR strong; Buy
Quick Glance Financials and Valuations

Fig 2 Balance sheet (`m)
Fig 1 Income statement (`m)

Year-end: Mar
FY11
FY12
FY13
FY14e
FY15e
Year-end: Mar
FY11
Net revenues
1,221,279 1,656,545 1,888,176 2,148,862 2,468,905
Revenue growth (%)
32.0
35.6
14.0
13.8
14.9
- Op. expenses
1,043,129 1,419,540 1,622,487 1,837,428 2,111,358
EBIDTA
178,150 237,005 265,689 311,434 357,546
EBITDA margin (%)
14.6
14.3
14.1
14.5
14.5
- Interest expenses
23,853
29,822
35,533
34,645
33,779
- Depreciation
56,531
70,146
95,909 105,126 115,836
+ Other income
4,295
6,618
8,115
8,521
8,947
- Extraordinary items
-2,310
-9,621
6,027
0
0
- Tax
12,164
17,536
37,710
51,128
63,375
Effective tax rate (%)
11.7
11.4
27.7
28.4
29.2
Reported Profit
92,736 135,165
98,926 129,444 153,996
Adjusted Profit
90,426 125,544 104,953 129,444 153,996
Adj. Profit growth (%)
666.9
38.8
-16.4
23.3
19.0
Adj. FDEPS (`/share)
27.2
37.8
31.6
38.9
46.3
Adj. FDEPS growth (%)
666.9
38.8
-16.4
23.3
19.0
Share capital
Reserves & surplus
Net worth
Total debt
Def. tax liab. (net)
Capital employed
Net fixed assets
Investments
Net working capital
Cash and bank balance
Capital deployed
No. of shares (m)
Net debt
Net debt / Equity
WC turn days
Book value (`/sh)
Reported Profit
+ Depreciation
Cash profit
- Incr./(decr.) in WC
Operating cash-flow
- Capex
Free cash-flow
- Dividend
+ Equity raised
+ Debt raised
- Investments
- Misc. items
Net cash-flow
+ Op. cash & bank bal.
Cl. cash & bank bal.
FY13
FY14e
FY15e
Fig 4 Ratio analysis @ `296
Fig 3 Cash-flow statement (`m)

Year-end: Mar
FY12
6,377
6,348
6,381
6,381
6,381
185,338 325,152 369,992 490,208 628,857
191,715 331,499 376,373 496,589 635,238
303,622 387,041 437,223 457,223 477,223
17,104 -25,186 -20,390 -20,390 -20,390
512,440 693,354 793,206 933,422 1,092,071
468,058 603,062 735,860 931,004 1,046,755
25,443
89,177
90,577
90,577 90,577
-95,157 -181,266 -244,358 -258,611 -280,527
114,096 182,381 211,127 170,453 235,266
512,440 693,354 793,206 933,422 1,092,071
638
3,174
3,190
3,190
3,190
189,526 204,659 226,096 286,770 241,957
1.0
0.6
0.6
0.6
0.4
-18
-10
-18
-14
-14
60.1
104.5
118.0
155.7
199.1
FY11
FY12
FY13
FY14e
FY15e
92,736
56,531
149,267
-15,812
165,079
99,999
65,080
12,742
671
-48,302
3,251
-25,208
26,663
87,433
114,096
135,165
56,254
191,419
-86,110
277,528
228,053
49,476
12,807
-30
83,419
63,735
-11,961
68,285
114,096
182,381
98,926
75,693
174,619
-33,091
207,710
208,404
-694
6,429
33
50,182
1,400
12,947
28,745
182,381
211,127
129,444
79,856
209,300
-14,254
223,554
275,000
-51,446
8,024
0
20,000
0
1,204
-40,674
211,127
170,453
153,996
84,248
238,244
-21,916
260,161
200,000
60,161
13,346
0
20,000
0
2,002
64,813
170,453
235,266
Year-end: Mar
FY11
FY12
FY13
FY14e
FY15e
P/E (x)
P/B (x)
EV/EBITDA (x)
RoE (%)
RoCE (%)
Dividend yield (%)
Dividend payout (%)
Debt to equity (%)
Core P/E (x)
Cash P/E
EV/sales
Inventory days
Receivables days
Payables days
Asset Turnover
10.9
4.9
6.2
48.1
26.5
1.4
15.8
1.6
11.4
6.8
0.9
30
20
68
2.4
7.8
2.8
4.5
40.9
26.8
1.4
10.8
1.2
8.3
4.9
0.6
31
18
59
2.4
9.4
2.5
4.1
26.2
25.0
0.7
7.5
1.2
10.2
5.4
0.6
36
15
69
2.4
7.6
1.9
3.7
26.0
25.7
0.8
7.1
0.9
8.1
4.5
0.5
36
16
66
2.3
6.4
1.5
3.1
24.2
25.8
1.4
10.0
0.8
6.8
4.0
0.4
36
16
66
2.2
Fig 5 PE band
Fig 6 JLR product mix
500
12x
40,000
400
10x
32,000
8x
24,000
300
6x
200
Tata Motors
4x
16,000
8,000
100
Source: Bloomberg, Anand Rathi Research
Jaguar
Jun-13
Apr-13
Feb-13
Dec-12
Oct-12
Aug-12
Jun-12
Apr-12
Feb-12
Dec-11
Oct-11
Jun-11
Aug-11
Jul-13
Apr-13
Jan-13
Jul-12
Oct-12
Apr-12
Jan-12
Jul-11
Oct-11
Apr-11
Jan-11
Jul-10
Oct-10
Apr-10
Jan-10
Jul-09
Oct-09
Apr-09
Apr-11
Land Rover
Source: Company
Autos
India I Equities
Result preview
Change in Estimates Target Reco
9 July 2013
Mahindra & Mahindra
Rating: Hold
Target Price: `1,015
Share Price: `968
Tractors bounce back; Hold

Key takeaways
Tractors, the growth driver. After a robust performance in FY13, Mahindra
& Mahindras automotive division volumes were subdued in 1Q (1.8% lower
yoy). However, the robust performance of the farm-equipment division made
up for this. Tractor sales grew 25.2% yoy to 74,577 units, a noticeably sharp
recovery after yoy declines in four consecutive quarters. Sales of pickups were
also decent, rising 9.2% yoy. The weaker performing segments were UVs
(down ~4.5% yoy), three-wheelers (down 10.5% yoy) and cars (down ~1.8%
yoy). M&Ms overall volume growth in 1QFY14 was 7% yoy.
1Q likely to be good. For 1Q we expect 9.7% yoy income growth to
`102.8bn and 20.4% EBITDA growth to `13.4bn. We expect an EBITDA
margin of 13% (up 120bps yoy, 100bps qoq). The greater proportion of
tractors in the product mix is likely to drive up profitaibility for the quarter.
We expect profit for the quarter to grow 22.1% yoy to `8.6bn.
FES to drive EBIT margin. We expect the automotive division EBIT
margin at 9.2% (up 40bps yoy, but 60bps lower qoq), with the farmequipment division EBIT margin at 17% (130bps higher yoy, 100bps qoq).
EBIT per tractor is expected to be 11.7% higher yoy, while EBIT per vehicle
in the automotive division is expected to be 6.6% higher yoy.
Our take. UVs, the growth driver in FY13, are expected to record a lower
growth rate in FY14, while pickups would maintain a decent pace. Tractors
have
registered a strong recovery in 1Q. The consolidated performance also
`
should be good, but Systech and the two-wheeler business would drag on
profitability. We have a Hold rating on the stock, with a sum-of-parts-based
target of `1,015. It trades at ~12.2x consolidated earnings; valuations appear
fair from an FY14 perspective. Risks. Upside: Recovery in tractor demand,
lower commodity costs. Downside: Delay in Ssangyongs recovery, keener
competition, diesel price hike.
1QFY13
1QFY14e
Sales (`m)
93,674
EBITDA (`m)
11,094
11.8
EBITDA margin (%)

Interest (`m)
Depreciation (`m)
% yoy
FY12
FY13
% yoy
102,792
9.7
318,535
404,412
27.0
13,363
20.4
37,629
46,943
24.8
13.0
116bps
11.8
11.6
-21bps
460
506
10.0
1,628
1,912
17.5
1,548
1,703
10.0
5,762
7,109
23.4
599
658
10.0
4,658
5,492
17.9
PBT (`m)
9,684
11,812
22.0
37,543
44,470
18.5
Tax (`m)
2,428
2,953
21.6
8,755
10,943
25.0
25.1
25.0
-7bps
23.3
24.6
129bps
7,256
8,859
22.1
26,168
32,735
25.1
Other income (`m)
Tax rate (%)

Key data
MM IN / MAHM.BO
52-week high / low

Sensex / Nifty
3-m average volume
Market cap
Shares outstanding
`1026 / `675
19496 / 5868
US$18.6m
`584.01bn / US$9.73bn
589m
Mar 13 Dec 12
Promoters
- of which, Pledged
Free Float
- Public
25.18
8.18
74.82
35.01
15.54
24.27
Financials (YE Mar)
Sales (`m)
25.30
8.85
74.70
32.86
16.40
25.44
Sep12
25.35
8.83
74.65
30.00
18.60
26.05
FY14e
FY15e
454,475
519,355
35,079
39,830
EPS (`)
57.1
64.9
Cons. EPS (`)
79.5
93.0
PE (x)
16.9
14.9
Cons PE (x)
12.2
10.4
RoE (%)
20.4
19.8
RoCE (%)
23.8
23.5
Net profit (`m)
Dividend yield (%)

Net gearing (%)
1.4
1.5
37.4
33.9
Rohan Korde
+9122 6626 6733
Source: Company
India Equities
9 July 2013
Mahindra & Mahindra Tractors bounce back; Hold


Year-end: Mar
Net revenues
Revenue growth (%)
- Op. expenses
EBIDTA
EBITDA margin (%)
- Interest expenses
- Depreciation
+ Other income
- Tax
Reported Profit
Adjusted Profit
FY11
FY12
FY13
FY14e
FY15e
233,877
26.2
200,060
33,817
14.5
725
4,139
4,342
-1,901
8,576
318,535
36.2
280,907
37,629
11.8
1,628
5,761
4,658
-2,647
8,755
404,412
27.0
357,469
46,943
11.6
1,912
7,108
5,492
-1,056
10,943
454,475
12.4
403,237
51,238
11.3
2,084
8,713
6,334
0
11,694
519,355
14.3
461,415
57,940
11.2
2,045
10,101
7,317
0
13,278
24.4
26,620
24,961
25.5
40.7
25.5
23.3
28,789
26,169
4.8
42.6
4.8
24.6
33,527
32,482
24.1
52.9
24.1
25.0
35,079
35,079
8.0
57.1
8.0
25.0
39,830
39,830
13.5
64.9
13.5
2,936
100,198
103,134
23,211
3,544
129,889
39,066
89,256
-4,580
6,146
129,889
587
-72,192
-0.7
-16
175.6
FY12
FY13
FY14e
FY15e
2,945
2,952
2,952
2,952
118,766 143,638 168,945 198,307
121,711 146,589 171,897 201,259
31,742
32,271
27,271
27,271
4,607
6,149
6,149
6,149
158,060 185,008 205,316 234,678
50,808
58,213
67,502
74,402
103,105 118,335 128,335 143,335
-7,736
-9,354
662
1,162
11,884
17,814
8,819
15,782
158,060 185,008 205,317 234,680
589
590
590
590
-83,247 -103,878 -109,883 -131,845
-0.7
-0.7
-0.6
-0.7
-16
-5
-9
0
206.6
248.3
291.2
340.9

Reported Profit
+ Depreciation
Cash profit
Operating cash-flow
- Capex
Free cash-flow
- Dividend
+ Equity raised
+ Debt raised
- Investments
- Misc. items
Net cash-flow
FY11
Share capital
Reserves & surplus
Net worth
Total debt
Capital employed
Net fixed assets
Investments
Net working capital
Capital deployed
No. of shares (m)
Net debt
Net debt / Equity
WC turn days
Book value (`/sh)
Year-end: Mar
Year-end: Mar
FY11
FY12
FY13
FY14e
FY15e
26,620
4,139
30,759
4,394
26,365
5,045
21,320
7,061
107
-5,591
25,276
-5,215
-11,286
17,432
6,146
28,789
5,761
34,550
-3,156
37,706
18,881
18,825
7,675
9
8,531
13,848
104
5,738
6,146
11,885
33,527
7,108
40,635
-1,618
42,253
14,514
27,739
7,982
6
528
15,230
-867
5,929
11,884
17,813
35,079
8,713
43,792
10,016
33,776
18,000
15,776
8,596
0
-5,000
10,000
1,178
-8,998
17,814
8,816
39,830
10,101
49,931
500
49,431
17,000
32,431
9,210
0
0
15,000
1,262
6,959
8,819
15,778
Year-end: Mar
FY11
FY12
FY13
FY14e
FY15e
Consolidated P/E (x)

P/B (x)
EV/EBITDA (x)
RoE (%)
RoCE (%)
Dividend yield (%)
Dividend payout (%)
Debt to equity (%)
Standalone P/E (x)
Cash P/E
EV/sales
Inventory days
Receivables days
Payables days
Asset Turnover
20.5
5.5
17.3
24.2
26.2
1.2
32.5
0.2
23.8
19.8
2.2
27
20
63
1.8
19.0
4.7
15.7
21.5
23.0
1.3
33.2
0.3
22.7
18.0
1.6
27
23
56
2.0
15.8
3.9
12.5
22.2
24.5
1.3
27.9
0.2
18.3
14.6
1.2
22
20
51
2.2
12.2
3.3
11.5
20.4
23.8
1.4
27.9
0.2
16.9
13.2
1.0
30
25
55
2.2
10.4
2.8
10.1
19.8
23.5
1.5
26.3
0.1
14.9
11.5
0.9
30
25
55
2.2
Fig 5 PE band
Fig 6 Product mix

250,000
1,200
19x
200,000
Automotive
1QFY14
4QFY13
3QFY13
2QFY13
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
0
1QFY13
4x
200
50,000
4QFY12
7x
3QFY12
M&M
400
100,000
2QFY12
10x
1QFY12
600
150,000
4QFY11
13x
3QFY11
800
2QFY11
16x
1QFY11
1,000
Tractors
Source: Company
Autos
India I Equities
Result preview
9 July 2013
Bajaj Auto
Rating: Sell
Share Price: `1,873
Weak performance likely; Sell

Key takeaways
Weak demand. In 1Q, weak demand, labour strife at its Chakan plant,
problems in key export markets and keener competition, all impacted Bajaj
Autos sales. During the quarter, sales delcined 9.2% yoy; of this motorcycles
dropped 12.5% yoy. Three-wheelers grew 23.6% yoy, but this was on the
lower base of the previous year when exports to Sri Lanka had been impacted
by a sudden increase in duties. We expect the weak demand trend to continue
in 1HFY14.
Decent sales growth. We expect a 2.5% dip in income to `47.4bn, and a
6.1% yoy decline in EBITDA to `8.5bn. We expect an EBITDA margin of
18% (70bps lower yoy, up 40bps qoq). Our tax rate expectation is 29%. We
expect a 3.2% yoy fall in adjusted profit to `7.1bn, a profit margin of 15%
(down 110bps qoq, 10bps yoy).
Our take. The demand outlook for FY14 is dim, both in domestic sales as
well as exports. The key positive is better export realisations and a low base of
the healthy-profitability three-wheeler division. Additional positives are the
strong cash-flow generation and consistently displaying the highest EBITDA
margin in the Indian auto industry. However, demand weakness and keener
competition would result in market-share loss and cost pressures, ultimately
weighing on profitability.
We have a Sell rating on the stock as we expect lower volumes to result in a
short-term PE de-rating. At our price target of `1,721, the stock would trade
` PE of 15.4x FY14e and 13.4x FY15e. At the ruling price, it trades at 16.8x
at
FY14e and 14.6x FY15e EPS. We expect valuations to shrink in the short
term. Risks. Quicker-than-expected demand recovery, further favorable forex
movements, sharp recovery in demand in export markets and a drop in
commodity prices.
Key data
BJAUT IN / BAJA.BO
`2229 / `1423
19496 / 5868
US$16.1m
`534.18bn / US$8.9bn
289.4m
52-week high / low

Sensex / Nifty
3-m average volume
Market cap
Shares outstanding
Mar 13 Dec 12 Sep 12
Promoters
- of which, Pledged
Free Float
- Public
50.02
0.10
49.98
18.20
7.26
24.52
Financials (YE Mar)
50.02
0.12
49.98
17.04
8.30
24.64
50.02
0.14
49.98
15.11
9.97
24.90
FY14e
FY15e
213,074
242,308
32,251
37,042
111.5
128.0
4.3
14.9
PE (x)
16.8
14.6
PBV (x)
5.6
4.6
RoE (%)
33.2
31.1
RoCE (%)
45.8
43.1
Sales (`m)
Net profit (`m)
EPS (`)
Growth (%)
Dividend yield (%)

Net gearing (%)
2.7
2.9
21.7
20.6

1QFY13
1QFY14e
% yoy
FY12
FY13
Sales (`m)
48,657
47,420
-2.5
195,290
199,973
2.4
9,077
8,524
-6.1
37,200
36,833
-1.0
18.7
18.0
-68bps
19.0
18.4
-63bps
-105.0
60
-100.0
352
370
5.0
1,456
1,640
12.6
30.8
EBITDA (`m)
EBITDA margin (%)
Interest (`m)
Depreciation (`m)
% yoy
1,720
1,892
10.0
6,080
7,955
PBT (`m)
10,184
10,044
-1.4
40,262
43,182
7.3
Rohan Korde
Tax (`m)
3,000
2,913
-2.9
10,221
12,227
19.6
29.5
29.0
-46bps
25.4
28.3
293bps
+9122 6626 6733

7,366
7,131
-3.2
31,045
30,928
-0.4
Other income (`m)
Tax rate (%)

Source: Company
India Equities
9 July 2013
Bajaj Auto Weak performance likely; Sell


Year-end: Mar
Net revenues
Revenue growth (%)
- Op. expenses
EBIDTA
EBITDA margin (%)
- Interest expenses
- Depreciation
+ Other income
- Tax
Reported Profit
Adjusted Profit
FY11
FY12
FY13
FY14e
FY15e
163,982
37.6
132,270
31,712
19.3
17
1,228
5,765
-7,246
10,080
23.2
33,397
26,152
44.0
90.4
44.0
195,290
19.1
158,090
37,200
19.0
222
1,456
6,080
1,340
10,221
25.4
30,041
31,046
18.7
107.3
18.7
199,973
2.4
163,140
36,833
18.4
5
1,640
7,955
-40
12,227
28.3
30,956
30,928
-0.4
106.9
-0.4
213,074
6.6
174,451
38,622
18.1
4
1,731
8,537
0
13,173
29.0
32,251
32,251
4.3
111.5
4.3
242,308
13.7
197,788
44,520
18.4
4
1,851
9,507
0
15,130
29.0
37,042
37,042
14.9
128.0
14.9
FY11
FY12
FY13
2,894
46,209
49,102
3,487
297
52,886
15,490
47,219
-12,111
2,288
52,886
289
-46,020
-0.9
-20
169.7
2,894
57,517
60,411
1,250
484
62,145
15,234
48,828
-18,455
16,538
62,145
289
-64,116
-1.1
-17
208.8
2,894
76,126
79,020
884
1,151
81,055
20,980
64,305
-9,818
5,589
81,055
289
-69,009
-0.9
-11
273.1
FY14e
FY15e
2,894
2,894
94,364 116,149
97,257 119,043
884
884
1,151
1,151
99,293 121,078
22,106
23,103
86,305 105,305
-11,381
-8,711
2,263
1,381
99,293 121,078
289
289
-87,683 -105,802
-0.9
-0.9
-11
-11
336.1
411.4
Fig 4 Ratio analysis @ `1,873

Reported Profit
+ Depreciation
Cash profit
Operating cash-flow
- Capex
Free cash-flow
- Dividend
+ Equity raised
+ Debt raised
- Investments
- Misc. items
Net cash-flow
Share capital
Reserves & surplus
Net worth
Total debt
Capital employed
Net fixed assets
Investments
Net working capital
Capital deployed
No. of shares (m)
Net debt
Net debt / Equity
WC turn days
Book value (`/sh)
Year-end: Mar
Year-end: Mar
FY11
FY12
FY13
FY14e
FY15e
33,397
1,228
34,626
1,644
32,982
1,507
31,475
13,311
1,447
-10,134
7,004
1,199
1,274
1,014
2,288
30,041
1,456
31,497
-6,344
37,841
1,200
36,641
14,975
0
-2,001
1,609
3,805
14,251
2,288
16,539
30,956
1,640
32,595
8,637
23,959
7,386
16,573
14,975
0
-366
15,477
-3,295
-10,949
16,538
5,589
32,251
1,731
33,982
-1,563
35,545
2,857
32,688
16,639
0
0
22,000
-2,625
-3,326
5,589
2,263
37,042
1,851
38,892
2,670
36,222
2,847
33,375
18,303
0
0
19,000
-3,046
-882
2,263
1,381
Year-end: Mar
FY11
FY12
FY13
FY14e
FY15e
P/E (x)
P/B (x)
EV/EBITDA (x)
RoE (%)
RoCE (%)
Dividend yield (%)
Dividend payout (%)
Debt to equity (%)
Core P/E (x)
Cash P/E
EV/sales
Inventory days
Receivables days
Payables days
Asset Turnover
20.7
11.0
15.6
53.3
68.5
2.1
39.9
0.1
17.6
19.8
3.1
13
8
41
3.0
17.5
9.0
12.8
51.4
67.3
2.4
49.8
0.0
19.7
16.7
2.5
13
8
38
3.0
17.5
6.9
12.8
39.1
53.2
2.4
48.4
0.0
19.4
16.6
2.4
12
14
37
2.4
16.8
5.6
11.8
33.2
45.8
2.7
51.6
0.0
17.9
15.9
2.2
12
14
37
2.1
14.6
4.6
9.8
31.1
43.1
2.9
49.4
0.0
15.6
13.9
1.8
12
14
37
2.0
Fig 5 PE band
Fig 6 Product mix
2,500
1,250,000
19x
1,000,000
2,000
16x
13x
1,500
Bajaj Auto
10x
750,000
500,000
1,000
7x
500
250,000
4x
Two-wheelers
1QFY14
4QFY13
3QFY13
2QFY13
1QFY13
4QFY12
3QFY12
2QFY12
1QFY12
4QFY11
3QFY11
2QFY11
Jul-13
Apr-13
Jan-13
Jul-12
Oct-12
Apr-12
Jan-12
Jul-11
Oct-11
Apr-11
Jan-11
Jul-10
Oct-10
Apr-10
Jan-10
Jul-09
Oct-09
Apr-09
1QFY11
Three-wheelers
Source: Company
Autos
India I Equities
Result preview
9 July 2013
Maruti Suzuki
Rating: Sell
Share Price: `1,555
Margins to improve, but valuations are premium; Sell

Key takeaways
Vehicle sales lower. Maruti Suzukis 1Q sales volume growth was
unexciting; total sales dropped 10% yoy to 266,434 units. This was the second
straight quarter of yoy sales decline. Compared to the FY13 growth rate
(3.3% yoy), we expect a 4.2% growth rate in FY14. Channel inventory stands
at ~4-5 weeks. In early Jun13, the company had to control production at its
diesel plant, which till last year ran at top utilisation. We estimate residual
growth of 9% for the rest of the year.
Decent results expected. We expect a 4.9% yoy decline in revenue (10%
volume decline and 5% realisation growth) to `102.5bn. We expect the
EBITDA margin to come at 11.5% (up 420bps yoy, down 320bps qoq). Our
EBITDA growth estimate is 50% and our profit growth estimate is 37.9%
yoy to `5.8bn.
Per-unit parameters to improve. We expect the contribution per vehicle to
be 33.5% higher yoy and 49.7% qoq. Our expectation for EBITDA per
vehicle is 66.5% higher yoy, and profit per vehicle 53.2% higher yoy. Qoq
comparison of parameters is not suitable as the consolidation of Suzuki
Powertrain in 4Q distorts the financials.
Our take. In FY14 the company would benefit from a favourable exchange
rate and a low base for its vehicle sales. Nevertheless, headwinds from
curtailed demand for passenger cars and from launches by competitors would
be the bumpy road in the next two quarters. We believe that the near-term
`
positives
have been factored into the price and the stock now trades at fair
valuations.
Hence, we maintain a Sell with a price target of `1,521 (based on 14x Sep14
EPS; the target multiple is at a 10% discount to the past five-year average).
Risks. Above-expected volume growth and currency-related benefits.
Key data
MSIL IN / MRTI.BO
52-week high / low

Sensex / Nifty
3-m average volume
Market cap
Shares outstanding
`1,773 / `1075
19496 / 5868
US$23.1m
`463.52bn / US$7.72bn
289m
Promoters
- of which, Pledged
Free Float
- Public
56.21
43.79
22.36
12.60
8.83
Financials (YE Mar)
54.21
45.79
23.13
14.35
8.31
54.21
45.79
20.45
16.15
9.19
FY14e
FY15e
482,358
563,515
30,287
35,341
100.3
117.0
Growth (%)
30.5
16.7
PE (x)
15.5
13.3
PBV (x)
2.2
1.9
RoE (%)
14.2
14.4
RoCE (%)
18.1
18.7
Sales (`m)
Net profit (`m)
EPS (`)
Dividend yield (%)

Net gearing (%)
0.6
0.6
22.7
21.4

Sales (`m)
EBITDA (`m)
EBITDA margin (%)
1QFY13
1QFY14e
% yoy
FY12
FY13
% yoy
107,782
7,863
102,536
-4.9
355,871
435,879
22.5
11,792
50.0
24,819
41,797
7.3
68.4
11.5
420bps
7.0
9.6
261bps
332
450
35.7
552
1,898
243.8
Depreciation (`m)
3,399
4,750
39.7
11,384
18,612
63.5
Other income (`m)
1,123
1,151
2.5
8,269
7,694
-7.0
PBT (`m)
5,255
7,743
47.3
21,462
29,911
39.4
Rohan Korde
Tax (`m)
1,018
1,897
86.4
5,111
5,989
17.2
19.4
24.5
514bps
23.8
20.0
-379bps
+9122 6626 6733

4,238
5,846
37.9
16,116
23,215
44.0
Interest (`m)
Tax rate (%)

Source: Company
India Equities
9 July 2013
Maruti Suzuki Margins to improve, but valuations are premium; Sell


Year-end: Mar
Net revenues
Revenue growth (%)
- Op. expenses
EBIDTA
EBITDA margin (%)
- Interest expenses
- Depreciation
+ Other income
- Tax
Reported Profit
Adjusted Profit
FY11
FY12
FY13
FY14e
FY15e
370,401
25.0
333,362
37,038
10.0
244
10,135
4,823
395
8,201
26.4
22,886
23,342
-6.5
80.8
-6.5
355,871
-3.9
331,052
24,819
7.0
552
11,384
8,269
-310
5,111
23.8
16,351
16,119
-30.9
55.8
-30.9
435,879
22.5
394,083
41,797
9.6
1,898
18,612
7,694
-930
5,989
20.0
23,921
23,215
44.0
76.8
37.8
482,358
10.7
426,404
55,953
11.6
2,084
21,817
7,805
0
9,571
24.0
30,287
30,287
30.5
100.3
30.5
563,515
16.8
500,965
62,550
11.1
2,084
21,496
8,151
0
11,780
25.0
35,341
35,341
16.7
117.0
16.7
FY11
FY12
FY13
1,445
137,230
138,675
1,702
1,644
142,021
63,919
51,068
1,949
25,085
142,021
289
-74,451
-0.5
-4
479.8
1,445
150,429
151,874
10,783
3,023
165,680
81,321
61,474
-1,476
24,361
165,680
289
-75,052
-0.5
-6
525.5
1,510
184,279
185,790
13,892
4,087
203,768
117,414
70,783
7,822
7,750
203,768
302
-64,641
-0.3
-8
615.0
FY14e
FY15e
1,510
1,510
211,848 244,168
213,358 245,678
13,892
13,892
4,087
4,087
231,337 263,657
125,597 129,101
85,783 110,783
8,207
7,874
11,749
15,898
231,337 263,657
302
302
-83,640 -112,790
-0.4
-0.5
-8
-8
706.3
813.3

Reported Profit
+ Depreciation
Cash profit
Operating cash-flow
- Capex
Free cash-flow
- Dividend
+ Equity raised
+ Debt raised
- Investments
- Misc. items
Net cash-flow
Share capital
Reserves & surplus
Net worth
Total debt
Capital employed
Net fixed assets
Investments
Net working capital
Capital deployed
No. of shares (m)
Net debt
Net debt / Equity
WC turn days
Book value (`/sh)
Year-end: Mar
Year-end: Mar
FY11
FY12
FY13
FY14e
FY15e
22,886
10,135
33,021
885
32,136
18,059
14,077
2,167
0
-6,512
-20,698
1,993
24,103
982
25,085
16,351
11,384
27,735
-3,425
31,160
27,459
3,701
2,167
0
9,081
10,406
933
-724
25,085
24,361
23,921
18,612
42,533
9,298
33,235
54,704
-21,469
2,417
65
3,109
9,309
-13,410
-16,611
24,361
7,750
30,287
21,817
52,104
385
51,718
30,000
21,718
2,719
0
0
15,000
0
4,000
7,750
11,749
35,341
21,496
56,837
-333
57,170
25,000
32,170
3,021
0
0
25,000
0
4,149
11,749
15,898
Year-end: Mar
FY11
FY12
FY13
FY14e
FY15e
P/E (x)
P/B (x)
EV/EBITDA (x)
RoE (%)
RoCE (%)
Dividend yield (%)
Dividend payout (%)
Debt to equity (%)
Core P/E (x)
Cash P/E
EV/sales
Inventory days
Receivables days
Payables days
Asset Turnover
19.3
3.2
10.1
16.5
22.5
0.5
9.3
0.0
22.5
13.4
1.0
14
8
26
2.5
27.9
3.0
15.1
10.8
13.1
0.5
13.4
0.1
43.5
16.3
1.1
20
9
65
2.1
20.2
2.5
9.7
12.9
15.2
0.5
10.4
0.1
26.3
11.2
1.0
17
11
61
2.1
15.5
2.2
6.9
14.2
18.1
0.6
9.0
0.1
18.9
9.0
0.8
17
11
63
2.0
13.3
1.9
5.7
14.4
18.7
0.6
8.5
0.1
15.9
8.3
0.6
17
11
62
2.1
Fig 5 PE band
Fig 6 Product Mix

375,000
2,600
24.0x
2,200
21.0x
1,800
17.0x
300,000
225,000
150,000
1,400
13.0x
75,000
1,000
9.0x
Apr-13
Dec-12
Apr-12
Aug-12
Dec-11
Apr-11
Aug-11
Dec-10
Apr-10
Aug-10
Dec-09
Apr-09
Aug-09
Dec-08
Apr-08
Aug-08
Mini
Executive
Compact
UVs
Super Compact
Vans
1QFY14
4QFY13
3QFY13
2QFY13
1QFY13
4QFY12
3QFY12
2QFY12
1QFY12
4QFY11
3QFY11
200
0
2QFY11
6.0x
1QFY11
Maruti Suzuki
600
Mid-Size
Exports
Source: Company
10
Autos
India I Equities
Result preview
9 July 2013
Hero MotoCorp
Rating: Sell
Share Price: `1,647
Weak demand; Sell

Key takeaways
Key data
Demand scenario unexciting. Hero MotoCorps 1Q sales were subdued

and marked a fourth successive quarter of yoy volume decline. Two-wheeler
sales were 5.1% lower yoy (flat qoq). Consequent on the weak demand
context for two-wheelers and on keener competition, we expect this
challenging industry scenario to continue into 1HCY13.
1Q likely to be subdued. We expect a slight 2.1% yoy income decline to
`61.1bn, and an 8.6% yoy EBITDA decline to `8.6bn. We expect a 14%
EBITDA margin (100bps lower yoy, 20bps up qoq). As previously guided to
by the management, in 4QFY13 the gross margin was better because of a
ramp-up in production of the new models. We expect the tax rate in 1Q to be
24%. We expect a 16.3% yoy drop in adjusted profit to `5.2bn.
Lower profitability per vehicle. Hurt by lower sales yoy, per-unit parameters
would deteriorate. While we expect realisation per unit to rise 3% yoy, per
vehicle contribution is expected to be better (3.8% yoy). EBITDA per vehicle
would decline 3.8% yoy and profit per vehicle drop 11.8% yoy.
Our take. We expect Hero MotoCorp to report yoy decline in profitability
due to lower two-wheeler dispatches in the quarter. In the past three quarters,
a weak demand environment has prevailed and is likely to continue into
1HFY13. We expect the entire two-wheeler sector to be under pressure in the
near tem, with only Honda Motors and Scooters India faring better than the
rest of the sector.
We maintain our Sell rating with a price target of `1,534, based on 13x Sep14
core earnings of `1,323 and the value of cash and investments at `207. At the
current market price, the stock quotes at a PE of 15.6x FY14e. Risks: Morethan expected rupee appreciation that could reduce royalty outflow, betterthan expected volumes and faster-than-expected recovery in rural growth.
HMCL IN / HROM.BO
52-week high / low

Sensex / Nifty
3-m average volume
Market cap
Shares outstanding
`2,135 / `1,434
19496 / 5868
US$14.8m
`330.13bn / US$5.50bn
199.7m
Promoters
- of which, Pledged
Free Float
- Public
52.21
3.00
47.79
31.99
7.10
8.70
52.21
3.00
47.79
31.99
7.10
8.70
52.21
3.00
47.79
32.24
6.67
8.78
Estimates revision (%)
FY13e
FY14e
FY15e
-0.8
-0.7
-0.9
13
-0.8
-0.7
-0.8
Sales
EBITDA
EPS
Target Core PE multiple (x)
Financials (YE Mar)
FY14e
FY15e
260,164
291,860
21,044
26,449
105.4
132.4
Growth (%)
-0.6
25.7
PE (x)
15.6
12.4
PBV (x)
5.8
4.9
RoE (%)
36.8
39.1
RoCE (%)
48.2
53.5
Sales (`m)
Net profit (`m)
EPS (`)
Dividend yield (%)

Net gearing (%)
4.3
4.9
34.5
34.6

1QFY13
1QFY14e
% yoy
FY12
FY13
Sales (`m)
62,473
61,143
-2.1
235,790
237,681
0.8
9,369
8,560
-8.6
36,048
32,845
-8.9
15.0
14.0
-100bps
15.3
13.8
-147bps
29
29
0.0
-79
119
-250.5
Depreciation (`m)
3,035
2,900
-4.4
10,974
11,418
4.0
Other income (`m)
1,044
1,149
10.0
3,408
3,984
16.9
PBT (`m)
7,349
6,779
-7.7
28,561
25,292
-11.4
Rohan Korde
Tax (`m)
1,194
1,627
36.2
4,866
4,110
-15.5
16.3
24.0
775bps
17.0
16.3
-78bps
+9122 6626 6733

6,155
5,152
-16.3
23,695
21,182
-10.6
EBITDA (`m)
EBITDA margin (%)
Interest (`m)
Tax rate (%)

% yoy
Source: Company
India Equities
9 July 2013
Hero MotoCorp Weak demand; Sell


Year-end: Mar
Net revenues
Revenue growth (%)
- Op. expenses
EBIDTA
EBITDA margin (%)
- Interest expenses
- Depreciation
+ Other income
- Tax
Reported Profit
Adjusted Profit
FY11
FY12
FY13
FY14e
FY15e
194,012
22.6
167,848
26,164
13.5
-19
4,024
2,688
1,148
4,419
18.6
19,279
20,269
-9.2
101.5
-9.2
235,790
21.5
199,743
36,048
15.3
-136
10,974
3,408
0
4,866
17.0
23,752
23,752
17.2
118.9
17.2
237,681
0.8
204,836
32,845
13.8
119
11,418
3,984
0
4,110
16.3
21,182
21,182
-10.8
106.1
-10.8
260,164
9.5
224,595
35,569
13.7
112
11,758
4,359
0
7,015
25.0
21,044
21,044
-0.6
105.4
-0.6
291,860
12.2
252,491
39,369
13.5
131
7,455
4,951
0
10,286
28.0
26,449
26,449
25.7
132.4
25.7
FY11
FY12
FY13
FY14e
FY15e
399
29,161
29,561
14,585
2,468
46,613
41,302
51,288
-46,692
715
46,613
200
-37,418
-1.3
-27
148.0
399
42,499
42,898
9,949
2,083
54,929
38,244
39,643
-23,725
768
54,929
200
-30,462
-0.7
-21
214.8
399
49,663
50,062
0
1,324
51,387
31,331
36,238
-17,993
1,810
51,387
200
-38,049
-0.8
-9
250.7
399
56,728
57,127
0
1,324
58,451
29,573
45,238
-19,430
3,070
58,451
200
-48,308
-0.8
-9
286.1
399
67,201
67,600
0
1,324
68,924
28,118
60,238
-21,090
1,658
68,924
200
-61,896
-0.9
-9
338.5

Reported Profit
+ Depreciation
Cash profit
Operating cash-flow
- Capex
Free cash-flow
- Dividend
+ Equity raised
+ Debt raised
- Investments
- Misc. items
Net cash-flow
Share capital
Reserves & surplus
Net worth
Total debt
Capital employed
Net fixed assets
Investments
Net working capital
Capital deployed
No. of shares (m)
Net debt
Net debt / Equity
WC turn days
Book value (`/sh)
Year-end: Mar
Year-end: Mar
FY11
FY12
FY13
FY14e
FY15e
19,279
4,024
23,303
-8,132
31,435
27,893
3,542
20,967
0
13,924
12,030
2,825
-18,357
19,072
715
23,752
10,974
34,726
22,967
11,758
7,587
4,171
8,987
0
-4,636
-11,645
2,141
53
715
768
21,182
11,418
32,599
5,732
26,867
4,505
22,362
11,982
0
-9,949
-3,404
2,794
1,042
768
1,810
21,044
11,758
32,802
-1,437
34,238
10,000
24,238
13,979
0
0
9,000
0
1,259
1,810
3,070
26,449
7,455
33,904
-1,660
35,564
6,000
29,564
15,976
0
0
15,000
0
-1,412
3,070
1,658
Year-end: Mar
P/E (x)
P/B (x)
EV/EBITDA (x)
RoE (%)
RoCE (%)
Dividend yield (%)
Dividend payout (%)
Debt to equity (%)
Core P/E (x)
Cash P/E
EV/sales
Inventory days
Receivables days
Payables days
Asset Turnover
FY11
FY12
FY13
FY14e
FY15e
16.2
11.1
11.1
68.6
53.3
6.4
126.4
0.5
17.9
13.5
1.5
10
2
39
4.1
13.8
7.7
8.3
55.4
51.9
2.7
44.3
0.2
15.4
9.5
1.3
11
4
36
4.3
15.5
6.6
8.9
42.3
49.5
3.6
66.2
0.0
17.9
10.1
1.2
10
10
29
4.6
15.6
5.8
7.9
36.8
48.2
4.3
77.7
0.0
18.3
10.0
1.1
10
10
29
4.4
12.4
4.9
6.8
39.1
53.5
4.9
70.7
0.0
14.3
9.7
0.9
10
10
29
4.2
Fig 5 PE band
Fig 6 Product mix
(`)
1,750,000
2,400
22.0x
1,500,000
19.0x
1,250,000
16.0x
1,000,000
13.0x
750,000
2,000
1,600
Hero Honda
1,200
10.0x
800
7.0x
500,000
250,000
Motorcycles
1QFY14
4QFY13
3QFY13
2QFY13
1QFY13
4QFY12
3QFY12
2QFY12
1QFY12
4QFY11
3QFY11
2QFY11
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
1QFY11
400
Scooters
Source: Company
12
Autos
India I Equities
Result preview
9 July 2013
Eicher Motors
Rating: Hold
Share Price: `3,610
CV weakness to hamper growth; we downgrade to a Hold

Key takeaways
Key data
Operating performance at Royal Enfield to be strong. The operating

performance at Royal Enfield is expected to be strong, helped by robust sales
and operating leverage. Following 30% yoy volume growth, we expect income
to grow 34.5% yoy to `3.4bn. The EBITDA margin is expected to come at
15%, 30bps lower yoy. While 1Q performance was good, we do not expect
the significantly high margin to recur. As a result, we expect Eicher Motors
standalone profit to be `402m, up 24.6% yoy.
EIM IN / EICH.BO
`3,882 / `1,900
19496 / 5868
US$0.9m
`97.31bn / US$1.62bn
27m
52-week high / low

Sensex / Nifty
3-m average volume
Market cap
Shares outstanding
Mar 13 Dec 12
Sep12
Promoters
- of which, Pledged
Free Float
- Public
55.19
44.81
12.88
11.83
20.10
55.19
44.81
10.68
13.70
20.43
55.20
44.80
9.08
15.34
20.38
Consolidated profit to stagnate. Consolidated revenue would be hit by the

present slump in M&H CV sales. CV sales in 2QCY13 were 3% lower yoy.
This would result in revenue in the consolidated results growing just 4.7% yoy.
On the weaker sales, we expect the EBITDA margin to come at 9.3% (down
60bps qoq). We expect the adjusted net profit to be `772m, up 1.6% yoy.
CY13e
CY14e
CY15e
2.4
-0.4
1.9
1.5
0.5
-7.7
- SOTP
0.0
2.2
-6.2
-
Our take. Royal Enfield continues to be robust due to greater capacity and
sustained demand. The M&H CV slide, however, is expected to result in a
lower growth rate for VECV. The recent run-up in the stock price has
rendered valuations rich. While we are optimistic from a long-term
perspective, we lower our rating to a Hold to reflect the fair valuations.
Financials (YE Dec)
Lower CV sales to eat into VECV growth. For the subsidiaries, we expect
a 1% revenue decline and 2.4% EBITDA growth. We expect the EBITDA
margin to be 7.8% (20bps lower qoq and 20bps higher yoy). Due to greater
depreciation, profit is expected to decline 15.4% yoy to `370m.
We have a target of `3,437. At the ruling price, the stock trades at a PE of

22.5x CY14e. Risks. Downside: Sustained M&H CV slump, commodity price
rise, delay in new project execution. Upside: Sequential improvement in
operating performance, recovery in the CV cycle in CY15, and quicker
revenue accretion from the engine plant.
Sales
EBITDA
EPS
Target PE multiple (x)
CY13e
CY14e
69,536
87,886
Net profit (`m)
3,375
4,333
EPS (`)
124.1
159.3
4.1
28.4
PE (x)
29.1
22.5
PBV (x)
4.5
3.6
RoE (%)
15.6
16.0
RoCE (%)
20.5
22.3
Sales (`m)
Growth (%)
Dividend yield (%)

Net gearing (%)
0.6
0.7
69,536
87,886

Quarterly results (YE Dec)
2QCY12
2QCY13e
% yoy
CY11
CY12
% yoy
Sales (`m)
15,850
16,600
4.7
56,844
63,899
12.4
1,395
1,544
10.6
5,894
5,490
-6.8
8.8
9.3
50bps
10.4
8.6
-178bps
11
40.1
77
38
-50.6
187
305
63.3
640
822
28.5
EBITDA (`m)
EBITDA margin (%)
Interest (`m)
Depreciation (`m)
306
329
7.4
1,425
1,366
-4.1
PBT (`m)
1,507
1,559
3.5
6,602
5,997
-9.2
Rohan Korde
Tax (`m)
381
417
9.5
1,628
1,249
-23.3
Tax rate (%)
25.3
26.8
148bps
24.7
20.8
-384bps
+9122 6626 6733

760
772
1.6
3,088
3,243
5.0
Other income (`m)
Source: Company
India Equities
9 July 2013
Eicher Motors CV weakness to hamper growth; we downgrade to a Hold


Year-end: Dec
Net revenues
Revenue growth (%)
- Op. expenses
EBIDTA
EBITDA margin (%)
- Interest expenses
- Depreciation
+ Other income
- Tax
Reported Profit bef MI
Profit after MI
Adj. Profit
CY10
CY11
CY12
CY13e
CY14e
44,213
49.5
40,402
3,811
8.6
95
573
1,034
0
1,108
56,844
28.6
50,951
5,894
10.4
77
640
1,425
0
1,628
63,899
12.4
58,409
5,490
8.6
38
822
1,366
0
1,249
69,536
8.8
62,976
6,561
9.4
38
1,243
1,415
0
1,855
87,886
26.4
79,194
8,692
9.9
38
1,502
1,296
0
2,276
26.5
3,069
1,889
1,889
126.5
69.4
24.7
4,974
3,088
3,088
63.4
113.5
20.8
4,749
3,243
3,243
5.0
119.2
27.7
4,839
3,375
3,375
4.1
124.1
26.9
6,172
4,333
4,333
28.4
159.3
CY10
CY11
CY12
269
12,052
12,321
956
7,023
20,301
4,547
4,586
-1,289
12,457
20,301
0
-16,086
-1.3
-1
457
270
14,661
14,931
371
9,021
24,324
8,567
5,126
-1,285
11,915
24,324
0
-16,670
-1.1
-1
553
270
17,279
17,549
384
10,717
28,649
14,962
6,385
-733
8,035
28,649
0
-14,036
-0.8
-1
650
CY13e
CY14e
270
270
21,394
26,750
21,664
27,020
384
384
10,717
10,717
32,764
38,120
13,175
15,173
7,185
9,085
-785
-878
13,190
14,740
32,764
38,120
0
0
-19,991 -23,441.1
-0.9
-0.9
-1
-1
802
1,001

Reported Profit
+ Depreciation
Cash profit
Operating cash-flow
- Capex
Free cash-flow
- Dividend
+ Equity raised
+ Debt raised
- Investments
- Misc. items
Net cash-flow
Share capital
Reserves & surplus
Net worth
Total debt
Capital employed
Net fixed assets
Investments
Net working capital
Capital deployed
No. of shares (m)
Net Debt
Net debt / Equity
WC turn days
Book value (`/sh)
Year-end: Dec
Year-end: Dec
CY10
CY11
CY12
CY13e
CY14e
3,069
573
3,642
-297
3,939
1,363
2,576
296
143
-307
-1,645
3,010
750
11,707
12,457
4,974
640
5,614
111
5,503
4,660
843
432
1
-585
-540
909
-542
12,457
11,915
4,749
822
5,570
758
4,812
7,216
-2,404
540
0
12
-1,259
2,207
-3,880
11,915
8,035
4,839
1,243
6,082
123
5,960
-544
6,503
621
0
0
-800
1,527
5,155
8,035
13,190
6,172
1,502
7,674
82
7,592
3,500
4,092
700
0
0
-1,900
3,741
1,550
13,190
14,740
Year-end: Dec
CY10
CY11
CY12
CY13e
CY14e
P/E (x)
P/B (x)
EV/EBITDA (x)
RoE (%)
RoCE (%)
Dividend yield (%)
Dividend payout (%)
Debt to equity (%)
Core P/E (x)
Cash P/E
EV/sales
Inventory days
Receivables days
Payables days
Asset Turnover
51.5
7.9
21.3
15.3
21.0
0.3
18.3
0.1
114.8
26.7
1.8
27.1
21.7
50.1
5.4
31.6
6.5
13.7
20.7
27.5
0.4
16.3
0.0
59.1
17.4
1.4
27.7
22.3
51.4
5.7
30.1
5.6
15.2
18.5
21.1
0.6
19.4
0.0
52.3
17.5
1.3
28.2
25.7
55.1
4.1
29.1
4.5
11.8
15.6
20.5
0.6
21.4
0.0
50.1
16.0
1.1
28.2
25.7
55.1
3.5
22.5
3.6
8.5
16.0
22.3
0.7
18.8
0.0
32.3
12.7
0.9
28.2
25.7
55.1
3.7
Fig 5 PE band
Fig 6 Trend in volume growth
4,000
3,500
29x
(units)
50,000
(%)
45
24x
45,000
40
3,000
19x
2,500
40,000
35
35,000
2,000
14x
30
30,000
1,500
9x
1,000
25
25,000
Eicher Motors
Volume
2QCY13
1QCY13
4QCY12
3QCY12
2QCY12
1QCY12
4QCY11
3QCY11
20
2QCY11
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
20,000
1QCY11
4x
500
yoy change (RHS)
14
Autos
India I Equities
Result preview
9 July 2013
Ashok Leyland
Rating: Sell
Target Price: `19
Share Price: `19
Demand squeeze continues; Sell

Key takeaways
Sales down, yoy and qoq. Ashok Leylands 1QFY14 sales were poor, a
21.2% yoy decline. The drop was all encompassing, as LCVs dipped 11.1%
yoy and M&H CVs were down 25.1% yoy. A near-term recovery is unlikely,
although 2H may have a slightly positive trajectory because of the lower base.
A full-fledged cyclical recovery is likely only in FY15.
Muted 1Q results. Following the poor sales performance, we expect a 22.8%
yoy drop in sales to `23.2bn. We expect an EBITDA margin of 5.3%, and
EBITDA would be 48.6% lower yoy to `1.2bn. We estimate a 1QFY14 loss
of `352m, against `669m profit last year.
Ramp-up of Dosts presence across India to continue. Dost covered 12
states in FY13. Ashok Leyland is now targeting an all-India presence by
FY14-end. It is aiming to sell nearly 50,000 units of Dost in FY14 (a growth
rate of over 40% yoy; our estimate is for ~9% growth). The company plans a
slew of launches in coming months. These include the Dost CNG, the 4tonner Partner, the Stile positioned in the Innova segment in 2H, and the 12tonner A-truck in the next 2-3 months.
Our take. At the wrong end of the CV cycle, Ashok Leyland is likely to
continue doing poorly in 1HFY14. Although its light commercial vehicle
Dost is doing well, and providing apparent support to volumes, the breadand-butter M&H CV segment continues to sputter. We have a Sell on the
stock
due to the ongoing downswing in the M&H CV cycle, with a near-term
`
recovery appearing unlikely. While the low 2HFY13 base would arrest the fall,
a recovery in volumes based on mounting demand is likely only in FY15. The
stock trades at 12.6x FY15e. Our target of `19 is based upon 8x Sep14e
EV/E. At this target, the stock would trade at a PE of 17x Sep14 EPS.
Risks. Strong economic growth, rise in freight rates, more-than-expected
LCV profitability.
1QFY13
1QFY14e
% yoy
FY12
FY13
Sales (`m)
30,073
23,214
-22.8
128,420
124,812
-2.8
2,407
1,237
-48.6
13,071
8,765
-32.9
EBITDA (`m)
Key data
ALIN / AL.BO
`29 / `18
19496 / 5868
US$3.7m
`50.28bn / US$838m
2,661m
52-week high / low

Sensex / Nifty
3-m average volume
Market cap
Shares outstanding
Mar 13
Dec 12
Sep 12
Promoters
- of which, Pledged
Free Float
- Public
38.61
7.05
61.39
16.89
13.13
31.37
38.61
7.05
61.39
16.93
13.67
30.79
38.61
7.05
61.39
14.79
14.32
32.28
Financials (YE Mar)
Sales (`m)
Net profit (`m)
FY14e
FY15e
125,116
146,410
1,942
3,999
0.7
1.5
Growth (%)
12.2
105.9
PE (x)
26.0
12.6
PBV (x)
1.6
1.6
RoE (%)
6.3
12.4
RoCE (%)
8.4
11.8
Dividend yield (%)
3.9
4.7
68.5
70.3
EPS (`)
Net gearing (%)

% yoy
EBITDA margin (%)
8.0
5.3
-267bps
10.2
7.0
-316bps
Interest (`m)
834
875
5.0
2,553
3,769
47.7
Depreciation (`m)
893
937
5.0
3,528
3,808
7.9
Other income (`m)
129
135
5.0
404
624
54.5
PBT (`m)
809
-440
-154.4
6,900
4,707
-31.8
Tax (`m)
140
-88
-162.9
1,240
370
-70.2
Tax rate (%)
17.3
20.0
270bps
18.0
7.9
-1,011bps
669
-352
-152.6
6,092
1,731
-71.6
Rohan Korde
+9122 6626 6733
Source: Company
India Equities
9 July 2013
Ashok Leyland Demand squeeze continues; Sell


Year-end: Mar
Net revenues
Revenue growth (%)
- Op. expenses
EBIDTA
EBITDA margin (%)
- Interest expenses
- Depreciation
+ Other income
- Tax
Reported Profit
Adjusted Profit
FY11
FY12
FY13
FY14e
FY15e
111,771
54.3
99,634
12,137
10.9
1,889
2,674
445
0
1,705
21.3
6,313
6,313
65.2
2.4
65.2
128,420
14.9
115,349
13,071
10.2
2,553
3,528
404
494
1,240
18.0
5,660
6,092
-3.5
2.3
-3.5
124,812
-2.8
116,047
8,765
7.0
3,769
3,808
624
-2,896
370
7.9
4,337
1,731
-71.6
0.7
-71.6
125,116
0.2
114,769
10,348
8.3
4,362
4,203
708
0
548
22.0
1,942
1,942
12.2
0.7
12.2
146,410
17.0
133,128
13,282
9.1
4,322
4,407
779
0
1,333
25.0
3,999
3,999
105.9
1.5
105.9
FY11
FY12
FY13
FY14e
FY15e
1,330
25,237
26,567
26,095
4,439
57,100
36,855
12,300
6,150
1,795
57,100
1,330
24,299
0.9
35
20.0
2,661
26,287
28,948
31,421
4,940
65,309
41,484
15,345
8,155
326
65,309
2,661
31,096
1.1
20
10.9
2,661
28,757
31,417
44,536
5,274
81,227
46,575
23,376
11,137
139
81,227
2,661
44,396
1.4
25
11.8
2,661
28,380
31,040
45,036
5,274
81,350
44,871
25,876
9,544
1,059
81,350
2,661
43,977
1.4
25
11.7
2,661
29,595
32,256
44,036
5,274
81,566
42,464
28,376
9,376
1,349
81,566
2,661
42,686
1.3
25
12.1

Reported Profit
+ Depreciation
Cash profit
Operating cash-flow
- Capex
Free cash-flow
- Dividend
+ Equity raised
+ Debt raised
- Investments
- Misc. items
Net cash-flow
Share capital
Reserves & surplus
Net worth
Total debt
Capital employed
Net fixed assets
Investments
Net working capital
Capital deployed
No. of shares (m)
Net debt
Net debt / Equity
WC turn days
Book value (`/sh)
Year-end: Mar
Year-end: Mar
FY11
FY12
FY13
FY14e
FY15e
Year-end: Mar
FY11
FY12
FY13
FY14e
FY15e
6,313
2,674
8,987
-450
9,437
4,966
4,471
2,661
0
4,056
9,038
221
-3,394
5,189
1,795
5,660
3,528
9,188
2,005
7,183
7,477
-294
2,661
0
5,326
3,045
797
-1,470
1,795
325
4,337
3,808
8,145
2,982
5,163
8,899
-3,736
1,596
0
13,115
8,032
-63
-186
326
140
1,942
4,203
6,146
-1,593
7,739
2,500
5,239
1,996
0
500
2,500
324
919
139
1,059
3,999
4,407
8,406
-168
8,574
2,000
6,574
2,395
0
-1,000
2,500
388
291
1,059
1,350
P/E (x)
P/B (x)
EV/EBITDA (x)
RoE (%)
RoCE (%)
Dividend yield (%)
Dividend payout (%)
Debt to equity (%)
Core P/E (x)
Cash P/E
EV/sales
Inventory days
Receivables days
Payables days
Asset Turnover
8.0
1.0
4.1
23.8
17.4
10.5
42.1
1.0
8.5
2.8
0.3
73
38
76
1.9
8.3
1.7
6.2
21.0
15.2
5.3
43.7
1.1
8.7
5.3
0.5
64
36
80
1.9
29.2
1.6
10.8
5.5
6.9
3.2
92.2
1.4
40.0
9.1
0.6
57
42
74
1.5
26.0
1.6
9.1
6.3
8.4
3.9
102.7
1.5
35.8
8.2
0.5
57
42
74
1.5
12.6
1.6
7.0
12.4
11.8
4.7
59.9
1.4
14.8
6.0
0.4
57
42
74
1.8
Fig 5 PE band
Fig 6 Volume-growth trend
100
(units)
40,000
(%)
200
75
35,000
150
30,000
100
25,000
50
20,000
15,000
-50
Volume (units)
1QFY14
4QFY13
3QFY13
2QFY13
1QFY13
4QFY12
3QFY12
2QFY12
1QFY12
4QFY11
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
3QFY11
Ashok Leyland
2QFY11
25
39x
32x
25x
18x
11x
4x
1QFY11
50
yoy change (%)
Source: Company
16
Autos
India I Equities
Result preview
9 July 2013
TVS Motors
Rating: Hold
Target Price: `39
Share Price: `33
Competitive pressures persist; Hold

Key takeaways.
Key data
TVSL IN / TVSM.BO
`50 / `31
19496 / 5868
US$1.1m
`15.25bn / US$254.16m
475.1m
Weak demand continues. During 1QFY14, moped and scooter sales were
down 10.9% and 9.5% respectively. Motorcycles fared better, but recorded
just 0.1% sales growth. Only the three-wheeler segment displayed a rocking
growth trajectory, up 90.5% yoy. Three-wheelers have been up consistently,
while two-wheelers continue to sputter.
52-week high / low

Sensex / Nifty
3-m average volume
Market cap
Shares outstanding
1Q results subdued. TVS Motors 1QFY14 results are expected to be weak,

with revenue growth of just 0.2% yoy to `18.2bn (volumes dipping 4.7% yoy
and realisations improving 5% yoy). We expect an EBITDA margin of 5.7%
(30bps higher qoq, 20bps yoy), and the EBITDA dipping 3.2% yoy. We
expect profit to decline 14.1% yoy to `439m. Our profit margin expectation is
2.4% (40bps lower qoq and yoy).
Mar 13
Dec 12
Sep 12
Promoters
- of which, Pledged
Free Float
- Public
57.40
42.60
1.83
18.18
22.59
57.40
42.60
1.93
18.09
22.58
57.40
42.60
1.27
18.27
23.06
Per-unit parameters lower qoq. We expect the EBITDA per vehicle to be

up 1.6% yoy (14.3% qoq), while the contribution per vehicle is expected to be
up 10.8% yoy (3.8% qoq). Profit per vehicle is expected to be lower 9.8% yoy
(down 7.8% qoq).
Our take. Subdued domestic and overseas sales would result in lower 1Q
results yoy. Yoy, profit is expected to be lower for a fifth consecutive quarter.
While intense competition, subdued domestic demand and lower overseas
sales could curb the yoy growth potential in 1HFY14, demand recovery is
likely in CY14. After FY13s 7.5% yoy decline, 1QFY14 volume decline was
4.7%. In view of the relatively inexpensive valuations, we maintain a Hold.
`
Risks.
Upside: Better-than-expected demand and operating performance,
possibility of a foreign technology tie-up or partnership, which would lead to
faster product development and product launches. Downside: Intensifying
competition leading to destructive price wars, steep rises in commodity prices
and lower-than-expected demand due to an industry slowdown.
Sales
EBITDA
EPS
Financials (YE Mar)
Sales (`m)
Net profit (`m)
FY14e
FY15e
0.0
0.0
-4.3
0.0
-4.0
-6.6
FY14e
FY15e
74,932
82,684
2,032
2,284
EPS (`)
4.3
4.8
Growth (%)
2.8
12.4
PE (x)
7.7
6.9
PBV (x)
1.2
1.0
RoE (%)
15.0
15.2
RoCE (%)
16.1
16.7
Dividend yield (%)

Net gearing (%)
4.5
5.3
58.3
53.8

1QFY13
1QFY14e
% yoy
FY12
FY13
Sales (`m)
18,198
18,229
0.2
71,262
70,650
-0.9
1,075
1,041
-3.2
4,694
4,090
-12.9
EBITDA (`m)
% yoy
EBITDA margin (%)
5.9
5.7
-20bps
6.6
5.8
-80bps
Interest (`m)
155
170
10.0
571
480
-15.9
Depreciation (`m)
310
341
10.0
1,175
1,304
11.0
51
56
10.0
217
238
9.8
PBT (`m)
661
585
-11.4
3,165
1,636
-48.3
Tax (`m)
150
146
-2.5
674
476
-29.4
Tax rate (%)
22.7
25.0
230bps
21.3
29.1
778bps
511
439
-14.1
2,491
1,978
-20.6
Other income (`m)
Rohan Korde
+9122 6626 6733
Source: Company
India Equities
9 July 2013
TVS Motors Competitive pressures persist; Hold


Year-end: Mar
Net revenues
Revenue growth (%)
- Op. expenses
EBIDTA
EBITDA margin (%)
- Interest expenses
- Depreciation
+ Other income
- Tax
Reported Profit
Adjusted Profit
FY11
FY12
FY13e
FY14e
FY15e
62,880
41.9
58,960
3,921
6.2
723
1,073
356
0
535
71,262
13.3
66,568
4,694
6.6
571
1,175
217
0
674
70,650
-0.9
66,560
4,090
5.8
480
1,304
238
908
476
74,932
6.1
70,473
4,458
6.0
451
1,444
259
0
790
82,684
10.3
77,764
4,920
5.9
465
1,564
282
0
888
21.6
1,946
1,946
451.7
4.1
451.7
21.3
2,491
2,491
28.0
5.2
28.0
29.1
1,160
1,978
-20.6
4.2
-20.6
28.0
2,032
2,032
2.8
4.3
2.8
28.0
2,284
2,284
12.4
4.8
12.4
FY11
FY12
FY13e
FY14e
FY15e
475
9,519
9,994
7,678
957
18,629
9,950
6,611
2,008
60
18,629
475
7,618
16.0
8
21.0
475
11,218
11,693
8,311
976
20,979
10,781
9,309
759
130
20,979
475
8,181
17.2
4
24.6
475
11,772
12,247
5,459
931
18,637
10,476
8,688
-702
175
18,637
475
5,284
11.1
-1
25.8
475
13,091
13,566
5,809
931
20,306
11,032
8,488
565
221
20,306
475
5,588
11.8
6
28.6
475
14,544
15,019
5,809
931
21,759
11,467
9,488
676
127
21,759
475
5,682
12.0
6
31.6

Reported Profit
+ Depreciation
Cash profit
Operating cash-flow
- Capex
Free cash-flow
- Dividend
+ Equity raised
+ Debt raised
- Investments
- Misc. items
Net cash-flow
Share capital
Reserves & surplus
Net worth
Total debt
Capital employed
Net fixed assets
Investments
Net working capital
Capital deployed
No. of shares (m)
Net debt
Net debt / Equity
WC turn days
Book value (`/sh)
Year-end: Mar
Year-end: Mar
FY11
FY12
FY13e
FY14e
FY15e
Year-end: Mar
FY11
FY12
FY13e
FY14e
FY15e
1,946
1,073
3,018
707
2,312
935
1,377
523
0
-2,355
-781
231
-950
1,010
60
2,491
1,175
3,666
-1,249
4,915
1,773
3,141
618
0
633
2,698
388
71
60
131
1,160
1,304
2,464
-1,461
3,926
999
2,927
570
0
-2,852
-621
81
44
130
174
2,032
1,444
3,476
1,267
2,209
2,000
209
713
0
350
-200
0
46
175
221
2,284
1,564
3,848
111
3,737
2,000
1,737
831
0
0
1,000
0
-94
221
127
P/E (x)
P/B (x)
EV/EBITDA (x)
RoE (%)
RoCE (%)
Dividend yield (%)
Dividend payout (%)
Debt to equity (%)
Core P/E (x)
Cash P/E
EV/sales
Inventory days
Receivables days
Payables days
Asset Turnover
8.1
1.6
5.9
19.5
17.2
3.3
30.9
0.8
9.9
5.2
0.3
31.2
16.0
39.5
3.3
6.3
1.3
5.1
21.3
17.8
3.9
28.5
0.7
6.9
4.3
0.2
30.5
12.2
38.5
3.3
7.9
1.3
5.1
16.1
16.2
3.6
56.5
0.4
9.0
4.8
0.2
26.7
15.7
43.1
3.7
7.7
1.2
4.8
15.0
16.1
4.5
40.3
0.4
8.8
4.5
0.2
30.0
15.7
40.0
3.6
6.9
1.0
4.3
15.2
16.7
5.3
41.9
0.4
7.8
4.1
0.1
30.0
15.7
40.0
3.7
Fig 5 PE band
Fig 6 Product mix
100
600,000
80
60
18x
500,000
15x
400,000
12x
300,000
9x
200,000
Scooters
Mopeds
Motorcycles
1QFY14
4QFY13
3QFY13
2QFY13
1QFY13
4QFY12
3QFY12
2QFY12
0
1QFY12
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
100,000
4QFY11
3x
3QFY11
6x
20
2QFY11
TVS Motors
1QFY11
40
Three-wheelers
Source: Company
18
Autos
India I Equities
Result preview
9 July 2013
VST Tillers & Tractors
Rating: Buy
Target Price: `509
Share Price: `374
Long-term outlook good; Buy

Key takeaways
2HFY13 was decent. After a dismal 2QFY13, which experienced channel
inventory correction, in the subsequent two quarters VSTs performance
recovered. While volumes of both power tillers and tractors dropped more
than we expected, realisations came better than we anticipated. In 4Q, sales of
power tillers declined 23.4% yoy, while sales of tractors dipped 13.5% yoy.
For FY13, sales of the latter were down 19.1% yoy, those of the former
12.2% yoy.
1QFY14 should continue the 2HFY14 trend. While there are nascent signs
of a recovery in tractors, the cyclical nature of the industry suggests that the
recovery would only be affirmed after the monsoon. Supported by estimated
15% yoy volume growth, we expect 12.1% yoy revenue growth to `1.4bn. We
expect an EBITDA margin of 15.5% (up 30bps qoq, down 80bps yoy). We
expect 6.8% growth in EBITDA to `225m, and profit of `152m, 8.9% yoy
and 0.9% qoq growth.
Long-term outlook good. Of the cultivated land, more than 50% is smaller
than four hectares; of this, ~42% is less than two hectares. Nearly 83% of
operational land-holders are marginal or small farmers, who own less than
two hectares. This trend augurs well for the company.
Our take. Lower offtake of tractors and power tillers had impacted the
2QFY13 performance. While 2HFY13 marked a noticeable improvement,
`
FY14 is expected to build on that. In 1QFY14 we expect a 12% yoy revenue
growth and 9% profit growth.
We are optimistic from a long-term perspective and maintain our Buy based
on 7.5x FY14e EPS. The stock quotes at 5.6x FY14e. Risks. High interest
rates, commodity-price rises, keener competition, delayed tractor recovery.
Key data
VSTT IN / VST.BO
`563 / `407
19496 / 5868
US$0.1m
`3.2bn / US$53.3m
8.6m
52-week high / low

Sensex / Nifty
3-m average volume
Market cap
Shares outstanding
Mar13
Dec12
Sep12
Promoters
- of which, Pledged
Free Float
- Public
53.85
46.15
2.27
5.47
38.41
53.85
46.15
2.27
5.46
38.42
53.85
46.15
2.64
4.89
38.62
Financials (YE Mar)
FY14e
FY15e
Sales (`m)
5,847
7,072
Net profit (`m)
581
727
EPS (`)
67.2
84.2
Growth (%)
19.6
25.2
PE (x)
5.6
4.4
PBV (x)
1.1
0.9
RoE (%)
19.9
20.5
RoCE (%)
29.0
30.0
Dividend yield (%)

Net gearing (%)
2.7
2.9
14.8
-2.7

1QFY13
1QFY14e
% yoy
FY12
FY13
1,291
1,448
12.1
5,306
4,817
-9.2
EBITDA (`m)
211
225
6.8
728
722
-0.9
EBITDA margin (%)
Sales (`m)
% yoy
16.3
15.5
-78bps
13.7
15.0
126bps
Interest (`m)
53.8
13
48.8
Depreciation (`m)
13.9
32
34
4.4
-54.6
11.1
46
21
PBT (`m)
208
221
6.1
734
696
-5.1
Rohan Korde
Tax (`m)
68
68
0.3
234
211
-10.2
Tax rate (%)
32.8
31.0
-177bps
31.9
30.2
-171bps
+9122 6626 6733

Profit (`m)
140
152
8.9
499
486
-2.7
Other income (`m)
Source: Company
India Equities
9 July 2013
VST Tillers and Tractors Long-term outlook good; Buy


Year-end: Mar
Net revenues
Revenue growth (%)
- Op. expenses
EBIDTA
EBITDA margin (%)
- Interest expenses
- Depreciation
+ Other income
- Tax
Reported Profit
Adjusted Profit
FY11
FY12
FY13
FY14e
FY15e
Year-end: Mar
4,253
23.4
3,573
681
16.0
7
23
60
0
249
35.0
462
462
9.3
53.5
9.3
5,306
24.8
4,579
728
13.7
9
32
46
0
234
31.9
499
499
8.1
57.8
8.1
4,817
-9.2
4,095
722
15.0
13
34
21
0
211
30.2
486
486
-2.7
56.2
-2.7
5,861
21.7
4,973
888
15.2
14
54
22
0
261
31.0
581
581
19.6
67.2
19.6
7,086
20.9
5,972
1,114
15.7
15
67
23
0
327
31.0
727
727
25.2
84.2
25.2
Share capital
Reserves & surplus
Net worth
Total debt
Capital employed
Net fixed assets
Investments
Working capital
Cash
Capital deployed
Net Debt
No. of shares (m)
Net Debt/ Equity (%)
WC days
Book value (`/sh)
FY11
FY12
FY13
FY14e
FY15e
86
1,554
1,640
0
28
1,668
557
368
534
208
1,668
-576
8.6
-12.6
69
190
86
1,963
2,049
160
32
2,241
632
244
1,158
206
2,241
-290
8.6
-2.2
103
237
86
2,357
2,444
0
29
2,473
915
42
1,185
329
2,473
-370
8.6
-13.5
120
283
86
2,838
2,924
0
29
2,953
1,161
42
1,509
239
2,953
-280
8.6
-8.2
120
338
86
3,455
3,541
0
29
3,570
1,294
42
1,896
336
3,570
-377
8.6
-9.5
120
410

Year-end: Mar
FY11
FY12
FY13
FY14e
FY15e
PAT
+ Non-cash items
Cash profit
- Incr./(Decr.) in WC
Operating cash-flow
- Capex
Free cash-flow
- Dividend
+ Equity raised
+ Debt raised
- Investments
- Misc. items
Net cash-flow
462
23
485
-125
610
52
558
78
0
-108
325
-10
58
150
207
499
32
531
624
-93
107
-200
78
0
160
-124
8
-2
208
206
486
34
519
35
484
317
168
78
0
-160
-202
10
123
206
329
581
54
635
340
296
300
-4
86
0
0
0
-1
-90
329
239
727
67
795
393
402
200
202
95
0
0
0
9
98
239
337
Year-end: Mar
FY11
FY12
FY13
FY14e
FY15e
P/E (x)
P/B (x)
EV/EBITDA (x)
RoE (%)
RoCE (%)
Dividend yield
Dividend payout (%)
Debt to equity (%)
Core P/E (x)
Cash P/E
EV/sales
Inventory days
Receivables days
Payables days
Asset Turnover
7.0
2.0
3.9
28.2
43.0
2.4
16.8
0.0
8.0
6.7
0.6
47
53
32
2.5
6.5
1.6
4.0
24.4
33.1
2.4
15.6
0.1
7.1
6.1
0.6
45
85
28
2.4
6.7
1.3
4.0
19.9
28.7
2.4
16.0
0.0
7.0
6.2
0.6
63
74
17
1.9
5.6
1.1
3.3
19.9
29.0
2.7
14.9
0.0
5.8
5.1
0.5
63
74
17
2.0
4.4
0.9
2.6
20.5
30.0
2.9
1.3
0.0
4.6
4.1
0.4
63
74
17
2.0
Fig 5 PE band
Fig 6 Trend in EBITDA margin

(%)
800
11x
18
9x
600
16
7x
400
VST Tillers
5x
3x
200
14
12
1x
0
FY15e
FY14e
FY13
FY12
FY11
FY10
FY09
FY08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
10
Source: Company
20
Auto Components
India I Equities
Result preview
92July 2013
Motherson Sumi Systems
Rating: Buy
Target Price: `249
Share Price: `206
Rising trajectory to continue; Buy

Key takeaways
Domestic performance to be decent. While car sales in India have been
lower yoy, Motherson Sumi Systems (MSS) is in a position to ably combat this
deceleration. This is possible through supply of new models, fewer supplies to
OEMs and the upward trend in passenger-car models. Ytd performance at its
India operations has been good, as exports were ramped up and plants
commissioned to meet further demand.
Steady performance by SMR, SMP. We expect the Europe-centric
companies, SMR and SMP, to maintain a trajectory of steadily improving
performances. We expect SMPs 1QFY13 EBITDA margin to be 3% and
SMRs 7%. Ahead, a recovery in European automotive production may
strongly benefit both these companies.
Consolidated results likely to be good. Consolidated revenues are expected
to grow 5.2% yoy, to `67.2bn. We expect 7.3% consolidated EBITDA margin
(up 20bps yoy) and profit to grow 20.7% yoy to `1.3bn.
Our take. MSS is expected to continue marching ahead, aided by product
launches and customer additions, greater synergies from integrating its
European acquisitions and turnaround of its unprofitable plants. Launches by
OEMs and customer additions would further boost growth.
We retain a Buy, with a price target of `249. At our target price, the stock
would trade at 16.5x Sep 14e; at the ruling price, it trades at 15.5x FY14e.
Risks. Sustained slowdown in European demand, delay in launches of new
models, currency volatility, complicated company structure.
Key data
MSS IN / MOSS.BO
52-week high / low

Sensex / Nifty
3-m average volume
Market cap
Shares outstanding
`213/ `103
19496 / 5868
US$1.2m
`121.69bn / US$2.44bn
587.9m
Mar 13 Dec 12 Sep12
Promoters
- of which, Pledged
Free Float
- Public
65.59
17.85
34.41
15.19
9.57
9.65
Financials (YE Mar)
Sales (`m)
Net profit (`m)
65.59
24.70
34.41
13.93
9.50
10.98
65.60
26.43
34.40
13.66
9.96
10.78
FY14e
FY15e
297,595
338,194
7,802
9,945
EPS (`)
13.3
16.9
Growth (%)
44.5
27.5
PE (x)
15.5
12.2
PBV (x)
4.1
3.2
RoE (%)
26.9
26.8
RoCE (%)
23.9
28.0
Dividend yield (%)

Net gearing (%)
1.1
1.2
75.8
70.0

Standalone Quarterly results (YE Mar)
1QFY13
1QFY14e
% yoy
FY12
FY13
% yoy
Sales (`m)
63,880
67,185
5.2
149,076
256,170
71.8
4,552
4,929
8.3
10,744
19,440
80.9
EBITDA margin (%)
7.1
7.3
21bps
7.2
7.6
38bps
Interest (`m)
660
601
-8.9
1,649
2,495
51.3
1,643
1,825
11.1
3,796
7,145
88.2
38
45
17.8
135
170
25.5
PBT (`m)
279
2,548
813.6
4,117
8,342
102.6
Rohan Korde
Tax (`m)
700
637
-9.0
2,153
3,835
78.1
Tax rate (%)
251.1
25.0
NM
52.3
46.0
-633bps
+9122 66266733
PAT (`m)
1,112
1,342
20.7
3,519
5,400
53.5
EBITDA (`m)
Depreciation (`m)
Other income (`m)
Source: Company
India Equities
9 July 2013
Motherson Sumi Systems Rising trajectory to continue; Buy


Year-end: Mar
Net revenues
Revenue growth (%)
- Op. expenses
EBIDTA
EBITDA margins (%)
- Interest
- Depreciation
+ Other income
- Extraordinaries & others
- Tax
Reported PAT before MI
Adjusted PAT
PAT growth (%)
FY11
FY12
FY13
FY14e
FY15e
83,460
21.8
74,824
8,636
10.3
576
2,465
130
-465
1,883
30.4
4,307
3,583
90.6
6.1
90.6
149,076
78.6
138,332
10,744
7.2
1,649
3,796
135
1,318
2,153
52.3
1,963
3,519
-1.8
6.0
-1.8
256,170
71.8
236,730
19,440
7.6
2,495
7,145
170
1,628
3,835
46.0
4,507
5,400
53.5
9.2
53.5
297,595
16.2
272,118
25,477
8.6
2,594
8,038
191
0
7,142
47.5
7,893
7,802
44.5
13.3
44.5
338,194
13.6
307,860
30,334
9.0
2,400
8,842
215
0
9,171
47.5
10,136
9,945
27.5
16.9
27.5
FY11
FY12
FY13
FY14e
FY15e
388
15,700
16,087
12,607
2,286
30,980
21,566
465
5,418
3,532
30,980
388
9,075
56.4
39
41.5
388
18,329
18,717
46,023
5,629
70,369
51,379
938
13,494
4,557
70,369
388
41,466
221.5
54
48.3
588
22,302
22,890
40,712
4,585
68,186
56,629
717
4,897
5,944
68,186
588
34,768
151.9
34
38.9
588
28,752
29,339
39,712
4,785
73,836
57,590
717
6,068
9,461
73,836
588
30,251
103.1
34
49.9
588
37,226
37,814
34,712
4,985
77,511
57,748
717
7,218
11,828
77,511
588
22,884
60.5
34
64.3

PAT
+ Non-cash items
Cash profit
Operating cash-flow
- Capex
Free cash-flow
- Dividend
+ Equity raised
+ Debt raised
- Investments
- Misc. items
Net cash-flow
Cl. Cash & bank bal.
Share capital
Reserves & surplus
Net worth
Total debt
Capital employed
Net fixed assets
Investments
Working capital
Cash
Capital deployed
Net debt
No. of shares (m)
Net debt/equity (x)
W C turn (days)
Book value (`/sh)
Year-end: Mar
Year-end: Mar
FY11
FY12
FY13
FY14e
FY15e
3,908
2,465
6,373
3,798
2,575
8,486
-5,911
1,070
13
4,428
-6
-2,636
102
3,431
3,532
2,596
3,796
6,393
8,076
-1,684
56,666
-58,349
890
0
33,416
473
-27,322
1,025
3,532
4,557
4,445
7,145
11,591
-8,598
20,188
12,395
7,794
1,176
0
-5,311
-221
141
1,387
4,557
5,944
7,802
8,038
15,840
1,172
14,669
9,000
5,669
1,352
0
-1,000
0
-200
3,517
5,944
9,461
9,945
8,842
18,787
1,149
17,638
9,000
8,638
1,470
0
-5,000
0
-200
2,368
9,461
11,828
Year-end: Mar
FY11
FY12
FY13
FY14e
FY15e
P/E (x)
P/B (x)
EV/EBITDA (x)
RoE (%)
RoCE (%)
Dividend yield (%)
Dividend payout (%)
Debt to equity (x)
Core P/E (x)
Cash P/E (x)
EV/sales (x)
Inventory days
Receivables days
Payables days
Asset T/O (x)
33.8
5.0
10.2
26.8
20.3
1.3
27.4
0.8
34.6
11.8
1.1
46.3
42.7
50.0
2.6
34.4
4.3
11.2
10.5
10.1
1.1
34.3
2.5
35.3
13.9
0.8
55.8
74.8
76.9
2.1
22.4
5.3
8.0
19.7
18.3
1.0
26.4
1.8
22.9
10.4
0.6
37.7
42.5
46.0
3.7
15.5
4.1
5.9
26.9
23.9
1.1
17.3
1.4
15.8
7.6
0.5
37.7
42.5
46.0
4.0
12.2
3.2
4.7
26.8
28.0
1.2
14.8
0.9
12.4
6.4
0.4
37.7
42.5
46.0
4.3
Fig 5 PE band
Fig 6 Trend in EBITDA Margin

(%)
450
30x
400
16
26x
350
14
22x
300
250
18x
200
14x
150
10x
12
10
100
8
Motherson Sumi
Systems
50
FY15e
FY14e
FY13
FY12
FY11
FY10
FY09
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
FY08
22
Auto Components
India I Equities
Result preview
9 July 2013
Rating: Buy
Target Price: `154
Share Price: `124
Exide Industries
Hoping for a recovery again; Buy
Key takeaways
Weak sales growth. On lower OEM sales and subdued auto-replacement
demand, we expect sales growth to come at just 5% yoy, to `16.3bn. In FY13,
the company had regained some of its lost market share and hopes to further
recover lost share.
Margin to be lower. We expect 210bps yoy EBITDA margin decline (30bps
higher yoy), to 13.5%. Although FY13 margin had disappointed, price
increases taken by the company in July would help cover costs, going forward.
Delays from OEMs, in terms of sanction of price increases, has been
adversely affecting Exides gross margins. With these price hikes now
sanctioned, profitability could improve. We expect 2.2% yoy profit decline, to
`1.5bn (up 1.5% qoq).
Lower capex guidance. The company intends to spend `1.9bn in FY13
towards capex, lowering it from the previously mentioned `2.5bn.
Our take. While Exide Industries FY13 performance was average, 4Q
marked a qoq improvement. With price increases, hopes for an operational
recovery has build up again, although lower OEM demand is a dampener. An
improving replacement-to-OEM ratio and ~5% price hikes in auto
replacement and UPS segments in July would help counter cost pressures,
thereby improving profitability.
` maintain Buy on the company, with a price target of `154, based upon a
We
one-year-forward standalone PE of 18.5x (on par with its past five-year
average) and value the companys stake in ING Vysya Life Insurance at `17.
Risks. Market-share loss, low industrial demand and pricing power,
commodity risk and price wars.
Key data
EXID IN /EXID.BO
52-week high / low

Sensex / Nifty
3-m average volume
Market cap
Shares outstanding
`166/ `115
19496 / 5868
US$4.2m
`103.74bn / US$1.73bn
850m
Mar13
Dec12
Sep12
Promoters
- of which, Pledged
Free Float
- Public
45.99
54.01
17.67
13.63
22.71
45.99
54.01
16.69
13.29
24.03
45.99
54.01
17.57
13.84
22.60
Financials (YE Mar)
Sales (`m)
Net profit (`m)
FY14e
FY15e
70,149
81,774
6,436
7,858
7.6
9.2
Growth (%)
22.9
22.1
PE (x)
16.4
13.4
PBV (x)
2.7
2.3
RoE (%)
16.5
17.5
RoCE (%)
23.1
24.6
EPS (`)
Dividend yield (%)

Net gearing (%)
1.6
1.8
10.5
11.5

1QFY13
1QFY14e
% yoy
FY12
FY13
% yoy
Sales (`m)
15,536
16,313
5.0
51,110
60,768
18.9
2,431
2,204
-9.3
6,879
7,910
15.0
15.6
13.5
-213bps
13.5
13.0
-44bps
14
-48.5
53
42
-21.3
276
280
1.4
1,007
1,135
12.7
11.3
EBITDA (`m)
EBITDA margin (%)
Interest (`m)
Depreciation (`m)
147
176
19.4
633
704
PBT (`m)
2,185
2,093
-4.2
6,452
7,423
15.1
Rohan Korde
Tax (`m)
665
607
-8.7
1,840
2,195
19.3
Tax rate (%)
30.4
29.0
-143bps
28.5
29.6
105bps
+9122 6626 6733

1,595
1,486
-6.8
4,612
5,238
13.6
Other income (`m)
PAT (`m)
Source: Company
India Equities
9 July 2013
Exide Industries Hoping for a recovery again; Buy


Year-end: Mar
Net revenues
Revenue growth (%)
- Op. expenses
EBIDTA
EBITDA margin (%)
- Interest expenses
- Depreciation
+ Other income
- Extraordinaries
- Tax
Reported PAT
Adjusted PAT
PAT growth (%)
FDEPS (`/share)
FDEPS growth (%)
FY11
FY12
FY13
FY14e
FY15e
45,775
20.0
36,902
8,873
19.4
57
835
799
-623
2,740
29.1
6,664
6,246
19.3
7.3
19.3
51,110
12.2
44,232
6,879
13.5
53
1,007
633
0
1,840
28.5
4,612
4,612
-26.2
5.4
-26.2
60,768
18.9
52,859
7,910
13.0
42
1,135
704
15
2,195
29.6
5,228
5,238
13.6
6.2
13.6
70,149
15.4
60,437
9,711
13.8
42
1,286
811
0
2,758
30.0
6,436
6,436
22.9
7.6
22.9
81,774
16.6
69,961
11,813
14.4
42
1,467
921
0
3,368
30.0
7,858
7,858
22.1
9.2
22.1
FY11
FY12
FY13
FY14e
FY15e
850
26,575
27,425
1
675
28,100
8,833
13,780
5,340
147
28,100
-146.8
850
-0.5
59
32.3
850
29,723
30,573
0
825
31,398
9,932
15,546
5,343
577
31,398
-576.7
850
-1.9
57
36.0
850
33,386
34,236
0
977
35,212
10,532
16,401
7,531
748
35,212
-747.9
850
-2.2
67
40.3
850
38,122
38,972
0
977
39,949
12,246
18,401
4,933
4,369
39,949
-4,368.6
850
-11.2
45
45.8
850
44,068
44,918
0
977
45,894
13,778
20,901
7,161
4,053
45,894
-4,053.1
850
-9.0
49
52.8

PAT
+ Non-cash items
Cash profit
Operating cash-flow
- Capex
Free cash-flow
- Dividend
+ Equity raised
+ Debt raised
- Investments
- Misc. items
Net cash-flow
Share capital
Reserves & surplus
Net worth
Total debt
Capital employed
Net fixed assets
Investments
Working capital
Cash
Capital deployed
Net Debt
No. of shares (m)
WC days
Book value (`/sh)
Year-end: Mar
Year-end: Mar
FY11
FY12
FY13
FY14e
FY15e
Year-end: Mar
FY11
FY12
FY13
FY14e
FY15e
6,664
835
7,498
2,068
5,430
2,344
3,086
1,275
0
-899
426
367
119
29
148
4,612
1,007
5,618
62
5,557
1,946
3,611
1,275
0
-1
1,766
139
430
147
577
5,228
1,135
6,363
2,200
4,163
1,735
2,428
1,360
0
0
855
42
171
577
748
6,436
1,286
7,722
-2,598
10,321
3,000
7,321
1,700
0
0
2,000
0
3,621
748
4,369
7,858
1,467
9,325
2,228
7,097
3,000
4,097
1,913
0
0
2,500
0
-316
4,369
4,053
P/E (x)
P/B (x)
EV/EBITDA (x)
RoE (%)
RoCE (%)
Dividend yield
Dividend payout (%)
Debt to equity (%)
Core P/E (x)
Cash P/E
EV/sales
Inventory days
Receivables days
Payables days
Asset Turnover
16.9
3.8
10.3
22.8
31.5
1.2
20.4
0.0
18.5
14.9
2.0
68
29
39
1.6
22.9
3.4
13.0
15.1
20.7
1.2
27.6
0.0
25.2
18.8
1.7
69
29
41
1.6
20.1
3.1
11.2
15.3
21.2
1.3
26.0
0.0
22.1
16.5
1.5
70
31
34
1.7
16.4
2.7
8.5
16.5
23.1
1.6
26.4
0.0
17.9
13.6
1.2
64
25
44
1.8
13.4
2.3
6.8
17.5
24.6
1.8
24.3
0.0
14.6
11.3
1.0
66
25
42
1.8
Fig 5 PE band

(%)
300
24
250
30x
22
25x
200
20
20x
150
18
15x
100
Exide Industries
10x
50
5x
16
14
FY15e
FY14e
FY13
FY12
FY11
FY10
FY09
FY08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
12
Source: LME
24
Auto Components
India I Equities
Result preview
9 July 2013
Bharat Forge
Rating: Hold
Target Price: `236
Share Price: `216
Sluggish times continue; Hold

Key takeaways
Dip in tonnage. Bharat Forges production tonnage is expected to decline
27.5% yoy during the quarter due to shrunken customer demand in India and
Europe. At home, continued slowdown in M&H CVs and lower non-auto
offtake has hit sales. In Europe, the industry-wide slowdown would have an
adverse impact. We are optimistic about the companys long-term strategy to
become a diversified forgings-parts manufacturer as well as strong US
demand in FY13, but believe that these will not suffice to counter the
stagnation in its domestic revenue. Moreover, for North America, the
company has projected a weak outlook ahead.
Key data
BHFC IN / BRFG.BO
`322 / `196
19496 / 5868
US$2.1m
`50.39bn / US$839.8bn
232.8m
52-week high / low

Sensex / Nifty
3-m average volume
Market cap
Shares outstanding
Mar 13
Dec 12
Sep 12
Standalone profitability down. We expect standalone income to decline

26.8% yoy, to `6.9bn. We expect a sequential reduction of 30bps in the
EBITDA margin, to 20.7%, and a 39.7% decline in EBITDA. EBITDA per
tonne is expected to be lower 16.9% yoy. Our profit expectation is `532m, a
49.4% yoy decline.
Promoters
- of which, Pledged
Free Float
- Public
42.05
57.95
9.44
18.95
29.56
42.05
57.95
9.47
18.89
29.59
42.05
57.95
9.51
19.06
29.38
Subsidiaries weak. In 4QFY12, revenue contribution from subsidiaries and

the China operations declined 6.5% yoy. However, both of them did manage
to report relatively good EBITDA margins of 9.1% and 3% respectively.
Nevertheless, PBT level losses at its China operations continued, leading to
consolidated PBT declining ~22% yoy. In 1QFY14, we expect the weak trend
to continue.
Cons Financials (YE Mar)
Our take. As the company heavily depends on M&H CVs, the ongoing
`
slowdown
in this segment would bear on its results. The outlook for 1HFY14
is weak due to poor domestic M&H CV sales, slowdown in Europe and
shrinking demand from North America. We lower our estimates to factor in
narrower EBITDA margins (consolidated) in FY14. On short-to-mid term
concerns, we maintain Hold on the stock. Risks. Downside. Slowdown in
execution, drop in US sales. Upside. Faster-than-expected CV recovery,
improvement in overseas demand.
1QFY13
1QFY14e
% yoy
FY12
FY13
% yoy
Sales (`m)
9,364
6,857
-26.8
36,860
31,512
-14.5
EBITDA (`m)
2,351
1,417
-39.7
9,168
7,156
-21.9
25.1
20.7
-444bps
24.9
22.7
-216bps
EBITDA margin (%)
Sales (`m)
Net profit (`m)
FY14e
FY15e
57,545
67,710
2,453
3,405
10.3
14.2
4.9
38.8
PE (x)
21.1
15.2
PBV (x)
2.1
1.9
RoE (%)
8.2
12.3
RoCE (%)
9.5
12.6
Dividend yield (%)
1.4
1.6
52.1
53.3
EPS (`)
Growth (%)
Net gearing (%)

Interest (`m)
547
356
-35.0
1,505
1,534
1.9
Depreciation (`m)
565
560
-0.9
2,149
2,239
4.2
Other income (`m)
279
293
5.0
661
916
38.6
Rohan Korde
1,518
794
-47.7
5,471
4,405
-19.5
+9122 6626 6733

PBT (`m)
Tax (`m)
466
262
-43.7
1,850
1,349
-27.1
Tax rate (%)
30.7
33.0
231bps
33.8
30.6
-319bps
1,052
532
-49.4
4,325
2,950
-31.8

Source: Company
India Equities
9 July 2013
Bharat Forge Sluggish times continue; Hold


Year-end: Mar
Net revenues
Revenue growth (%)
- Op. expenses
EBIDTA
EBITDA margin (%)
- Interest expenses
- Depreciation
+ Other income
- Tax
Reported Profit bef MI
Adjusted Profit
FY11
FY12
FY13
FY14e
FY15e
50,873
52.9
43,022
7,851
15.4
1,529
2,548
671
77
1,402
32.1
2,966
2,956
1,831.6
12.4
1,831.6
62,791
23.4
52,830
9,961
15.9
1,837
3,019
893
0
1,796
29.9
4,202
4,130
39.8
17.3
39.8
57,022
-9.2
49,328
7,694
13.5
1,908
3,360
1,126
-198
1,728
46.1
2,021
2,337
-43.4
9.8
-43.4
57,545
0.9
49,877
7,667
13.3
1,836
3,663
1,238
0
1,431
42.0
1,976
2,453
4.9
10.3
4.9
67,710
17.7
57,671
10,039
14.8
1,916
3,938
1,288
0
2,189
40.0
3,284
3,405
38.8
14.2
38.8
FY11
FY12
FY13
FY14e
FY15e
466
19,064
19,529
19,014
2,863
41,406
26,634
2,614
8,195
3,964
41,406
233
15,050
77.1
58
83.9
466
21,437
21,903
27,608
2,843
52,353
31,652
3,870
10,113
6,718
52,353
233
20,890
95.4
65
94.1
466
22,098
22,564
26,745
2,988
52,296
35,423
4,160
7,161
5,554
52,296
233
21,191
93.9
51
96.9
466
23,739
24,205
27,745
3,113
55,063
35,760
6,160
8,231
4,912
55,063
233
22,833
94.3
51
104.0
466
26,197
26,663
28,745
3,238
58,645
36,822
7,160
10,678
3,985
58,645
233
24,759
92.9
51
114.5
FY11
FY12
FY13
FY14e
FY15e
17.5
2.6
8.0
15.2
14.4
1.6
31.9
1.0
21.1
9.1
1.3
68.8
53.7
117.4
1.2
12.5
2.3
6.8
19.2
15.0
1.9
25.8
1.3
15.0
7.0
1.1
84.5
46.8
116.6
1.2
22.1
2.2
8.8
9.0
10.4
1.1
32.1
1.2
33.4
9.3
1.2
85.1
38.5
137.2
1.1
21.1
2.1
8.7
8.2
9.5
1.4
41.1
1.1
32.6
8.9
1.2
84.8
38.4
136.9
1.0
15.2
1.9
6.8
12.3
12.6
1.6
28.8
1.1
20.8
7.0
1.0
86.1
38.4
136.6
1.1

Reported Profit
+ Depreciation
Cash profit
Operating cash-flow
- Capex
Free cash-flow
- Dividend
+ Equity raised
+ Debt raised
- Investments
- Misc. items
Net cash-flow
Share capital
Reserves & surplus
Net worth
Total debt
Capital employed
Net fixed assets
Investments
Net working capital
Capital deployed
No. of shares (m)
Net debt
Net debt / Equity
WC turn days
Book value (`/sh)
Year-end: Mar
Year-end: Mar
FY11
FY12
FY13
FY14e
FY15e
Year-end: Mar
2,902
2,548
5,450
4,062
1,387
3,655
-2,268
815
20
-3,513
-123
-4,439
-2,013
5,977
3,964
4,130
3,019
7,149
1,919
5,230
8,215
-2,985
931
0
8,594
1,256
668
2,753
3,964
6,718
2,476
3,360
5,836
-2,953
8,789
7,131
1,657
559
0
-863
290
1,110
-1,164
6,718
5,553
2,453
3,663
6,116
1,071
5,045
4,000
1,045
699
0
1,000
2,000
-12
-641
5,554
4,912
3,405
3,938
7,342
2,447
4,896
5,000
-104
815
0
1,000
1,000
7
-926
4,912
3,985
P/E (x)
P/B (x)
EV/EBITDA (x)
RoE (%)
RoCE (%)
Dividend yield (%)
Dividend payout (%)
Debt to equity (%)
Core P/E (x)
Cash P/E
EV/sales
Inventory days
Receivables days
Payables days
Asset Turnover
Fig 5 PE band
Fig 6 Consolidated sales break-up, by business
600
100%
500
80%
60%
400
33x
30x
27x
24x
21x
300
Bharat Forge
200
40%
20%
18x
Standalone
WOS
FY12
FY11
FY10
Jul-13
Apr-13
Jan-13
Oct-12
Jul-12
Apr-12
Jan-12
Oct-11
Jul-11
Apr-11
Jan-11
Oct-10
Jul-10
Apr-10
FY09
FY08
0%
100
China
Source: Company
26
Auto Components
India I Equities
Result preview
92July 2013
Amara Raja Batteries
Rating: Buy
Target Price: `319
Share Price: `267
Replacement demand key; upgrade to Buy

Key takeaways
Key data
Decent performance. Amara Raja Batteries (ARB) is expected to report a

decent performance in 1QFY14, on its sustained leadership in the telecom
and UPS segments, as well as replacement demand providing some stability to
the automotive segment. We expect 15% yoy sales growth to `8bn and flat
yoy EBITDA at `1.2bn, while EBITDA margin is expected to be 15% (up
110bps qoq, but down 220bps yoy). The adjusted profit growth is expected to
be slightly loweryoy by 1.9%, to `747m (25.6% higher qoq).
Growth triggers in place. Through its increased capacity in two wheelers,
ARB registered strong growth in the automotive segment in FY13. Good
product quality, improved brand equity, and a sound technological base and
support from foreign partner is helping ARB take on competition in a
resounding way. Its centralized operations have also helped ARB to maintain
a relatively lower cost structure vis--vis competition.
Our take. The battery segment would feel the need for price increases due to
mounting input costs, currency volatility and weak OEM demand.
Competitive intensity is likely to increase with OEM demand weakness
continuing. However, with a good product portfolio, higher replacement
exposure, good industrial demand, ARB would outperform in the auto
ancillary space. The stock has stagnated in the past six months after a rerating in CY12, but is poised for a better performance hereon. Hence, we
upgrade it to a Buy with a target price of `319 based upon 15x Sep14
earnings. At the ruling price, it trades at 13.8x FY14e EPS. Risks. Keener
competition, input cost rise, capacity constraints, negative impact of rupee
depreciation, valuations close to its all-time high, and a substantial premium
to its past 5-year average of 8.3x.
AMRJ IN / AMAR.BO
52-week high / low

Sensex / Nifty
3-m average volume
Market cap
Shares outstanding
`328/ `134
19496 / 5868
US$1.8m
`45.26bn / US$754.33m
170.8m
Promoters
- of which, Pledged
Free Float
- Public
52.06
4.08
47.94
10.10
15.28
22.56
Sales
EBITDA
EPS
Financials (YE Mar)
Sales (`m)
Net profit (`m)
52.06
4.61
47.94
6.82
17.62
23.50
52.06
4.61
47.94
6.32
18.62
23.00
FY14e
FY15e
-3.4
-3.5
-5.3
-3.5
-2.6
-3.5
FY14e
FY15e
34,483
40,617
3,313
3,941
EPS (`)
19.4
23.1
Growth (%)
13.1
19.0
PE (x)
13.8
11.6
PBV (x)
3.4
2.7
RoE (%)
24.9
23.7
RoCE (%)
34.3
33.2
Dividend yield (%)

Net gearing (%)
1.1
1.2
-12.9
-16.2

1QFY13
1QFY14e
% yoy
FY12
FY13
% yoy
Sales (`m)
6,938
7,979
15.0
29,811
34,483
15.7
EBITDA (`m)
1,195
1,196
0.0
4,712
5,316
12.8
17.2
15.0
-224bps
15.8
15.4
-39bps
548.8
10
35
249.3
129
149
15.0
661
691
4.5
18.2
EBITDA margin (%)

Interest (`m)
Depreciation (`m)
59
67
15.0
269
318
PBT (`m)
1,123
1,106
-1.5
4,218
4,908
16.4
Rohan Korde
Tax (`m)
362
360
-0.7
1,351
1,595
18.1
Tax rate (%)
32.3
32.5
25bps
32.0
32.5
47bps
+9122 66266733
761
747
-1.9
2,928
3,313
13.1
Other income (`m)
Source: Company
India Equities
9 July 2013
Amara Raja Batteries Replacement demand key; upgrade to Buy


Year-end: Mar
Net revenues
Revenue growth (%)
- Op. expenses
EBIDTA
EBITDA margins (%)
- Interest
- Depreciation
+ Other income
- Tax
Reported PAT
Adjusted PAT
PAT growth (%)
Adj, FDEPS growth (%)
FY11
FY12
FY13
FY14e
FY15e
17,611
20.2
15,037
2,574
14.6
31
417
78
0
723
32.8
1,481
1,481
-6.8
8.7
-6.8
23,674
34.4
20,134
3,540
15.0
41
465
152
0
1,036
32.5
2,151
2,151
45.2
12.6
45.2
29,811
25.9
25,099
4,712
15.8
10
661
269
92
1,351
32.0
2,867
2,928
36.2
17.1
36.2
34,483
15.7
29,167
5,316
15.4
35
691
318
0
1,595
32.5
3,313
3,313
13.1
19.4
13.1
40,617
17.8
34,335
6,282
15.5
44
755
356
0
1,898
32.5
3,941
3,941
19.0
23.1
19.0
FY11
FY12
FY13
FY14e
FY15e
171
6,288
6,459
1,000
205
7,664
3,526
161
3,526
451
7,664
548
85
0.1
101
76
171
8,064
8,235
855
220
9,310
3,861
161
2,996
2,292
9,310
-1,437
85
-0.2
77
96
171
10,427
10,598
872
195
11,665
4,618
161
2,778
4,108
11,665
-3,236
85
-0.3
77
62
171
13,145
13,316
872
220
14,407
5,303
161
4,539
4,405
14,407
-3,533
85
-0.3
77
78
171
16,451
16,621
872
245
17,738
6,047
161
5,764
5,766
17,738
-4,894
85
-0.3
77
97

PAT
+ Non-cash items
Cash profit
Operating cash-flow
- Capex
Free cash-flow
- Dividend
+ Equity raised
+ Debt raised
- Investments
- Misc. items
Net cash-flow
Share capital
Reserves & surplus
Net worth
Total debt
Capital employed
Net fixed assets
Investments
Working capital
Cash
Capital deployed
Net debt
No. of shares (m)
Net debt/equity (x)
W C turn (days)
Book value (`/sh)
Year-end: Mar
Year-end: Mar
FY11
FY12
FY13
FY14e
FY15e
Year-end: Mar
FY11
FY12
FY13
FY14e
FY15e
1,481
417
1,898
1,005
893
659
234
222
0
88
0
273
-174
625
451
2,151
465
2,615
-537
3,152
799
2,353
323
0
-144
0
45
1,841
451
2,292
2,867
661
3,528
-257
3,785
1,418
2,367
430
0
16
0
127
1,826
2,292
4,118
3,313
691
4,004
1,751
2,252
1,375
877
512
0
0
0
68
297
4,108
4,405
3,941
755
4,697
1,215
3,482
1,500
1,982
547
0
0
0
74
1,361
4,405
5,766
P/E (x)
P/B (x)
EV/EBITDA (x)
RoE (%)
RoCE (%)
Dividend yield (%)
Dividend payout (%)
Debt to equity (x)
Core P/E (x)
Cash P/E (x)
EV/sales (x)
Inventory days
Receivables days
Payables days
Asset T/O (x)
30.8
3.5
17.9
22.9
29.2
1.0
15.0
0.2
16.0
12.0
2.6
59
63
22
2.3
21.2
2.8
12.4
26.1
34.7
1.4
15.0
0.1
11.1
8.7
1.9
41
49
14
2.5
15.6
4.3
9.0
27.1
37.0
0.9
15.0
0.1
16.6
6.5
1.4
41
49
14
2.6
13.8
3.4
7.9
24.9
34.3
1.1
15.5
0.1
14.7
5.7
1.2
41
49
14
2.4
11.6
2.7
6.5
23.7
33.2
1.2
13.9
0.1
12.3
4.9
1.0
41
49
14
2.3
Fig 5 P/E band

(%)
400
20
350
17.0x
300
14.0x
18
250
11.0x
200
16
8.0x
150
Amara Raja
Batteries
100
50
5.0x
14
2.0x
FY15e
FY14e
FY13
FY12
FY11
FY10
FY09
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
FY08
12
28
Auto Components
India I Equities
Result preview
92July 2013
Apollo Tyres
Rating: Sell
Target Price: `58
Share Price: `61
Weak demand, acquisition overhang; Sell

Key takeaways
Key data
APTY IN / APLO.BO
India operations to do better. Apollo Tyres domestic operations would be

showing a better trajectory, backed by improvement in demand and sanguine
commodity costs. We expect the company to report a marginal 1% yoy
revenue growth to `21.7bn, with an 11.5% EBITDA margin (up 120bps yoy,
but 60bps lower qoq). Our EBITDA growth expectation is 12.9% yoy. We
expect 23.7% yoy profit growth to `931m.
52-week high / low

Sensex / Nifty
3-m average volume
Market cap
Shares outstanding
`102 / `55
19496 / 5868
US$0.5m
`30.56bn / US$509.33m
504.1m
Mar 13 Dec 12 Sep12
Europe likely to be weak. Slowdown in the European market would bear

down heavily on the companys consolidated results. Although this would
lead to less-than-full capacity utilisation, currency depreciation would
somewhat compensate for it. As a result, we expect consolidated revenues to
decline 4% yoy to `30.4bn, with an 11.5% EBITDA margin (up 40bps yoy,
but 20bps lower qoq). We expect EBITDA to decline 0.9% yoy and profit to
dip 5.1% yoy (to `1.3bn).
Promoters
- of which, Pledged
Free Float
- Public
Cooper acquisition overhang. The Cooper acquisition is likely to be a nearterm overhang. Since the deal completion is likely only in 2HFY14, the
impact of consolidation would be felt only by 4QFY14 at the earliest.
However, the sizeable leverage to finance this acquisition would be a concern
over the next few years.
Our take. While we do not yet factor Cooper into our estimates, we lower
our rating to Sell to acknowledge concerns arising from a leveraged buyout,
weak European demand, and medium-term uncertainty. Over the long term,
this acquisition may propel Apollo Tyres into a different league, but in the
near term could cause it a lot of stress. We rate the company a Sell with a
price target of `58. Risks. Decline in rubber prices, less-than-expected impact
of the European slowdown, favourable forex movements, faster-thanexpected integration of Cooper Tires.
43.37
16.34
56.63
28.62
6.77
21.24
43.37
15.15
56.63
23.77
9.39
23.47
43.37
16.06
56.63
22.30
11.23
23.10
FY14e
FY15e
Sales
EBITDA
EPS
0.4
9.4
-11.0
1.6
10.3
-12.8
Financials (YE Mar)
Sales (`m)
Net profit (`m)
EPS (`)
Growth (%)
FY14e
FY15e
138,665
157,247
6,170
7,270
12.2
14.4
2.6
17.8
PE (x)
5.0
4.2
PBV (x)
0.8
0.7
RoE (%)
15.6
15.7
RoCE (%)
21.2
23.5
Dividend yield (%)

Net gearing (%)
1.3
1.6
44.2
40.1

1QFY13
1QFY14e
% yoy
FY12
FY13
Sales (`m)
31,647
30,381
-4.0
121,533
127,946
5.3
3,516
3,485
-0.9
11,661
14,567
24.9
EBITDA margin (%)
11.1
11.5
36bps
9.6
11.4
179bps
Interest (`m)
751
775
3.2
2,873
3,128
8.9
Depreciation (`m)
936
1,000
6.9
3,256
3,966
21.8
Other income (`m)
98
108
10.0
326
944
189.4
Rohan Korde
1,928
1,819
-5.7
5,565
8,586
54.3
+9122 66266733
EBITDA (`m)
PBT (`m)
% yoy
Tax (`m)
539
500
-7.2
1,444
2,448
69.6
Tax rate (%)
28.0
27.5
-46bps
25.9
28.5
257bps
1,380
1,309
-5.1
4,393
5,957
35.6
PAT (`m)
Source: Company
India Equities
9 July 2013
Apollo Tyres Weak demand, acquisition overhang; Sell


Year-end: Mar
Net revenues
Revenue growth (%)
- Op. expenses
EBIDTA
EBITDA margins (%)
- Interest
- Depreciation
+ Other income
- Tax
Reported PAT
Adjusted PAT
PAT growth (%)
FY11
FY12
FY13
FY14e
FY15e
88,677
9.2
79,626
9,051
10.2
1,970
2,719
359
-750
1,063
19.4
4,402
3,652
-35.5
7.2
-35.5
121,533
37.1
109,872
11,661
9.6
2,873
3,256
326
294
1,444
25.9
4,099
4,393
20.3
8.7
20.3
127,946
5.3
113,380
14,567
11.4
3,128
3,966
944
-169
2,448
28.5
6,126
6,013
36.9
11.9
36.9
138,665
8.4
121,831
16,834
12.1
5,245
4,366
1,020
0
2,061
25.0
6,170
6,170
2.6
12.2
2.6
157,247
13.4
137,841
19,405
12.3
5,848
4,617
1,103
0
2,762
27.5
7,270
7,270
17.8
14.4
17.8
FY11
FY12
FY13
FY14e
FY15e
504
23,630
24,134
24,802
3,162
52,098
38,770
112
11,307
1,909
52,098
504
22,893
0.9
62
47.9
504
27,831
28,335
28,720
4,025
61,081
44,881
158
14,311
1,730
61,081
504
26,990
1.0
56
56.2
504
33,814
34,318
25,720
4,225
64,264
45,842
158
15,565
2,698
64,264
504
23,022
0.7
56
68.1
504
40,361
40,865
21,720
4,425
67,011
47,797
158
17,156
1,900
67,011
504
19,820
0.5
56
81.1
504
48,057
48,561
18,720
4,625
71,907
49,515
158
19,728
2,505
71,907
504
16,215
0.3
56
96.3

PAT
+ Non-cash items
Cash profit
Operating cash-flow
- Capex
Free cash-flow
- Dividend
+ Equity raised
+ Debt raised
- Investments
- Misc. items
Net cash-flow
Share capital
Reserves & surplus
Net worth
Total debt
Capital employed
Net fixed assets
Investments
Working capital
Cash
Capital deployed
Net debt
No. of shares (m)
Net debt/equity (x)
W C turn (days)
Book value (`/sh)
Year-end: Mar
Year-end: Mar
FY11
FY12
FY13
FY14e
FY15e
4,402
2,719
7,121
8,571
-1,450
11,539
-12,989
252
0
7,731
53
-3,982
-1,581
3,490
1,908
4,099
3,256
7,355
3,568
3,787
11,122
-7,335
252
0
3,918
46
-3,537
-179
1,909
1,730
6,126
3,966
10,092
-1,792
11,884
5,313
6,571
353
0
-5,904
388
-1,583
1,509
1,730
3,240
6,170
4,366
10,537
2,188
8,349
6,000
2,349
403
0
-4,000
0
-478
-1,576
3,348
1,772
7,270
4,617
11,886
3,426
8,461
6,000
2,461
504
0
-3,000
0
-512
-531
1,879
1,348
Year-end: Mar
FY11
FY12
FY13
FY14e
FY15e
P/E (x)
P/B (x)
EV/EBITDA (x)
RoE (%)
RoCE (%)
Dividend yield (%)
Dividend payout (%)
Debt to equity (x)
Core P/E (x)
Cash P/E (x)
EV/sales (x)
Inventory days
Receivables days
Payables days
Fixed asset T/O (x)
8.4
1.3
5.9
18.3
12.8
0.8
6.7
1.0
9.1
4.3
0.6
72
39
49
1.7
7.0
1.1
4.9
14.5
14.3
0.8
7.1
1.0
7.4
4.2
0.5
60
34
39
2.0
5.1
0.9
3.4
18.0
18.7
1.1
6.7
0.7
5.8
3.0
0.4
58
28
29
2.1
5.0
0.8
2.8
15.6
21.2
1.3
7.6
0.5
5.7
2.9
0.3
58
28
29
2.2
4.2
0.7
2.3
15.7
23.5
1.6
8.0
0.3
4.8
2.6
0.3
58
28
29
2.3
Fig 5 PE band
160
11x
(%)
16
9x
120
14
7x
80
5x
Apollo Tyres
40
3x
12
10
1x
0
FY15e
FY14e
FY13
FY12
FY11
FY10
FY09
FY08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
30
Auto Components
India I Equities
Result preview
9 July 2013
SKF India
Rating: Buy
Target Price: `622
Share Price: `490
Tough demand environment; good long-term bet; Buy

Key takeaways
2QCY13 sales to decline. We expect SKF Indias 2Q revenues to come at
`5.3bn (down 8% yoy, a sixth consecutive quarterly decline). The dip would
primarily be because of lower demand in its key target market, autos and
industrials. We expect a sharper decline in revenue from the exports and
industrial divisions. Amidst these adversities, the company is focused on
tightening its working-capital requirement. We expect demand to pick up in
2HCY13.
Margins expected to decline 77bps yoy. In the past few quarters, margin
pressures have arisen due to slowing revenue growth and the companys
inability to pass on higher costs. With facilities underutilised, the margin will
be contained, primarily due to lower fixed-cost absorption. We expect the 2Q
EBIDTA margin to come at 9.6%, 77bps lower yoy.
Profit to decline 13.9%. We expect profit to decline 13.9% yoy to `402m,
down 1% qoq on an adjusted basis. Other income is expected to be `200m,
up 1.4% yoy.
Tightening working capital. In the tough situation today, the company is
focusing on tightening the working capital required. It has been generating
strong operating cash-flows over the years. We expect revenue and profit
CAGRs over CY12-14 of 10% and 13.6% respectively.
Our take. The slowdown in both industrial and auto industries are expected
to impact SKFs 2QCY13 results. A debt-free company, with `3bn in cash at
end-CY12, it has been generating strong operating cash flows over the years.
We value the stock at a one-year forward-PE of 15x Jun14e (on par with its
past two-year average), at a target of `622. Withn no short-term trigger, the
long-term story is intact. Risks. Slowdown in industrial activity, auto sales;
A
commodity
price fluctuations and increase in imports.
SKF IN / SKFB.BO
`690 / `483
19496 / 5868
US$0.3m
`25.8bn / US$431m
Key data
52-week high / low
Sensex / Nifty
3-m average volume
Market cap
Shares outstanding
52.7m
Promoters
- of which, Pledged
Free Float
- Public
53.6
46.4
15.8
16.2
14.4
Financials (YE Dec)
Sales (`m)
Net profit (`m)
EPS (`)
Growth (%)
53.6
46.4
15.8
16.2
14.4
53.6
46.4
14.6
17.5
14.3
CY13e
CY14e
22,683
26,754
1,923
2,452
36.5
46.5
1.2
27.5
PE (x)
13.5
10.6
PBV (x)
2.0
1.8
RoE (%)
15.7
17.8
RoCE (%)
16.0
18.4
Dividend yield (%)

Net gearing (%)
1.8
2.2
(35.2)
(43.2)

Quarterly results (YE Dec)
2QCY12
2QCY13e
% yoy
CY11
CY12
5,780
5,318
(8.0)
24,349
22,276
(8.5)
EBITDA (`m)
600
511
(14.8)
2,979
2,584
(13.3)
EBITDA margin (%)
10.4
9.6
(77) bps
12.2
11.6
(63) bps
Depreciation (`m)
107
118
9.7
385
436
13.2
Other income(`m)
197
200
1.4
546
683
25.2
Girish Solanki
PBT (`m)
690
593
(14.0)
3139
2831
(9.8)
+9122 6626 6712

Sales (`m)
Interest (`m)
% yoy
Tax (`m)
223
192
(14.1)
1,054
931
(11.7)
Tax rate (%)
32.4
32.3
(5) bps
33.6
32.9
(72) bps
PAT (`m)
467
402
(13.9)
2,085
1,901
(8.8)
Source: Company
Anand Rathi Share and Stock Brokers Limited does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm
may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
Disclosures and analyst certifications are located in Appendix 1
India Equities
9 July 2013
SKF India Tough demand environment; good long-term bet; Buy


Year-end: Dec
Net sales
Sales growth (%)
- Op. expenses
EBIDTA
EBITDA margins (%)
- Interest
- Depreciation
+ Other income
- Tax
Reported PAT
+/- Extraordinary items
Adjusted PAT
DPS (`/share)
CY10
CY11
CY12
CY13e
CY14e
20,684
31.7
13,511
2,506
12.1
(200)
333
288
891
33.5
1,770
1,770
33.6
87.8
7.0
24,167
16.8
15,737
2,807
11.6
(339)
385
378
1,054
33.6
2,085
2,085
39.5
17.8
7.5
22,041
(8.8)
14,415
2,349
10.7
(235)
436
683
931
32.9
1,901
1,901
36.0
(8.8)
7.5
22,683
2.9
14,812
2,415
10.6
(586)
460
355
973
33.6
1,923
1,923
36.5
1.2
9.0
26,754
17.9
17,390
3,023
11.3
(734)
484
419
1,240
33.6
2,452
2,452
46.5
27.5
11.0
Year-end: Dec
CY10
Share capital
Reserves & surplus
Shareholders fund
Debt
Minority interests
Deferred Tax Liab (net)
Capital employed
Net Fixed assets
Working capital
Cash
Capital deployed
Net Debt
No. of shares (m)
Net Debt/Equity (%)
W C turn (days)
Book Value (`/share)
CY11
CY12
CY13e
CY14e
527
527
527
527
527
7,960
9,585
11,026
12,394 14,168
8,487
10,112
11,554
12,922 14,695
0
30
16
84
84
84
8,517
10,128
11,637
13,005 14,779
3,193
3,619
4,072
3,688
3,704
3,205
4,265
4,496
4,771
4,725
2,119
2,244
3,070
4,546
6,349
8,517
10,128
11,637
13,005 14,779
(2,119.0) (2,244.4) (3,069.8) (4,545.7) (6,349.4)
52.7
52.7
52.7
52.7
52.7
(25.0)
(22.2)
(26.6)
(35.2)
(43.2)
43
56
73
75
65
161
192
219
245
279

Year-end: Dec
CY10
CY11
CY12
CY13e
CY14e
Year-end: Dec
CY10
CY11
CY12
CY13e
CY14e
PAT
+Non-cash Items
Cash profit
Operating cash-flow
-Capex
Free cash-flow
-Dividend
+ Equity raised
+ Debt raised
-Investments
-Misc. items
Net cash-flow
+Opening cash
Closing cash
1,770
372
2,142
1,526
617
959
(342)
430
(0)
(1)
(774)
2,893
2,119
2,085
371
2,456
1,060
1,396
811
585
460
(0)
(0)
125
2,119
2,244
1,901
503
2,404
231
2,174
889
1,285
463
3
825
2,244
3,070
1,923
460
2,383
276
2,108
76
2,031
555
1,476
3,070
4,546
2,452
484
2,936
(46)
2,982
500
2,482
679
(0)
1,804
4,546
6,349
P/E (x)
Cash P/E (x)
EV/EBITDA (x)
EV/Sales (x)
P/B (x)
RoAE (%)
RoACE (%)
Dividend yield (%)
Dividend payout (%)
Debt/Equity (x)
Receivables days
Inventory days
Payables days
Working capital days
Fixed asset T/O (x)
14.6
12.1
9.5
1.1
3.1
22.6
27.7
1.4
24.3
0.0
43.0
37.4
85.5
43.1
7.2
12.4
10.5
8.4
1.0
2.6
22.4
26.0
1.5
22.0
48.6
38.9
83.6
56.4
7.1
13.6
11.1
9.7
1.0
2.2
17.5
17.7
1.5
24.3
57.3
43.2
92.9
72.5
5.7
13.5
10.9
8.8
0.9
2.0
15.7
16.0
1.8
28.9
52.0
39.0
84.0
74.6
5.8
10.6
8.8
6.5
0.7
1.8
17.8
18.4
2.2
27.7
47.0
34.6
80.0
64.8
7.2
Fig 5 PE band
Fig 6 CY12 revenue break-up
(`)
800
20x
Exports
6%
16x
600
12x
400
Industrial
49%
8x
200
Automotive
45%
4x
Mar-13
Aug-12
Feb-12
Jul-11
Dec-10
Jun-10
Nov-09
May-09
Oct-08
Apr-08
Source: Company
32
Auto Components
India I Equities
Result preview
92July 2013
Balkrishna Industries
Rating: Buy
Target Price: `310
Share Price: `234
Short-term pressure; Buy

Key takeaways
Near-term weakness likely. Balkrishna Industries 4Q sales tonnage was
6.3% lower yoy due to demand slowing down in Europe and North America.
Qoq, however, tonnage improved 13%, better than ~1% qoq growth guided
by the management in the previous quarter. The order book position stands
at 45-50 days of existing sales. In terms of geographical sales mix, in FY13,
Europe constituted 45%, India 9%, North America 25% and the Rest of the
World 21%, similar to that in FY12.
Bhuj plant commercialised. The new `18bn plant at Bhuj partly
commenced operations in Sep12, and is in a scale-up mode. The 10,000-ton
capacity was available for production in FY13, which would be ramped up to
60,000 tons in FY14 and the full extent of 120,000 tons by FY15.
EBITDA margin to be healthy. On weaker demand (volume dip of 5.4%
yoy), we expect revenues to decline 1.6% yoy to `8.2bn. Our EBITDA
margin expectation is 19.6%, 70bps higher yoy (though 40bps lower yoy).
Our EBITDA growth expectation is 2.2% yoy. We expect 2.2% yoy adjusted
profit growth, to `888m.
Our take. We are optimistic regarding the companys prospects, though it
may see a near-term weakness in demand. A better product mix, though,
would help it counter sluggish revenue growth. Despite demand pressures,
FY13 performance has been good. The outlook ahead is expected to improve.
We maintain Buy, with a price target of `310. At our target, the stock would
trade at a standalone PE of 7.25x Sep14e. At the ruling price, it trades at 6.1x
FY14e EPS.
Risks. Spike in rubber prices, adverse forex movements and further dip in
North American demand.
Key data
BIL IN / BLKI.BO
52-week high / low

Sensex / Nifty
3-m average volume
Market cap
Shares outstanding
`318 / `199
19496 / 5868
US$1.2m
`22.56bn / US$376.0m
96.7m
Mar13 Dec12 Sep12
Promoters
- of which, Pledged
Free Float
- Public
58.30
41.70
10.27
19.75
11.68
Financials (YE Mar)
Sales (`m)
Net profit (`m)
EPS (`)
Growth (%)
54.37
45.63
9.67
19.98
15.98
54.37
45.63
10.77
19.92
14.94
FY14e
FY15e
37,407
45,461
3,715
4,553
38.4
47.1
3.3
22.6
PE (x)
6.1
5.0
PBV (x)
1.3
1.0
RoE (%)
21.0
20.6
RoCE (%)
15.2
17.6
Dividend yield (%)

Net gearing (%)
0.7
0.8
45.9
40.2

1QFY13
1QFY14e
% yoy
FY12
FY13
% yoy
Sales (`m)
8,313
8,180
-1.6
28,200
32,024
13.6
EBITDA (`m)
1,571
1,606
2.2
5,058
6,551
29.5
18.9
19.6
73bps
17.9
20.5
252bps
EBITDA margin (%)

Interest (`m)
Depreciation (`m)
61
75
23.2
278
200
-28.0
229
305
33.1
831
1,077
29.6
310.0
56.9
33
135
PBT (`m)
1,083
1,234
13.9
3,779
5,352
41.6
Rohan Korde
Tax (`m)
352
345
-1.9
1,297
1,794
38.3
Tax rate (%)
32.5
28.0
-451bps
34.3
33.5
-81bps
+9122 66266733
PAT (`m)
869
888
2.2
2,655
3,597
35.5
Other income (`m)
Source: Company
India Equities
9 July 2013
Balkrishna Industries Short-term pressure; Buy


Year-end: Mar
Net revenues
Revenue growth (%)
- Op. expenses
EBIDTA
EBITDA margins (%)
- Interest
- Depreciation
+ Other income
- Tax
Reported PAT
Adjusted PAT
PAT growth (%)
FY11
FY12
FY13
FY14e
FY15e
20,029
43.6
16,426
3,602
18.0
212
744
90
-14
894
32.5
1,856
1,845
-10.8
19.1
-10.8
28,200
40.8
23,142
5,058
17.9
278
831
33
203
1,297
34.3
2,482
2,655
43.9
27.5
43.9
31,906
13.1
25,262
6,644
20.8
200
1,077
42
57
1,794
33.5
3,558
3,597
35.5
37.2
35.5
37,407
17.2
29,514
7,893
21.1
401
1,993
46
0
1,830
33.0
3,715
3,715
3.3
38.4
3.3
45,461
21.5
35,687
9,774
21.5
538
2,491
51
0
2,243
33.0
4,553
4,553
22.6
47.1
22.6
FY11
FY12
FY13
FY14e
FY15e
193
8,124
8,318
5,981
570
14,869
7,315
322
7,122
110
14,869
5,871
97
70.6
113
86
193
10,608
10,801
16,630
626
28,056
12,780
322
11,380
3,574
28,056
13,056
97
120.9
99
112
193
13,996
14,190
20,636
999
35,824
22,232
329
10,599
2,663
35,824
17,972
97
126.7
80
147
193
17,526
17,720
20,345
1,098
39,163
25,240
354
8,573
4,996
39,163
15,349
97
86.6
80
183
193
21,876
22,069
18,345
1,208
41,623
25,749
379
10,608
4,887
41,623
13,459
97
61.0
80
228

PAT
+ Non-cash items
Cash profit
Operating cash-flow
- Capex
Free cash-flow
- Dividend
+ Equity raised
+ Debt raised
- Investments
- Misc. items
Net cash-flow
Share capital
Reserves & surplus
Net worth
Total debt
Capital employed
Net fixed assets
Investments
Working capital
Cash
Capital deployed
Net debt
No. of shares (m)
Net debt/equity (x)
W C turn (days)
Book value (`/sh)
Year-end: Mar
Year-end: Mar
FY11
FY12
FY13
FY14e
FY15e
Year-end: Mar
FY11
FY12
FY13
FY14e
FY15e
1,856
744
2,601
3,764
-1,164
1,227
-2,390
135
0
1,338
-485
-771
68
42
110
2,482
831
3,313
2,088
1,225
6,235
-5,010
145
0
10,649
0
2,029
3,464
110
3,574
3,558
1,077
4,636
-2,019
6,655
10,529
-3,874
145
0
4,006
7
891
-911
3,574
2,663
3,715
1,993
5,708
-2,026
7,734
5,000
2,734
159
0
-290
25
-74
2,333
2,663
4,996
4,553
2,491
7,044
2,035
5,009
3,000
2,009
175
0
-2,000
25
-81
-110
4,996
4,886
P/E (x)
P/B (x)
EV/EBITDA (x)
RoE (%)
RoCE (%)
Dividend yield (%)
Dividend payout (%)
Debt to equity (x)
Core P/E (x)
Cash P/E (x)
EV/sales (x)
Inventory days
Receivables days
Payables days
Fixed Asset T/O (x)
12.3
2.7
7.8
22.2
19.8
0.6
8.5
0.7
12.9
8.7
1.4
75
59
21
2.0
8.5
2.1
7.0
24.6
15.2
0.6
6.3
1.5
8.6
6.8
1.3
63
63
26
2.3
6.3
1.6
6.1
25.3
15.7
0.6
4.7
1.5
6.4
4.9
1.3
50
58
28
1.2
6.1
1.3
4.8
21.0
15.2
0.7
5.0
1.1
6.2
4.0
1.0
50
58
28
1.2
5.0
1.0
3.7
20.6
17.6
0.8
4.5
0.8
5.0
3.2
0.8
50
58
28
1.3
Fig 5 PE band
Fig 6 Geographical Mix (%)
600
14.0x
(`m)
(%)
2,000
23.0
500
11.0x
400
22.0
1,800
21.0
1,600
20.0
8.5x
1,400
300
6.0x
19.0
18.0
1,200
200
17.0
BIL
3.5x
100
1,000
16.0
800
EBITDA
1QFY14
4QFY13
3QFY13
2QFY13
1QFY13
4QFY12
3QFY12
2QFY12
1QFY12
4QFY11
3QFY11
2QFY11
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
15.0
1QFY11
1.0x
EBITDA Margin (%)
34
Auto Components
India I Equities
Result preview
9 July 2013
Wabco India
Rating: Buy
Share Price: `1,642
Near-term bleak; Buy

Key takeaways
Industry slowdown to hit growth. We expect 8.1% yoy revenue decline, to
`2.3bn, impacted by the ongoing slump in M&H CV sales. Revenue growth
ahead would be buoyed into positive territory by more exports
(commencement of the plant at Mahindra World City), sales of spares and
software. Recovery in the M&H CV cycle is likely only in FY15.
Subdued operating performance. We expect 19.4% EBITDA margin
(250bps lower yoy, up 40bps qoq). Our EBITDA decline expectation is
22.3% yoy. We expect 26.5% yoy profit decline, to `308m, the fourth
successive quarter of qoq profit drop.
Long-term prospects intact. 2HFY14 could mark an improvement over the
disappointing 2HFY13 performance. We are positive on the company from a
long-term perspective, as it would be a key beneficiary of the recovery in the
CV cycle in FY15, with mounting exports, potential regulatory changes and
good aftermarket potential adding to the positives. Wabco Holdings, the
parent, seeks to make Wabco India an R&D hub for its global operations,
which augurs well for the company.
Our take. The ongoing slowdown in commercial vehicles and Wabco Indias
heavy dependence on M&H CVs would weigh on its results. Moreover, the
recent uptick in the stock price due to the possibility of implementation of
mandatory ABS fitment into M&HCVs has driven the stock close to its fair
valuations. Due to this, we lower our rating to Hold. However, the lean cost
structure, strong parent backing and specialised products would help sustain a
strong performance in a recovered cycle. Risks. Downside. Above-expected
CV slowdown, keener competition and higher input costs, delay in ramp-up
of exports. Upside. Mandatory ABS fitment, resulting into a re-rating.
Key data
WIL IN / WABC.BO
52-week high / low

Sensex / Nifty
3-m average volume
Market cap
Shares outstanding
`1848 / `1250
19496 / 5868
US$0.2m
`31.80bn / US$464.77m
19m
Promoters
- of which, Pledged
Free Float
- Public
Financials (YE Mar)
Sales (`m)
75.00
Nil
25.00
2.39
8.65
13.96
75.00
Nil
25.00
2.40
9.05
13.55
75.00
Nil
25.00
2.38
9.37
13.25
FY14e
FY15e
10,924
13,444
1,464
1,903
EPS (`)
77.2
100.3
Growth (%)
11.9
30.0
PE (x)
21.3
16.4
PBV (x)
4.0
3.3
RoE (%)
18.7
19.9
RoCE (%)
26.0
27.7
Net profit (`m)
Dividend yield (%)
0.4
0.4
Net gearing (%)
-2.0
-4.7

Sales (`m)
1QFY13
1QFY14e
% yoy
FY12
FY13
% yoy
2,493
2,290
-8.1
10,516
9,659
-8.1
EBITDA (`m)
571
443
-22.3
2,265
1,940
-14.3
EBITDA margin (%)
22.9
19.4
-352bps
21.5
20.1
-144bps
-85.2
971.4
Depreciation (`m)
47
70
49.5
156
217
38.9
Other income (`m)
67
60
-10.9
55
126
128.3
PBT (`m)
591
433
-26.7
2,162
1,849
-14.5
Tax (`m)
173
126
-27.3
628
542
-13.8
Tax rate (%)
29.2
29.0
-22bps
29.1
29.3
23bps
PAT (`m)
418
308
-26.5
1,534
1,308
-14.7
Interest (`m)
Rohan Korde
+9122 66266733
Source: Company
India Equities
9 July 2013
Wabco India Near-term bleak; Buy


Year-end: Mar
Net revenues
Revenue growth (%)
- Op. expenses
EBIDTA
EBITDA margin (%)
- Interest expenses
- Depreciation
+ Other income
- Tax
- Extraordinaries
Reported PAT
Adjusted PAT
PAT growth (%)
FDEPS (`/share)
FDEPS growth (%)
FY11
FY12
FY13
FY14e
FY15e
8,925
46.9
6,919
2,007
22.5
2
144
54
639
0
33.4
1,274
1,274
63.0
67.2
63.0
10,457
17.2
8,257
2,199
21.0
1
156
121
628
0
29.1
1,534
1,534
20.4
80.9
20.4
9,659
-7.6
7,719
1,940
20.1
0
217
126
542
0
29.3
1,308
1,308
-14.7
69.0
-14.7
10,924
13.1
8,703
2,221
20.3
0
304
145
598
0
29.0
1,464
1,464
11.9
77.2
11.9
13,444
23.1
10,597
2,847
21.2
0
334
167
777
0
29.0
1,903
1,903
30.0
100.3
30.0
FY11
FY12
FY13
FY14e
FY15e
95
3,772
3,867
6
82
3,954
1,903
122
1,801
129
3,954
-245
19.0
-3.2
70
204
95
5,196
5,291
9
109
5,409
2,430
232
1,928
819
5,409
-1,042
19.0
-15.3
60
279
95
6,393
6,488
0
117
6,605
2,889
255
2,470
991
6,605
-1,246
19.0
-15.3
89
342
95
7,725
7,820
0
117
7,937
3,185
355
2,938
1,460
7,937
-1,814
19.0
-18.7
89
412
95
9,473
9,568
0
117
9,685
3,450
455
3,708
2,073
9,685
-2,527
19.0
-21.7
89
504

PAT
+ Non-cash items
Cash profit
Operating cash-flow
- Capex
Free cash-flow
- Dividend
+ Equity raised
+ Debt raised
- Investments
- Misc. items
Net cash-flow
Share capital
Reserves & surplus
Net worth
Total debt
Capital employed
Net fixed assets
Investments
Working capital
Cash
Capital deployed
Net Debt
No. of shares (m)
Net Debt/Equity (%)
W C turn (days)
Book value (`/sh)
Year-end: Mar
Year-end: Mar
FY11
FY12
FY13
FY14e
FY15e
Year-end: Mar
FY11
FY12
FY13
FY14e
FY15e
1,274
144
1,419
963
455
174
281
96
0
-66
100
-85
104
24
128
1,534
156
1,691
120
1,571
680
891
96
0
3
110
-2
690
129
819
1,308
217
1,525
550
975
676
299
95
0
-9
23
0
173
819
991
1,464
304
1,768
487
1,281
600
681
114
0
0
100
-1
469
991
1,460
1,903
334
2,237
790
1,447
600
847
133
0
0
100
1
613
1,460
2,073
P/E (x)
P/B (x)
EV/EBITDA (x)
RoE (%)
RoCE (%)
Dividend yield
Dividend payout (%)
Debt to equity (x)
Core P/E (x)
Cash P/E
EV/sales
Inventory days
Receivables days
Payables days
Fixed Asset T/O
24.4
8.1
15.4
33.0
48.4
0.3
8.7
0.0
25.5
22.0
3.5
34
72
35
2.2
20.3
5.9
13.7
29.0
40.0
0.3
7.2
0.0
22.0
18.4
2.9
42
57
39
1.9
23.8
4.8
15.4
20.2
28.0
0.3
8.4
0.0
26.4
20.4
3.1
54
76
41
1.4
21.3
4.0
13.2
18.7
26.0
0.4
9.0
0.0
23.6
17.6
2.7
54
76
41
1.3
16.4
3.3
10.1
19.9
27.7
0.4
8.1
0.0
17.9
13.9
2.1
54
76
41
1.3
Fig 5 PE band

(%)
2,000
23x
1,600
19x
1,200
15x
23
21
11x
Wabco India
19
800
7x
17
400
3x
0
FY15e
FY14e
FY13
FY12
FY11
FY10
FY09
FY08
Jun-13
Feb-13
Oct-12
Jun-12
Oct-11
Feb-12
Jun-11
Feb-11
Oct-10
Jun-10
Oct-09
Feb-10
Jun-09
Feb-09
Oct-08
15
Source: Company
36
Auto Components
India I Equities
Result preview
9 July 2013
Swaraj Engines
Rating: Buy
Target Price: `551
Share Price: `501
A decent quarter likely; Buy

Key takeaways
Tractor growth healthy. 1Q tractor sales have been good, which could
result in ~20% engine volume growth yoy. We expect just 22.4% revenue
growth yoy, to `1.4bn. In 3Q, the company had scaled a fresh peak in engine
sales, which is likely to have been crossed in 1Q. With the second phase of its
expansion nearly complete, available capacity is now 75,000 engines a year.
Steady EBITDA margin. We expect 15.4% EBITDA margin (up 110bps
qoq and 10bps yoy). Our EBITDA growth expectation is 23.2% yoy. We
expect 18.6% yoy profit growth, to `162m.
Long-term prospects good. Growth could be boosted by recovery in
tractor cycle (probably in FY14). We expect tractors to do well in the long
run, led by more productivity, low penetration, need for mechanization,
higher MSPs and policies such as the MGNREG scheme. Higher capacity
would help the company bank on this recovery. Short-term macroeconomic
headwinds and a high base, however, are near-term constraints.
Our take. We exepect higher growth, led by recovery in tractors (likely in
FY14), which in turn will be owing to: (1) More scope for productivity; (2)
low penetration; (3) need for mechanization; (4) higher MSPs; (4) and
favourable govt policies such as MGNREG. With this, there could be an
increase in the companys capacity. Short-term macroeconomic headwinds
and a high base, however, are near-term constraints.
We are positive on Swaraj Engines and maintain Buy, with a price target of
`551. At the ruling price, the stock trades at PE of 8.5x FY14e earnings. At
our target price, it trades at ~10x Sep14e earnings. Risks. Commodity price
rises, loss of market share by M&M.
Key data
SWE IN / SWAR.BO
52-week high / low

Sensex / Nifty
3-m average volume
Market cap
Shares outstanding
`529 / `382
19496 / 5868
US$0.1m
`6.26bn / US$104.33m
12.4m
Mar13
Dec12 Sep 12
Promoters
- of which, Pledged
Free Float
- Public
50.62
49.38
1.53
10.90
39.95
50.62
49.38
1.53
12.17
35.68
50.62
49.38
1.75
13.04
34.59
Financials (YE Mar)
FY14e
FY15e
Sales (`m)
5,639
6,538
Net profit (`m)
634
736
EPS (`)
51.0
59.3
Growth (%)
14.4
16.2
PE (x)
9.8
8.5
PBV (x)
2.6
2.1
RoE (%)
26.6
25.2
RoCE (%)
37.1
35.2
Dividend yield (%)
3.0
3.2
Net gearing (%)
-8.1
-7.8

1QFY13
1QFY14e
% yoy
FY12
FY13
% yoy
1,182
1,446
22.4
4,486
4,790
6.8
EBITDA (`m)
180
222
23.2
694
715
3.1
EBITDA margin (%)
15.3
15.4
10bps
15.5
14.9
-54bps
-100.0
87.5
14
23
64.3
43
72
68.1
25.2
Sales (`m)
Interest (`m)
Depreciation (`m)
31
33
7.1
122
153
PBT (`m)
197
232
17.8
773
795
2.9
Rohan Korde
Tax (`m)
60
70
16.1
245
241
-1.4
Tax rate (%)
30.5
30.0
-46bps
31.6
30.3
-133bps
+9122 6626 6733

PAT (`m)
137
162
18.6
528
554
4.9
Other income (`m)
Source: Company
India Equities
9 July 2013
Swaraj Engines A decent quarter likely; Buy


Year-end: Mar
Net revenues
Revenue growth (%)
- Op. expenses
EBIDTA
EBITDA margin (%)
- Interest expenses
- Depreciation
+ Other income
- Tax
- Extraordinaries
Reported PAT
Adjusted PAT
PAT growth (%)
FDEPS (`/share)
FDEPS growth (%)
FY11
FY12
FY13
FY14e
FY15e
Year-end: Mar
3,610
27.8
3,004
607
16.8
0
45
82
0
204
31.8
439
439
17.6
35.4
17.6
4,486
24.2
3,792
694
15.5
1
43
122
0
245
31.6
528
528
20.3
42.5
20.3
4,790
6.8
4,075
715
14.9
2
72
153
0
241
30.3
554
554
4.9
44.6
4.9
5,639
17.7
4,802
836
14.8
0
91
166
0
278
30.5
634
634
14.4
51.0
14.4
6,538
16.0
5,557
981
15.0
0
102
179
0
323
30.5
736
736
16.2
59.3
16.2
Share capital
Reserves & surplus
Net worth
Total debt
Capital employed
Net fixed assets
Investments
Working capital
Cash
Capital deployed
Net Debt
No. of shares (m)
WC days
Book value (`/sh)
FY13
FY14e
FY15e
124
1,739
1,863
0
32
1,895
505
811
-119
697
1,895
12
-1,508
-81.0
2
150.0
124
1,813
1,937
0
63
2,001
832
742
-380
807
2,001
12
-1,549
-79.9
6
156.0
124
2,260
2,385
0
73
2,458
941
842
-123
799
2,458
12
-1,640
-68.8
6
192.0
124
2,798
2,922
0
83
3,005
1,040
1,142
-102
926
3,005
12
-2,067
-70.8
6
235.2

PAT
+ Non-cash items
Cash profit
Operating cash-flow
- Capex
Free cash-flow
- Dividend
+ Equity raised
+ Debt raised
- Investments
- Misc. items
Net cash-flow
FY12
124
1,398
1,522
0
19
1,541
245
578
-43
762
1,541
12
-1,340
-88.0
7
122.6
Year-end: Mar
FY11
FY11
FY12
FY13
FY14e
FY15e
439
45
484
81
403
52
351
124
0
0
1
28
198
564
762
528
43
571
-76
646
266
380
161
0
0
233
50
-65
762
697
554
72
626
-261
887
398
489
410
0
0
-70
38
111
697
808
634
91
724
256
468
200
268
186
0
0
100
-10
-9
807
799
736
102
837
21
816
200
616
199
0
0
300
-10
127
799
926
Year-end: Mar
FY11
FY12
FY13
FY14e
FY15e
P/E (x)
P/B (x)
EV/EBITDA (x)
RoE (%)
RoCE (%)
Dividend yield
Dividend payout (%)
Debt to equity (%)
Core P/E (x)
Cash P/E
EV/sales
Inventory days
Receivables days
Payables days
Asset Turnover
14.2
4.1
8.0
28.8
41.8
2.0
28.3
0.0
16.2
12.9
1.4
35.5
8.1
36.2
2.3
11.8
3.3
6.8
28.4
40.8
2.6
30.6
0.0
13.9
10.9
1.1
27.2
9.7
35.4
2.4
11.2
3.2
6.5
28.6
39.8
6.6
74.0
0.0
13.8
9.9
1.0
30.0
7.0
31.5
2.4
9.8
2.6
5.5
26.6
37.1
3.0
29.4
0.0
11.9
8.6
0.8
30.0
7.0
31.5
2.3
8.5
2.1
4.2
25.2
35.2
3.2
27.0
0.0
10.1
7.4
0.6
30.0
7.0
31.5
2.2
Fig 5 PE band

(%)
750
20
13x
600
11x
450
9x
7x
300
Swaraj Engines
16
5x
3x
150
18
14
FY15e
FY14e
FY13
FY12
FY11
FY10
FY09
FY08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
12
Source: Company
38
Auto Components
India I Equities
Result preview
9 July 2013
Suprajit Engineering
Rating: Buy
Target Price: `42
Share Price: `35
Margins expected to be intact despite slowing revenue; Buy

Key takeaways
Sales slowdown. We expect Suprajit Engineerings sales to increase a mere
3.9% yoy to `1bn, affected by the sharp decline in offtake in the two-wheeler
segment (OEM clients). Exports would grow at a faster pace on account of
the companys export-focused strategy.
Margin set to decline slightly. Its EBITDA margin is expected to decline
by 124bps yoy, chiefly due to the higher other expenditure expected to come
at 20.1% of sales (up 110bps). Ahead, with an expected rise in volumes of
high-margin products, the margin would hold at around 16-17%.
Adj. profit expected to decline 9.5%. On slowing sales and the consequent
drop in margins, adjusted profit is expected to drop 9.5% yoy to `89m. The
1QFY14 PAT margin is expected at 8.9% (1QFY13: 10.2%). In 1QFY13 the
company had booked profit of `52m on sale of land and building.
Capacity addition, strategic plant location augur well. Capacity
expansion is on track and, by end-1QFY14, capacity touched 150m units.
Commercial production at its new unit at the Bommasandra Industrial Area,
Bangalore, began in Mar13. Even Suprajit Automotive, a 100% EOU has
commenced trial production at its new plant at Doddaballapur. Land has been
allotted in Karnataka for the companys proposed cable plant for one of its
key two-wheeler customers. Additional capacities would be of plants to cater
to Honda Motors and Scooters India and to Yamaha, by FY15.
Our take. Demand for control cables from the two-wheeler segment would
be hit during the quarter. Sales growth would be boosted by more revenue
from its four-wheeler business (the proportion of sales to M&M is rising). At
our target, we value the stock at 9x Mar14 PE. This translates to FY14e
EV/EBITDA of 5.8x. Risks: Higher interest rates, commodity price rises
and keener competition.
Sales (`m)
1Q13
958
1Q14
996
% yoy
3.9
FY12
3,787
FY13
4,210
Key data
SEL IN /SUPE.BO
`39/ `22
19496 / 5868
US$0.1m
`4.2bn / US$70m
120m
52-week high / low

Sensex / Nifty
3-m average volume
Market cap
Shares outstanding
Promoters
- of which, Pledged
Free Float
- Public
51.8
48.2
0.1
1.3
46.8
51.8
48.2
0.1
1.3
46.8
51.8
48.2
0.1
1.3
46.8
Financials (YE Mar)
FY14e
FY5e
Sales (`m)
5,469
6,239
Net profit (`m)
534
625
EPS (`)
4.5
5.2
23.0
16.9
PE (x)
7.9
6.7
PBV (x)
2.0
1.6
RoE (%)
28.5
26.7
RoCE (%)
28.4
30.1
Growth (%)
Dividend yield (%)

Net gearing (%)
2.3
2.6
37.0
10.6
% yoy
11.2
EBITDA (`m)
164
159
(3.6)
663
726
9.4
EBITDA margin (%)
17.2
15.9
(124) bps
17.5
17.2
(27) bps
Interest (`m)
20
24
17.7
85
96
13.2
Depreciation (`m)
13
17
28.9
51
57
10.8
Other income (`m)
18.3
22
31
43.1
Girish Solanki
187
123
(34.3)
550
657
19.5
+9122 6626 6712

PBT (`m)
Tax (`m)
Tax rate (%)
Adj. PAT (`m)
Source: Company
52
34
(33.2)
157
183
16.1
27.5
28.0
46 bps
28.6
27.8
(81) bps
Rohan Korde
98
89
(9.5)
392
474
20.9
+9122 6626 6733

India Equities
9 July 2013
Suprajit Engineering Margins expected to be intact despite slowing revenue; Buy


Year-end: Mar
Net sales
Sales growth (%)
- Op. expenses
EBIDTA
EBITDA margins (%)
- Interest
- Depreciation
+ Other income
- Tax
Reported cons.PAT
Adjusted cons. PAT
FDEPS (`/share)
DPS (`/share)
FY11
FY12
FY13
FY14e
FY15e
Year-end: Mar
3,467
39.5
2,901
566
16.3
74
72
48
135
28.8
327
327
2.7
2.7
47.7
0.5
4,238
22.2
3,551
686
16.2
93
75
29
150
27.3
398
398
3.3
3.3
21.6
0.7
4,625
9.2
3,853
772
16.7
102
81
28
197
29.5
471
435
3.9
3.6
9.1
0.8
5,469
18.2
4,545
924
16.9
122
102
34
199
27.1
534
534
4.5
4.5
23.0
0.8
6,239
14.1
5,171
1,069
17.1
139
112
39
232
27.1
625
625
5.2
5.2
16.9
0.9
Share capital
Reserves & surplus
Shareholders fund
Debt
Deferred Tax Liab (net)
Capital employed
Net Fixed assets
Investments
- of which liquid
Working capital
Cash
Capital deployed
Net Debt
Net Debt/Equity (%)
W C turn (days)
Book Value (`/share)
FY13
FY14e
FY15e
120
1,172
1,292
748
46
2,086
1,137
183
120
1,547
1,667
1,029
60
2,757
1,365
454
120
1,970
2,090
879
60
3,029
1,462
454
120
2,468
2,588
679
60
3,328
1,400
454
646
27
1,670
631.5
65.2
62.1
8.1
735
31
2,086
717.2
55.5
59.5
10.8
862
76
2,757
952.8
57.1
63.0
13.9
1,008
105
3,029
774.1
37.0
62.4
17.4
1,067
406
3,328
273.3
10.6
60.7
21.6

Consolidated PAT
+Non-cash Items
Cash profit
- Incr./(Decr) in WC
Operating cash-flow
-Capex
Free cash-flow
-Dividend
+ Equity raised
+ Others
+ Debt raised
-Investments
Net cash-flow
+Opening cash
Closing cash
FY12
120
849
969
659
42
1,670
909
84
Year-end: Mar
FY11
FY11
FY12
FY13
FY14e
FY15e
Year-end: Mar
FY11
FY12
FY13
FY14e
FY15e
327
72
399
112
288
265
23
63
2.1
42
(11)
15
12
27
398
83
481
89
392
302
90
91
15.1
90
100
4
27
31
471
96
567
127
440
309
131
105
9.6
281
271
45
31
76
534
102
637
146
491
200
291
112
0.0
(150)
29
76
105
625
112
737
59
677
50
627
126
(0.0)
(200)
301
105
406
P/E (x)
Cash P/E (x)
EV/EBITDA (x)
EV/Sales (x)
P/B (x)
RoAE (%)
RoACE (%)
Dividend yield (%)
Dividend payout (%)
Debt/Equity (x)
Receivable days
Inventory days
Payable days
Working capital days
Fixed asset T/O (x)
12.8
10.5
8.4
1.4
4.3
39.8
32.6
1.3
19.2
0.7
69.0
28.9
64.8
62.1
4.3
10.5
8.7
6.9
1.1
3.3
35.2
32.6
1.9
22.8
0.6
70.1
30.9
75.4
59.5
4.1
8.9
7.6
6.1
1.0
2.5
31.8
28.5
2.1
22.3
0.6
71.9
34.7
84.3
63.0
3.7
7.9
6.6
4.9
0.8
2.0
28.5
28.4
2.3
21.0
0.4
71.0
32.2
80.0
62.4
3.9
6.7
5.7
3.8
0.6
1.6
26.7
30.1
2.6
20.2
0.3
71.0
30.0
80.0
60.7
4.4
Fig 5 PE band
Fig 6 Export revenues
(`m)
(` mn)
37
700
7.5x
32
600
6.0x
Suprajit
27
22
4.5x
17
400
300
3.0x
12
7
1.5x
200
100
SEL Exports
FY13
FY12
FY11
FY10
FY09
FY08
FY07
FY06
FY05
Mar-13
Aug-12
Feb-12
Jul-11
Dec-10
Jun-10
Nov-09
May-09
Oct-08
Apr-08
FY04
2
-3
500
SAL / SEU (Export/Global sales)
Source: Company
40
Auto Components
India I Equities
Result preview
9 July 2013
Ceat
Rating: Hold
Target Price: `117
Share Price: `107
Improved trajectory; Hold

Key takeaways
Tonnage sales to improve. We expect sales tonnage for Ceat to improve
10.7% yoy, to ~57,000 MT. We expect revenues to grow 8.4% yoy to
`12.9bn. The company had earlier mentioned that in 1HCY13 it expects
subdued growth in the range of 05%, but now looks set to improve upon
that projection.
Margins better in quality. In 4QFY13, the companys EBITDA margin was
10.6%, up 210bps qoq, flat yoy. In 1QFY14, however, we expect EBITDA
margin at 10%, up 100bps yoy. EBITDA growth is expected to be 20.3% yoy.
Ahead, higher input costs can act as a dampener. Due to lower interest cost,
we expect adjusted profit to increase 64% yoy, to `422m.
Product mix set to change. Truck tyres currently constitute ~60% of Ceat's
annual sales, but that is expected to change and come down to 50% ahead. As
the company changes its product mix, it is also changing its distribution
strategy by opening up another channel for the two-wheeler segment, one on
which it will have greater control.
Our take. In 1QFY14, we expect Ceat to benefit from lower prices of
rubber, although the benefit is likely at a diminishing rate. However, demand
is yet to pick up significantly.
Key data
CEAT IN / CEAT.BO
`125 / `87
19496 / 5868
US$0.0m
`3.70bn / US$61.67m
34.2m
52-week high / low

Sensex / Nifty
3-m average volume
Market cap
Shares outstanding
Mar13
Dec12 Sep12
Promoters
- of which, Pledged
Free Float
- Public
54.24
45.76
0.03
11.26
34.47
52.87
47.13
1.49
10.96
34.68
Financials (YE Mar)
Sales (`m)
Net profit (`m)
EPS (`)
We maintain Hold on Ceat with a price target of `117 based upon 3x FY14e
` At CMP, Ceat is trading at 2.5x FY14e EPS.
PE.
Risks. Downside. Spike in rubber prices, late recovery in truck-tyre
replacement demand, high leverage and price wars. Upside. Decline in rubber
prices, faster-than-expected pick-up in replacement demand, better-thanexpected growth in overseas operations.
Growth (%)
52.87
47.13
1.58
10.98
34.57
FY14e
FY15e
53,060
59,258
1,338
1,495
39.1
43.7
7.1
11.8
PE (x)
2.7
2.5
PBV (x)
0.4
0.4
RoE (%)
15.5
15.0
RoCE (%)
22.1
23.3
Dividend yield (%)

Net gearing (%)
4.2
4.7
74.9
76.7

1QFY13
1QFY14e
% yoy
FY12
FY13
Sales (`m)
11,891
12,895
8.4
44,720
48,815
9.2
1,069
1,286
20.3
2,556
4,245
66.1
EBITDA margin (%)
9.0
10.0
98bps
5.7
8.7
298bps
Interest (`m)
530
472
-11.0
1,922
1,944
1.2
Depreciation (`m)
192
215
11.9
705
782
10.9
EBITDA (`m)
% yoy
34
31
-9.9
200
215
7.3
PBT (`m)
381
630
65.4
98
1,457
1,390.2
Rohan Korde
Tax (`m)
124
208
68.3
23
394
1,650.2
Tax rate (%)
32.4
33.0
57bps
23.0
27.0
401bps
+9122 6626 6733

PAT (`m)
257
422
64.0
96
1,249
NM
Other income (`m)
Source: Company
India Equities
9 July 2013
Ceat Improved trajectory; Hold


Year-end: Mar
Net revenues
Revenue growth (%)
- Op. expenses
EBIDTA
EBITDA margin (%)
- Interest expenses
- Depreciation
+ Other income
- Extraordinaries
- Tax
Reported PAT
Adjusted PAT
PAT growth (%)
FDEPS (`/share)
FDEPS growth (%)
FY11
FY12
FY13
FY14e
FY15e
35,164
25.2
33,754
1,409
4.0
785
342
128
78
110
33.0
223
301
-81.3
8.8
-81.3
44,720
27.2
42,165
2,556
5.7
1,922
705
200
32
23
23.0
75
96
-68.0
2.8
-68.0
48,815
9.2
44,570
4,245
8.7
1,944
782
215
277
394
27.0
1,064
1,249
1,194.9
36.5
1,194.9
53,060
8.7
48,391
4,669
8.8
2,235
812
236
0
520
28.0
1,338
1,338
7.1
39.1
7.1
59,258
11.7
54,162
5,096
8.6
2,459
848
260
0
553
27.0
1,495
1,495
11.8
43.7
11.8
FY11
FY12
FY13
FY14e
FY15e
342
6,088
6,491
9,050
241
15,782
14,684
865
-247
479
15,782
7,705
34.2
225.0
31
190
342
6,185
6,563
10,722
224
17,510
15,375
745
1,056
334
17,510
9,643
34.2
281.6
44
192
342
7,088
7,466
9,396
745
17,608
15,129
447
1,219
814
17,608
8,136
34.2
237.6
29
218
342
8,271
8,650
9,096
745
18,492
15,317
149
1,432
1,594
18,492
7,353
34.2
214.7
29
253
342
9,596
9,974
8,596
745
19,316
15,468
-148
1,801
2,195
19,316
6,550
34.2
191.3
29
291

PAT
+ Non-cash items
Cash profit
Operating cash-flow
- Capex
Free cash-flow
- Dividend
+ Equity raised
+ Debt raised
- Investments
- Misc. items
Net cash-flow
Share capital
Reserves & surplus
Net worth
Total debt
Capital employed
Net fixed assets
Investments
Working capital
Cash
Capital deployed
Net Debt
No. of shares (m)
WC days
Book value (`/sh)
Year-end: Mar
Year-end: Mar
FY11
FY12
FY13
FY14e
FY15e
Year-end: Mar
FY11
FY12
FY13
FY14e
FY15e
223
342
565
-1,354
1,918
4,987
-3,069
68
0
2,511
280
15
-921
1,400
479
75
705
780
1,266
-486
1,395
-1,881
34
0
1,673
-120
22
-144
479
335
1,064
782
1,845
703
1,142
535
607
137
0
-1,326
-298
-1,037
479
334
813
1,338
812
2,150
255
1,895
1,000
895
154
0
-300
-298
-42
780
814
1,594
1,495
848
2,344
412
1,932
1,000
932
171
0
-500
-298
-42
601
1,594
2,195
P/E (x)
P/B (x)
EV/EBITDA (x)
RoE (%)
RoCE (%)
Dividend yield
Dividend payout (%)
Debt to equity (%)
Core P/E (x)
Cash P/E
EV/sales
Inventory days
Receivables days
Payables days
Asset Turnover
12.2
0.6
8.1
4.6
7.6
1.9
35.3
1.4
20.8
5.7
0.4
59
50
77
3.3
38.0
0.6
5.2
1.5
11.7
0.9
52.3
1.6
-57.4
4.6
0.3
47
50
54
3.1
2.9
0.5
2.8
16.7
20.9
3.7
14.8
1.3
3.4
1.8
0.3
40
48
58
3.2
2.7
0.4
2.4
15.5
22.1
4.2
13.2
1.1
3.2
1.7
0.2
40
48
58
3.5
2.5
0.4
2.0
15.0
23.3
4.7
13.2
0.9
2.8
1.6
0.2
40
48
58
3.8
Fig 5 PB band
Fig 6 Segment-wise mix (% of revenues)
300
100%
1.00x
90%
80%
240
0.80x
180
120
70%
60%
0.65x
50%
0.50x
40%
30%
Ceat
60
0.35x
0.20x
20%
10%
69
66
12
14
19
20
59
17
24
Exports
OEM
FY12
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
FY11
FY10
0%
Replacement
Source: Company
42
Auto Components
India I Equities
Result preview
92July 2013
Gabriel India
Rating: Buy
Target Price: `27
Share Price: `19
More weakness in store; Buy

Key takeaways
OEM sales likely to improve. Decline in demand across most auto
segments would bear down on Gabriel Indias (Gabriel) 1Q results. After
robust growth over the past three years in autos (22% CAGR), FY13 OEM
growth rates were subdued (at ~3%), continuing into 1Q. However, the
company would outstrip this growth rate as more revenues from exports and
replacement segment help counter the OEM slowdown. We expect the
company to report above-estimated OEM sales growth of 2.6% yoy in 1Q.
EBITDA to come below estimates. We expect EBITDA margin to be
6.1%, lower 30bps qoq (90bps yoy). Though improvement in gross margin is
likely, other expenditure and staff expenses could be higher. EBITDA is
expected to be down 11.2% yoy. We expect profit to dip 16.2% yoy, to `76m.
Exports, replacement key to growth. The company expects strong growth
in exports in the next two years, at 40% (despite more than 100% in the two
previous years). Replacement sales is another high-growth area. Management
expects these two segments to constitute 25% of overall revenues in the next
2-3 years (from 14.3% currently).
Key data
GABR IN / GABR.BO
`33/ `18
19496 / 5868
US$0.2m
`2.66bn / US$44.33m
143.7m
52-week high / low

Sensex / Nifty
3-m average volume
Market cap
Shares outstanding
Mar 13
Dec 12
Sep 12
Promoters
- of which, Pledged
Free Float
- Public
54.63
45.37
5.54
0.74
39.09
54.63
45.37
5.54
0.73
39.10
54.63
45.37
5.54
0.43
39.40
Financials (YE Mar)
Our take. Gabriel has started focusing sharply on innovation, reducing costs,
working capital and overheads, and improving productivity. Measures have
also been taken on the working-capital side because of which there has been
significant improvement. Hence, Gabriel could reduce inventories and
receivables by `210m. Decent profitability and lower interest cost also helped
reduce its debt by ~`400m in FY13. Additions to the customer base, exports
and steady replacement sales are future growth drivers. We maintain Buy,
with price target of `27 (at PE of 7x Sep14e; the present PE is 5.5x FY14e).
Risks. Inadequate price hikes by OEMs, increase in commodity prices,
prolonged demand slump, delay in ramp-up by HMSI.
FY14e
FY15e
13,501
15,709
Net profit (`m)
492
599
EPS (`)
3.4
4.2
13.2
21.7
Sales (`m)
Growth (%)
PE (x)
5.5
4.6
PBV (x)
0.9
0.8
RoE (%)
17.0
18.3
RoCE (%)
19.5
21.8
Dividend yield (%)

Net gearing (%)
5.3
6.6
42.7
42.7

1QFY13
1QFY14e
% yoy
FY12
FY13
2,925
3,000
2.6
11,311
12,053
6.6
EBITDA (`m)
205
182
-11.2
949
823
-13.2
EBITDA margin (%)
7.0
6.1
-94bps
8.4
6.8
-156bps
Interest (`m)
37
28
-23.5
170
122
-28.5
Depreciation (`m)
70
72
3.0
277
273
-1.7
Other income (`m)
11
26.4
45
42
-6.9
Rohan Korde
71
93
31.4
624
412
-34.0
+9122 66266733
Sales (`m)
PBT (`m)
Tax (`m)
Tax rate (%)
PAT (`m)
Source: Company
% yoy
13
17
32.7
94
30
-67.5
17.8
18.0
18bps
15.0
7.4
-763bps
Girish Solanki
91
76
-16.2
461
435
-5.7
+9122 66266712
India Equities
9 July 2013
Gabriel India More weakness in store; Buy


Year-end: Mar
Net revenues
Revenue growth (%)
- Op. expenses
EBIDTA
EBITDA margins (%)
- Interest
- Depreciation
+ Other income
- Tax
Reported PAT
Adjusted PAT
PAT growth (%)
FY11
FY12
FY13
FY14e
FY15e
9,701
38.0
8,821
879
9.1
163
219
94
17
120
21.0
453
471
95.8
3.3
95.8
11,282
16.3
10,363
919
8.1
170
276
74
-77
94
15.0
531
461
-2.0
3.2
-2.0
12,053
6.8
11,230
824
6.8
122
273
42
59
30
7.4
381
435
-5.7
3.0
-5.7
13,501
12.0
12,530
971
7.2
114
312
49
0
101
17.0
492
492
13.2
3.4
13.2
15,709
16.4
14,533
1,176
7.5
116
347
56
0
169
22.0
599
599
21.7
4.2
21.7
FY11
FY12
FY13
FY14e
FY15e
72
1,794
1,865
1,512
157
3,534
2,209
133
1,153
39
3,534
1,339
71.9
0.7
18.7
26.0
72
2,241
2,312
1,230
133
3,676
2,175
0
1,445
56
3,676
1,174
71.9
0.5
35.0
32.2
144
2,425
2,569
657
111
3,336
2,618
0
648
70
3,336
587
143.7
0.2
27.7
17.9
144
2,749
2,893
607
136
3,636
2,806
0
757
72
3,636
534
143.7
0.2
27.7
20.1
144
3,139
3,283
607
161
4,050
3,058
0
924
67
4,050
540
143.7
0.2
27.7
22.8

PAT
+ Non-cash items
Cash profit
Operating cash-flow
- Capex
Free cash-flow
- Dividend
+ Equity raised
+ Debt raised
- Investments
- Misc. items
Net cash-flow
Share capital
Reserves & surplus
Net worth
Total debt
Capital employed
Net fixed assets
Investments
Working capital
Cash
Capital deployed
Net debt
No. of shares (m)
Net debt/equity (x)
W C turn (days)
Book value (`/sh)
Year-end: Mar
Year-end: Mar
FY11
FY12
FY13
FY14e
FY15e
453
219
672
264
409
462
-53
72
0
24
0
-7
-95
134
39
531
276
807
292
515
243
272
72
0
-281
-133
35
16
39
56
381
273
654
-797
1,451
715
735
108
72
-573
0
112
14
56
70
492
312
805
109
695
500
195
144
0
-50
0
-1
3
70
72
599
347
946
167
779
600
179
180
0
0
0
5
-5
72
67
Year-end: Mar
FY11
FY12
FY13
FY14e
FY15e
P/E (x)
P/B (x)
EV/EBITDA (x)
RoE (%)
RoCE (%)
Dividend yield (%)
Dividend payout (%)
Debt to equity (x)
Core P/E (x)
Cash P/E (x)
EV/sales (x)
Inventory days
Receivables days
Payables days
Fixed asset T/O (x)
5.8
0.7
4.9
25.2
21.3
5.3
17.8
0.9
6.8
2.0
0.5
39
36
56
2.5
5.9
0.6
4.4
19.9
19.5
5.3
18.1
0.6
6.7
1.7
0.4
40
41
46
2.8
6.3
1.1
4.7
16.9
17.8
3.9
28.9
0.5
6.8
4.2
0.3
34
36
42
2.6
5.5
0.9
4.0
17.0
19.5
5.3
34.1
0.4
6.0
3.4
0.3
34
36
42
2.6
4.6
0.8
3.3
18.3
21.8
6.6
35.0
0.4
4.9
2.9
0.3
34
36
42
2.7
Fig 5 P/E band

(%)
(`)
40
11x
10
9x
7x
5x
30
20
Gabriel India
10
3x
6
1x
0
FY15e
FY14e
FY13
FY12
FY11
FY10
FY09
FY08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
44
Chemicals
India I Equities
Result preview
97July 2013
Rating: Buy
Target Price: `74
Share Price: `52
Phillips Carbon Black

Inexpensive valuations; upgrade to Buy
Key takeaways
Hit by slowdown in domestic market. We expect Phillips Carbon Black to
report 1QFY14 volumes declining 12.8% yoy (but qoq rising 0.6%). The
decline would be chiefly due to the drop in demand in export markets and
more imports by domestic clients. On account of the fall in volumes we
expect revenue to decline 11.3% yoy. The contribution from power could also
decline, by 30% yoy, to `183m.
Disappointment in carbon-black. We expect a 5.6% EBITDA margin in
1QFY14 versus 5.8% in 1QFY13. This decline would chiefly be due to the
rise in raw material costs. Carbon black imports are squeezing the company.
We expect other expenditure to be up 380bps to 13%, and the margin up
10bps qoq.
Little profit expected, profit to decline 59.8% yoy. We expect 1QFY14
profit to drop by a steep 59.8%. We expect the revenue decline to have
dragged the profit down. The company was struck by dumping by China and
other countries. The government has imposed a 30% safeguard duty on
carbon black imports from China. Though this would help reduce imports
over time, we do not see any benefit in 1Q.
Our take. Since the 30% safeguard duty was imposed in Oct12 (till Oct13)
and 25% on CB imports from China till 31 Dec13, such imports have slid, but
imports from Korea have now risen. The 50,000-ton Cochin plant CB
`
expansion
was completed in May13. An MoU has been signed with the Tamil
Nadu government to set up a new CB and power plant; environment clearances
are in progress. In view of global developments, project work at Vietnam is
under review. We value the stock at a target PE of 4.5x FY14e earnings. We
upgrade it to a Buy, at a target of `74. Risks. A slowdown with original
equipment manufacturers and adverse forex movement.
Key data
PHCB IN /PHIL.BO
52-week high / low

Sensex / Nifty
3-m average volume
Market cap
Shares outstanding
`118/ `50
19496 / 5868
US$0.2m
`1.8bn / US$29m
34.5m
Mar13
Dec12
Sep12
Promoters
- of which, Pledged
Free Float
- Public
52.3
47.7
10.1
5.8
31.8
52.3
47.7
10.1
6.3
31.3
52.3
47.7
10.1
6.3
31.3
Financials (YE Mar)
FY14e
FY15e
26,236
29,839
Net profit (`m)
571
1,071
EPS (`)
16.6
31.1
(376.6)
87.6
PE (x)
3.1
1.7
PBV (x)
0.3
0.2
RoE (%)
9.3
15.8
RoCE (%)
9.2
12.8
Dividend yield (%)
7.7
7.7
120.5
113.5
Sales (`m)
Growth (%)
Net gearing (%)

Sales (`m)
EBITDA (`m)
1QFY13
1QFY14
% yoy
FY12
FY13
6210
5508
(11.3)
21,868
22,849
% yoy
4.5
357
311
(13.0)
2,092
736
(64.8)
(634) bps
EBITDA margin (%)
5.8
5.6
(11) bps
9.6
3.2
Interest (`m)
189
170
(10.0)
676
721
6.7
Depreciation (`m)
115
134
16.7
486
508
4.5
Other income(Rsm)
28
25
(11.0)
104
93
(11.2)
PBT (`m)
82
32
(61.0)
1034
-400
(138.7)
Girish Solanki
Tax (`m)
16
(66.2)
163
(194)
(219.0)
19.6
17.0
(258) bps
15.8
48.5
+9122 6626 6712

66
26
(59.8)
871
-206
(123.7)
Tax rate (%)

PAT (`m)
Source: Company
India Equities
9 July 2013
Phillips Carbon Black Inexpensive valuations; upgrade to Buy


Year-end: Mar
Net sales
Sales growth (%)
- Op. expenses
EBIDTA
EBITDA margins (%)
- Interest
- Depreciation
+ Other income
- Tax
Tax rate (%)
PAT
PAT growth (%)
FDEPS (`/share)
FDEPS growth (%)
CEPS (`/share)
DPS (`/share)
FY11
FY12
FY13e
FY14e
FY15e
16,902
37
14,688
2,214
13
274
386
89
481
29
1,163
(5)
35
(19)
47
5
21,868
29
19,776
2,092
10
676
486
105
163
16
871
(25)
25
(28)
39
4
22,849
4
22,113
736
3
721
508
93
(194)
48
(206)
(124)
(6)
(124)
9
0.5
26,236
15
24,294
1,942
7
748
566
86
143
20
571
(377)
17
(377)
33
4
29,839
14
27,209
2,630
9
775
610
93
268
20
1,071
88
31
88
49
4
FY11
FY12
FY13e
FY14e
FY15e
332
4,891
5,223
5,014
569
10,806
7,842
576
27
1,736
653
10,806
33
84
33
157
345
5,773
6,118
6,554
729
13,401
8,124
724
4,418
135
13,401
34
105
51
178
345
5,567
5,911
8,210
527
14,647
9,023
724
4,210
690
14,647
34
127
69
172
345
5,984
6,328
8,310
527
15,164
8,850
724
4,906
685
15,164
34
120
63
184
345
6,895
7,239
8,610
527
16,375
9,040
724
6,215
396
16,375
34
113
68
210

Reported PAT
+Depreciation
Cash profit
-Incr./(Decr.) in WC
Operating cash-flow
-Capex
Free cash-flow
-Dividend
+ Equity raised
+ Debt raised
-Investments
-Misc. items
Net cash-flow
+Opening cash
Closing cash
Share capital
Reserves & surplus
Shareholders fund
Debt
Deferred Tax/ others
Capital employed
Fixed assets
Investments
of which, Liquid
Working capital
Cash
Capital deployed
No. of shares (m)
Net Debt/Equity (%)
W C turn (days)
Book value (`/share)
Year-end: Mar
Year-end: Mar
FY11
FY12
FY13e
FY14e
FY15e
Year-end: Mar
FY11
FY12
FY13e
FY14e
FY15e
1,160
386
2,019
404
1,615
1,373
242
233
1,052
(540)
198
323
330
653
871
486
1,517
2,683
(1,166)
768
(1,934)
203
226
1,540
148
(518)
653
135
(206)
508
99
(208)
307
1,407
(1,100)
40
39
1,655
555
135
690
571
566
1,137
695
442
393
49
210
56
100
(4)
690
685
1,071
610
1,681
1,309
371
800
(429)
160
300
(289)
685
396
P/E
P/BV
EV/EBITDA
EV/Sales
Cash P/E
Dividend Yield (%)
Dividend Payout (%)
RoE
RoCE
Debtors (Days)
Inventory (Days)
Creditors (Days)
Working Cap (Days)
Asset Turnover (x)
Debt/Equity (x)
1.5
0.3
2.8
0.4
1.1
9.6
16.7
27.5
18.6
71
49
163
33
2.2
1.0
2.1
0.3
3.9
0.4
1.3
7.7
18.4
15.4
13.3
76
51
148
51
2.7
1.1
(8.7)
0.3
12.7
0.4
5.9
1.0
(9.7)
(3.4)
1.6
85
69
160
69
2.5
1.4
3.1
0.3
4.8
0.4
1.6
7.7
28.1
9.3
9.2
81
70
165
63
3.0
1.3
1.7
0.2
3.8
0.3
1.1
7.7
15.0
15.8
12.8
84
65
158
68
3.3
1.2
Fig 5 PBV band
Fig 6 FY13 revenue mix
(`)
400
350
Power
4%
1.8x
300
250
1.3x
200
150
0.8x
100
0.3x
50
Carbon black
96%
Mar-13
Sep-12
Mar-12
Aug-11
Feb-11
Aug-10
Feb-10
Source: Company
46
Auto Components
India I Equities
Result preview
9 July 2013
Setco Automotive
Rating: Hold
Target Price: `104
Share Price: `94
OE slowdown to eat into sales; Hold

Key takeaways
Sales slowdown mirrors industry slump. We expect Setco Automotives
sales to decline 5% yoy to `706m, affected by the sharp decline in offtake
in the M&H CV OEM segment; sales here declined 38% in 4QFY13. To
counter the slowdown in domestic OEM sales, management is now
focusing on exports and the aftermarket. In FY13, the aftermarket and
exports grew 16% and 31% respectively, while OE sales declined 31%.
Margins and profitability to be hit. After the EBITDA margin dropped to
a multi-year low of 10.3% in 4Q, we expect it to recover to 13.1% though it
would still be down 195bps yoy. EBITDA is expected to dip 17.3% yoy
owing to lower fixed-cost absorption. Hence, we expect PAT to decline
35.8%, to `39.9m. With the expected rise in volumes of high-margin aftermarket clutches, the margin would hold at the present level.
Long-term prospects good. We expect 1HFY14 to be a disappointing year
in terms of financial performance. However, in 2HFY14, we expect the
company to be a key beneficiary of the recovery in the CV cycle, with
increasing exports and good aftermarket potential as added positives.
Our take. We expect the companys financial performance to disappoint in
1HFY14 as well. In 2HFY14, however, we expect Setco to be a key
beneficiary of the recovery and upswing in the CV cycle. Increasing exports
and sound aftermarket potential would be added positives. The companys
`
short-term prospects continue to be dim. We maintain our Hold rating on the
stock. We assign a one-year-forward-PE of 7x (Sep13) and arrive at a target
of `104. Risks. Slump in auto demand, rise in commodity prices, insufficient
price hikes by OEMs.
Key data
SETC IN /SETC.BO
52-week high / low

Sensex / Nifty
3-m average volume
Market cap
Shares outstanding
`153/ `94
19496 / 5868
US$0.1m
`2.5bn / US$42m
26.6m
Mar13
Dec12
Sep12
Promoters
- of which, Pledged
Free Float
- Public
63.2
36.8
4.6
0.0
32.2
63.2
36.8
4.6
0.0
32.2
63.2
36.8
4.6
0.0
32.2
Financials (YE Mar)
FY14e
FY15e
Sales (`m)
4,790
5,497
Net profit (`m)
345
446
EPS (`)
13.0
16.8
Growth (%)
32.0
29.3
7.2
5.6
PE (x)
PBV (x)
1.2
1.0
RoE (%)
17.8
20.0
RoCE (%)
17.1
19.0
Dividend yield (%)

Net gearing (%)
3.4
4.1
80.1
66.6

1QFY13
1QFY14
% yoy
FY12
FY13
Sales (`m)
743
706
(5.0)
3,671
3,408
% yoy
(7.2)
EBITDA (`m)
112
92
(17.3)
677
478
(29.5)
EBITDA margin (%)
(443)bps
15.0
13.1
(195)bps
18.5
14.0
Interest (`m)
42
41
(1.7)
166
174
4.9
Depreciation (`m)
21
27
26.8
81
92
13.9
Other income(`m)
19
20
4.7
20
85
336.9
Girish Solanki
PBT (`m)
68
44
(34.5)
451
298
(34.0)
+9122 6626 6712

Tax (`m)
Tax rate (%)
PAT (`m)
Source: Company
(20.8)
24
249.3
8.3
10.0
174bps
1.5
8.1
657bps
Rohan Korde
62.2
39.9
(35.8)
443.9
273.4
(38.4)
+9122 6626 6733

India Equities
9 July 2013
Setco Automotive OE slowdown to eat into sales; Hold
Quick Glance Consolidated Financials and Valuations


FY11
FY12
FY13
FY14e
FY15e
Year-end: Mar
3,529
37.9
2,881
648
18.4
125
105
22
104
24
335
133.2
335
12.6
133.2
16.6
4,231
19.9
3,479
752
17.8
187
108
33
6
1
483
44.2
455
18.2
44.2
22.2
3,994
-5.6
3,427
567
14.2
198
123
49
33
11
261
-45.9
261
9.8
-45.9
14.5
4,790
19.9
4,059
731
15.3
215
147
55
79
19
345
32.0
345
13.0
32.0
18.5
5,497
14.8
4,632
865
15.7
215
162
63
105
19
446
29.3
446
16.8
29.3
22.9
Share capital
Reserves & surplus
Shareholders fund
Debt
Minority interests
Def Tax Liab
Capital employed
Fixed assets
Investments
Working capital
Cash
Capital deployed
No. of shares (m) (FD)
Net Debt/Equity (%)
W C turn (days)
Book Value
Year-end: Mar
Net sales
Sales growth (%)
- Op. expenses
EBIDTA
EBITDA margins (%)
- Interest
- Depreciation
+ Other income
- Tax
Effective tax rate
PAT
PAT growth (%)
Consolidated PAT
FDEPS (Rs/share)
FDEPS Growth (%)
CEPS (Rs/share)
FY13
FY14e
FY15e
176
1,160
1,393
1,421
0
57
2,814
1,148
218
1,360
88
2,814
27
96
107
52
266
1,552
1,884
1,726
0
66
3,610
1,509
368
1,707
28
3,611
27
90
140
71
266
1,798
2,130
1,726
0
66
3,856
1,462
368
2,008
20
3,857
27
80
142
80
266
2,125
2,457
1,726
0
66
4,183
1,399
368
2,328
89
4,184
27
67
144
92
FY11
FY12
FY13
FY14e
FY15e
7.5
5.7
4.3
0.8
2.6
2.8
24.5
42.1
27.5
52.8
67.0
25.0
104.6
0.7
1.3
5.2
4.2
3.8
0.7
1.8
2.8
17.0
42.8
26.8
66.6
68.4
30.5
107.3
0.7
1.0
9.6
6.5
5.5
0.8
1.3
2.8
31.6
16.6
15.3
76.8
91.4
33.7
140.2
1.0
0.9
7.2
5.1
4.3
0.7
1.2
3.4
28.7
17.8
17.1
66.6
93.1
29.9
141.5
0.9
0.8
5.6
4.1
3.6
0.6
1.0
4.1
26.7
20.0
19.0
68.0
95.0
32.7
144.0
0.9
0.7

Consolidated PAT
+ Depreciation
Cash profit
Operating cash-flow
- Capex
Free cash-flow
- Dividend
+ Equity raised
+ Debt raised
- Investments
- Misc. items
Net cash-flow
+ Opening cash
Closing cash
FY12
176
746
971
1,270
0
49
2,241
987
89
1,127
38
2,241
27
127
105
37
Year-end: Mar
FY11
FY11
FY12
FY13
FY14e
FY15e
335
105
458
232
226
155
71
82
0
100
78
(4)
14
23
38
483
108
599
233
367
269
98
82
0
151
129
(13)
50
38
88
261
123
394
347
48
484
(436)
83
0
305
150
(303)
(61)
88
27
345
147
492
301
191
100
91
99
0
0
0
0
(8)
27
19
446
162
609
320
288
100
188
119
0
0
0
0
69
19
89
Year-end: Mar
P/E
Cash P/E
EV/EBITDA
EV/Sales
Price to Book Value
Dividend Yield (%)
Dividend payout %
RoE (%)
RoCE (%)
Debtors (Days)
Inventory (Days)
Creditors (Days)
Working Capital (Days)
Asset Turnover (x)
Debt/Equity (x)
Fig 5 PE band
Fig 6 FY13 revenue break-up
(`)
FY13
190
Exports
9%
170
Others
0%
10x
150
130
OEM
37%
8x
110
90
6x
70
4x
50
AM
54%
Mar-13
Oct-12
May-12
Dec-11
Jul-11
Feb-11
Sep-10
Apr-10
Nov-09
Jun-09
Jan-09
Aug-08
30
Source: Company
48
Auto Components
India I Equities
Result preview
9 July 2013
Munjal Showa
Rating: Buy
Target Price: `80
Share Price: `62
Two wheelers spoilsport; Buy

Key takeaways
Challenges to continue. Against the backdrop of weak demand, Munjal
Showa (MJS) reported a mere 1.6% revenue growth (we estimated 3.2%) in
FY13. Capacity was not a major constraint, but CY13 ytd sales of its
customers were weak. It may be recalled that, in 3QFY13 also, when demand
was weak, revenue declined 1.9% yoy. On the better EBITDA margin and
lower interest costs, however, its 3Q profit jumped 21.4% yoy. We expect this
challenging two-wheeler-industry scenario to continue into 1HFY14.
Profit likely to decline. In 1QFY14, overall automotive demand was weak.
Hence, we expect MJS revenue to decline 5% yoy. We expect its EBITDA
margin to be 5.3% (lower 20bps yoy and down 280bps qoq). This would
cause 8.4% yoy EBITDA decline. Hence, the profit decline would be 20.1%
yoy, to `108m.
Gujarat plant a possibility. Although a final announcement is yet to be
made, MJS may set up a plant in Gujarat with Hero MotoCorp. If this plan
materialises, capex would be `1.2-1.5bn; else the normalized range would be
`300-350m of annual capex.
Our take. While the two-wheeler demand was subdued, better operational
performance and lower tax rate helped the company put on a good show.
Although its key customers are still facing sluggish demand, growth is likely to
be driven by non-HMC customers. Positives ahead are inexpensive valuations
`
and more revenues from diversification of its customer base.
We reiterate a Buy, with a price target of `80, based upon 4.2x FY14e (on par
with its past three-year average). Risks. Sustained slump in motorcycle sales,
rise in commodity prices and inadequate price hikes allowed by OEMs.
Key data
MJS IN / MNJL.BO
`88 / `56
19496 / 5868
US$0.03m
`2.48bn / US$41.33m
40m
52-week high / low

Sensex / Nifty
3-m average volume
Market cap
Shares outstanding
Mar 13 Dec 12
Promoters
- of which, Pledged
Free Float
- Public
65.02
34.98
0.23
1.87
32.88
Financials (YE Mar)
Sales (`m)
65.02
34.98
0.02
1.88
33.08
Sep12
65.02
34.98
0.02
1.86
33.10
FY14e
FY15e
16,968
19,474
Net profit (`m)
723
806
EPS (`)
18.1
20.2
Growth (%)
12.2
11.5
PE (x)
3.4
3.1
PBV (x)
0.7
0.6
RoE (%)
20.0
18.9
RoCE (%)
22.4
22.3
Dividend yield (%)

Net gearing (%)
5.6
6.5
49.1
35.8

1QFY13
1QFY14e
% yoy
FY12
FY13
4,199
3,989
-5.0
15,569
15,824
1.6
EBITDA (`m)
232
212
-8.4
1,227
1,064
-13.3
EBITDA margin (%)
5.5
5.3
-20bps
7.9
6.7
-116bps
Interest (`m)
19
18
-3.6
112
72
-35.8
Depreciation (`m)
66
72
8.8
272
276
1.5
Sales (`m)
% yoy
-2.1
16
19
21.1
PBT (`m)
152
127
-16.3
859
679
-20.9
Rohan Korde
Tax (`m)
17
19
14.6
188
72
-61.4
Tax rate (%)
11.0
15.0
404bps
21.9
10.7 -1,120bps
+9122 6626 6733

PAT (`m)
135
108
-20.1
671
644
Other income (`m)
-4.0
Source: Company
India Equities
9 July 2013
Munjal Showa Two-wheelers spolisport; Buy


Year-end: Mar
Net revenues
Revenue growth (%)
- Op. expenses
EBIDTA
EBITDA margin (%)
- Interest expenses
- Depreciation
+ Other income
- Extraordinaries
- Tax
Reported PAT
Adjusted PAT
PAT growth (%)
FDEPS (`/share)
FDEPS growth (%)
FY11
FY12
FY13
FY14e
FY15e
12,893
30.5
12,083
810
6.3
91
262
23
0
139
29.0
340
340
38.2
8.5
38.2
15,569
20.8
14,342
1,227
7.9
112
272
16
0
188
21.9
671
671
97.3
16.8
97.3
15,824
1.6
14,760
1,064
6.7
72
276
19
56
72
9.8
607
644
-4.0
16.1
-4.0
16,968
7.2
15,763
1,205
7.1
63
314
23
0
128
15.0
723
723
12.2
18.1
12.2
19,474
14.8
18,053
1,422
7.3
65
349
25
0
227
22.0
806
806
11.5
20.2
11.5
Year-end: Mar
Share capital
Reserves & surplus
Net worth
Total debt
Capital employed
Net fixed assets
Investments
Working capital
Cash
Capital deployed
Net Debt
No. of shares (m)
WC days
Book value (`/sh)
FY11
FY12
FY13
FY14e
FY15e
80
1,950
2,030
857
142
3,029
2,631
0
367
31
3,029
40
826
40.7
4
50.7
80
2,482
2,562
732
142
3,435
2,562
30
796
47
3,435
40
654
25.5
13
64.0
80
2,948
3,028
320
142
3,491
2,534
200
577
179
3,491
40
-59
-1.9
7
75.7
80
3,531
3,611
320
142
4,074
2,970
250
630
224
4,074
40
-154
-4.3
7
90.3
80
4,177
4,257
520
142
4,920
3,721
250
709
240
4,920
40
30
0.7
7
106.4

Year-end: Mar
FY11
FY12
FY13
FY14e
FY15e
Year-end: Mar
FY11
FY12
FY13
FY14e
FY15e
PAT
+ Non-cash items
Cash profit
Operating cash-flow
- Capex
Free cash-flow
- Dividend
+ Equity raised
+ Debt raised
- Investments
- Misc. items
Net cash-flow
340
262
603
-110
713
286
427
120
0
-343
-50
7
7
24
31
671
272
944
429
515
155
360
120
0
-125
30
68
16
31
47
607
276
883
-219
1,102
249
853
140
0
-411
170
0
132
47
179
723
314
1,037
52
985
750
235
160
0
0
50
-20
45
179
224
806
349
1,155
79
1,076
1,100
-24
150
0
200
0
10
16
224
240
P/E (x)
P/B (x)
EV/EBITDA (x)
RoE (%)
RoCE (%)
Dividend yield
Dividend payout (%)
Debt to equity (%)
Core P/E (x)
Cash P/E
EV/sales
Inventory days
Receivables days
Payables days
Asset Turnover
7.3
1.2
4.1
16.8
18.8
4.0
29.4
0.4
7.7
4.1
0.3
12.6
38.4
54.4
4.3
3.7
1.0
2.6
26.2
28.3
4.8
17.9
0.3
3.8
2.6
0.2
13.5
37.4
52.4
4.5
3.8
0.8
2.3
20.0
23.1
4.8
19.8
0.1
3.9
2.8
0.2
13.8
36.6
49.5
4.5
3.4
0.7
1.9
20.0
22.4
5.6
19.4
0.1
3.5
2.4
0.1
12.0
31.6
45.1
4.2
3.1
0.6
1.8
18.9
22.3
6.5
19.8
0.1
3.2
2.1
0.1
11.6
30.6
43.7
4.0
Fig 5 PE band

(%)
160
8x
140
7x
120
6x
100
5x
80
4x
60
3x
40
Munjal Showa
20
0
FY15e
FY14e
FY13
FY12
FY11
FY10
FY09
FY08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Source: Company
50
Appendix
Analyst Certification
The views expressed in this Research Report accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the research
analyst(s) was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. The research analysts are bound by
stringent internal regulations and also legal and statutory requirements of the Securities and Exchange Board of India (hereinafter SEBI) and the analysts compensation are completely
delinked from all the other companies and/or entities of Anand Rathi, and have no bearing whatsoever on any recommendation that they have given in the Research Report.
The research analysts, strategists, or research associates principally responsible for the preparation of Anand Rathi Research have received compensation based upon various factors,
including quality of research, investor client feedback, stock picking, competitive factors, firm revenues and overall investment banking revenues.
Anand Rathi Ratings Definitions
Analysts ratings and the corresponding expected returns take into account our definitions of Large Caps (>US$1bn) and Mid/Small Caps (<US$1bn) as described in the Ratings Table
below:
Ratings Guide
Large Caps (>US$1bn)
Mid/Small Caps (<US$1bn)
Buy
>15%
>25%
Anand Rathi Research Ratings Distribution (as of 28 Feb 2013)

Buy
Anand Rathi Research stock coverage (184)
65%
% who are investment banking clients
4%
Hold
5-15%
5-25%
Sell
<5%
<5%
Hold
27%
2%
Sell
8%
0%
Other Disclosures
This report has been issued by ARSSBL which is a SEBI regulated entity, and which is in full compliance with all rules and regulations as are applicable to its functioning and governance.
The investors should note that ARSSBL is one of the companies comprising within ANAND RATHI group, and ANAND RATHI as a group consists of various companies which may
include (but is not limited to) its subsidiaries, its affiliates, its group companies who may hold positions, views, stakes and may service the companies covered in this report independent of
ARSSBL. Investors are cautioned to be aware that there could arise a potential conflict of interest in the views held by ARSSBL and other companies of Anand Rathi who maybe affiliated,
connected or catering to the companies mentioned in the Research Report; even though, ARSSBL and Anand Rathi are fully complaint with all procedural and operational regulatory
requirements. Thus, investors should not use this as a sole basis for making their investment decision and should consider the recommendations mentioned in the Research Report
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Further, the information herein has been obtained from various sources which we believe is reliable, and we do not guarantee its accuracy or completeness. Neither the information nor
any opinion expressed herein constitutes an offer, or an invitation to make an offer, to buy or sell any securities or any options, futures or other derivatives related to such securities
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Autos

BSE Auto: 10818

Stuck in first gear

India Autos: June 13 quarter, forecasts

yoy chg (%)

yoy chg (bps)

yoy chg (%)

Mahindra & Mahindra

Source: Company, Anand Rathi Research

* Estimates for 2QCY13

India Autos Stuck in first gear

Fig 1 Snapshot: Quarterly result estimates

Mahindra & Mahindra

Motherson Sumi Systems

Amara Raja Batteries

VST Tillers & Tractors

Anand Rathi Research

* Estimates for 2QCY13

Domestic weakness, JLR strong; Buy

52-week high / low

Shareholding pattern (%)

Financials (YE Mar)

Quarterly results (YE Mar)

7.1 1,656,545 1,888,176

Net profit (`m)

Dividend yield (%)

Source: Anand Rathi Research

+9122 6626 6733

Other income (`m)

Tax rate (%)

Tata Motors Domestic weakness, JLR strong; Buy

Quick Glance Financials and Valuations

Fig 1 Income statement (`m)

Source: Company, Anand Rathi Research

Source: Company, Anand Rathi Research

Fig 4 Ratio analysis @ `296

Fig 3 Cash-flow statement (`m)

Source: Company, Anand Rathi Research

Source: Company, Anand Rathi Research

Fig 6 JLR product mix

Source: Bloomberg, Anand Rathi Research

Anand Rathi Research

Mahindra & Mahindra

Tractors bounce back; Hold

EBITDA margin (%)

Other income (`m)

Tax rate (%)

52-week high / low

Shareholding pattern (%)

Financials (YE Mar)

Cons. EPS (`)

Net profit (`m)

Dividend yield (%)

Source: Anand Rathi Research

Mahindra & Mahindra Tractors bounce back; Hold

Quick Glance Financials and Valuations

Fig 1 Income statement (`m)

Fig 4 Ratio analysis @ `968

Fig 3 Cash-flow statement (`m)

Source: Company, Anand Rathi Research

Source: Company, Anand Rathi Research

Consolidated P/E (x)

Source: Company, Anand Rathi Research