Quarterly Update
23 JAN 2014
ASHOK LEYLAND
SELL
AUTO
Target Price: Rs 12
Continues to disappoint; some respite in FY15
Ashok Leylands (ALs) Q3 was impacted by high discounts and inferior
mix (as reflected by QoQ increase in RM to sales ratio). Q3 EBITDA loss
at Rs 969 mn (margin at -5%) was higher than our est. of Rs
[Link], we expect FY15 to see improvement in volumes (10%
growth) and margin (up 600 bps) led by gradual improvement in the
economy.
CMP
Potential Upside
Relative to Sector
: Rs 17
: -31%
: Underperformer
MARKET DATA
No. of Shares
: 2,661mn
Free Float
Market Cap
52-week High / Low
Avg. Daily vol. (6mth)
Bloomberg Code
Promoters Holding
FII / DII
BSE Code
NSE Code
Valuation rich
We now expect a loss of Rs 1.6/sh in FY14 (Rs 0.3/sh earlier) and
accordingly reduce FY15 EPS by 14% to Rs [Link] raise our target
EV/EBIDTA multiple to 7x from 6x on expectations of demand recovery.
Our target price is based of Rs 12 (7x FY15E EV/EBIDTA + Rs 2/ sh for
investments) implies 31% downside from [Link] SELL.
: 59%
: Rs46bn
: Rs 26 / Rs 12
: 10.8 mn shares
: AL IB Equity
: 41%
: 13% / 12%
: 500477
: ASHOKLEY
Other highlights
Despite cash generation, debt at Rs 54 bn was flat QoQ: Cash flow generation of Rs 2.3 bn in Q3FY14 was driven
by operational working capital reduction (Rs 4.9bn), profit on sale of IndusInd Bank shares (~ Rs 1 bn) and profit
on sale of land (Rs 340 mn). Note ALs target is to reduce debt to Rs 51 bn by March 14. We expect net debt of
Rs 37 bn in FY15 led by volume and margin recovery
Market share: In Q3,AL has gained market share YoY in trucks but has lost some on buses as AL was not willing to
discount its products as much as the competition in tender floated by state transport units. Overall, AL has seen a
marginal gain in market share
Boss has been launched in 4 states till Dec-13. Also launched Captain (with Neptune engine) in January 2014 with
23 ton and 25 ton options. The platform can support 18 variants
Cost reduction: While management did not share any specific targets, it indicated AL targets significant cost
reduction by H2FY15. The company has achieved 40% of the target till date
(Continued on page 2)
Financial summary(Standalone)
Y/E March
Sales (Rs mn)
Key drivers
FY12
FY13
FY14E
1,27,034
1,22,031
98,830
FY15E
1,09,267
Adj PAT (Rs mn)
6,267
1,442
(4,274)
1,999
Con. EPS* (Rs.)
(1.1)
0.7
2.4
0.5
(1.6)
0.8
Change YOY (%)
(4.7)
(77.0)
(396.4)
(146.8)
P/E (x)
12.7
31.8
(10.7)
23.0
RoE (%)
22.6
4.8
(14.5)
7.1
RoCE (%)
13.6
6.5
(1.0)
6.8
EV/EBITDA (x)
8.3
10.1
40.2
9.1
DPS
1.0
0.6
0.2
0.3
EPS (Rs.)
Source: *Consensus broker estimates, Company, Axis Capital
(%)
FY13
FY14E
(16)
(23)
10
14.1
14.4
14.5
7.0
2.0
8.1
Volume Growth
ASP
EBITDA margin
FY15E
Price performance
150
Sensex
Ashok Leyland
100
50
0
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
01
23 JAN 2014
Quarterly Update
ASHOK LEYLAND
AUTO
(Continued from page 1)
Capex and investments planned for FY14 is Rs 5-7 bn. In Q3FY14, the
company spent Rs 870 mnon investments and Rs 350 mnon capex
Exports: AL aims to achieve 1/3rd of its revenue from exports over medium-term
vs. ~10% of revenue currently. Key exports markets under consideration:
Middle East, South-east Asia, Africa and Latin America
Capacity currently stands at ~150,000 units with LCV contract manufacturing
capacity at ~60,000 units
Exhibit 1: Results update
(Rsmn)
Dec-13
Quarter ended
Dec-12
% Chg
Sep-13
% Chg
FY14E
Y/E
FY13
% Chg
Net sales
19,532
23,805
(17.9)
25,496
(23.4)
101,333
124,812
(18.8)
(969)
1,023
563
2,063
8,765
(76.5)
154
141
9.3
231
(33.3)
677
624
8.6
(815)
1,164
794
2,063
8,765
(76.5)
EBIDTA
Other income
PBIDT
Depreciation
883
931
(5.1)
901
(1.9)
3,672
3,808
(3.6)
1,153
1,071
7.6
1,244
(7.4)
4,507
3,769
19.6
PBT
(2,851)
(838)
(1,351)
(5,439)
1,812
Tax
(378)
20
(981)
(1,165)
370
(2,473)
(858)
(371)
(4,274)
1,442
801
1,599
(49.9)
120
567.2
1,166
2,896
(59.7)
Interest
Adjusted PAT
Extra ordinary income/ (exp.)
Reported PAT
(1,672)
741
(251)
(3,107)
4,337
No. of shares (mn)
2,661
2,661
2,661
2,661
2,661
EBIDTA margin (%)
(5.0)
4.3
2.2
2.0
7.0
PBIDT margin (%)
(4.2)
4.9
3.1
2.0
7.0
EPS - annualized (Rs)
(3.7)
(1.3)
(0.6)
(1.6)
0.5
Source: Company, Axis Capital
02
23 JAN 2014
Quarterly Update
ASHOK LEYLAND
AUTO
Financial summary (Standalone)
Cash flow (Rsmn)
Profit &loss (Rsmn)
Y/E March
Net sales
Other operating income
Total operating income
Cost of goods sold
Gross profit
Gross margin (%)
Total operating expenses
EBITDA
EBITDA margin (%)
Depreciation
EBIT
Net interest
Other income
Profit before tax
Total taxation
Tax rate (%)
Profit after tax
Minorities
Profit/ Loss associate co(s)
Adjusted net profit
Adj. PAT margin (%)
Net non-recurring items
Reported net profit
FY12
FY13
FY14E
FY15E
1,27,034
1,22,031
98,830
1,09,267
2,009
2,781
2,503
2,678
1,29,043
1,24,812
1,01,333
1,11,945
(94,618)
(91,231)
(76,433)
(79,837)
34,425
33,581
24,900
32,108
27.1
27.5
25.2
29.4
(21,241)
(24,816)
(22,837)
(23,076)
13,184
8,765
2,063
9,033
10.4
7.2
2.1
8.3
(3,528)
(3,808)
(3,672)
(3,830)
Y/E March
Profit before tax
Depreciation & Amortisation
Chg in working capital
FY12
FY13
FY14E
FY15E
7,507
1,812
(5,439)
2,324
(3,528)
(3,808)
(3,672)
(3,830)
(764)
(3,732)
9,625
(1,637)
Cash flow from operations
11,171
7,283
14,020
7,070
Capital expenditure
(8,722)
(7,503)
(1,000)
(1,000)
Cash flow from investing
(11,364)
(14,911)
(3,323)
(2,695)
Equity raised/ (repaid)
1,330
Debt raised/ (repaid)
5,296
12,575
(2,000)
(3,000)
Dividend paid
(3,092)
(1,868)
(727)
(982)
Cash flow from financing
(2,019)
4,170
(7,234)
(7,566)
Net chg in cash
(2,212)
(3,458)
3,462
(3,191)
FY12
FY13
FY14E
FY15E
9,656
4,957
(1,609)
5,203
(2,552)
(3,769)
(4,507)
(3,584)
404
624
677
705
7,507
1,812
(5,439)
2,324
(1,240)
(370)
1,165
(325)
OPERATIONAL
16.5
20.4
21.4
14.0
FDEPS (Rs)
2.4
0.5
(1.6)
0.8
6,267
1,442
(4,274)
1,999
CEPS (Rs)
3.7
3.1
0.2
2.2
DPS (Rs)
Dividend payout ratio (%)
6,267
1,442
(4,274)
1,999
4.9
1.2
(4.3)
1.8
16
2,896
1,166
6,283
4,337
(3,107)
1,999
Balance sheet (Rsmn)
Key ratios
Y/E March
1.0
0.6
0.2
0.3
42.3
36.8
(20.0)
42.0
14.9
(3.9)
(19.0)
10.6
6.3
(33.5)
(76.5)
337.8
Adj net profit (%)
(4.7)
(77.0)
(396.4)
(146.8)
FDEPS (%)
(4.7)
(77.0)
(396.4)
(146.8)
RoE (%)
22.6
4.8
(14.5)
7.1
RoCE (%)
13.6
6.5
(1.0)
6.8
GROWTH
Net sales (%)
EBITDA (%)
PERFORMANCE
Y/E March
FY12
FY13
FY14E
FY15E
Paid-up capital
2,661
2,661
2,661
2,661
Reserves & surplus
26,287
28,757
24,922
25,939
EFFICIENCY
Net worth
42,082
44,551
40,717
41,733
Asset turnover (x)
1.9
1.5
1.2
1.4
Borrowing
30,979
43,554
41,554
38,554
Sales/ total assets (x)
1.1
1.0
0.8
0.9
0.1
0.1
35.3
42.5
42.4
41.3
Other non-current liabilities
Total liabilities
4,904
5,274
5,274
5,274
1,19,157
1,30,967
1,25,000
1,24,630
Working capital/ sales (x)
Receivable days
Gross fixed assets
72,564
79,913
82,913
85,913
Inventory days
Less: Depreciation
(23,429)
(27,094)
(30,767)
(34,596)
Payable days
70.3
59.6
54.1
56.5
114.1
106.0
125.0
125.0
49,135
52,819
52,147
51,317
6,903
7,057
5,057
3,057
Total debt/ equity (x)
0.8
1.0
1.0
0.9
Total fixed assets
56,038
59,876
57,204
54,374
Net debt/ equity (x)
0.7
1.0
0.9
0.9
Total Investment
15,345
23,376
Inventory
22,306
18,960
26,376
28,776
Current ratio (x)
1.2
1.3
1.1
1.1
14,716
15,944
Interest cover (x)
3.8
1.3
(0.4)
1.5
Debtors
12,302
14,194
11,478
12,365
VALUATION
326
139
3,602
411
12.7
31.8
(10.7)
23.0
Loans & advances
11,932
13,539
10,742
11,877
EV/ EBITDA (x)
8.3
10.1
40.2
9.1
Current liabilities
41,193
37,588
37,456
39,068
EV/ Net sales (x)
0.9
0.7
0.8
0.8
6,581
10,127
3,965
2,411
PB (x)
2.8
1.5
1.7
1.6
Dividend yield (%)
3.3
3.5
1.4
1.8
Free cash flow yield (%)
3.1
(0.5)
28.4
13.2
Net fixed assets
Add: Capital WIP
Cash & bank
Net current assets
Other non-current assets
Total assets
Source: Company, Axis Capital
1,19,157
1,30,967
1,25,000
1,24,630
FINANCIAL STABILITY
PE (x)
Source: Company, Axis Capital
03
23 JAN 2014
Quarterly Update
ASHOK LEYLAND
AUTO
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04
