Auto Sector Report | Compact Car | Car

Angel Broking
Service Truly Personalized

TM

Automobile
India Research

TABLE OF CONTENTS Page No.

Industry
Investment Case Commercial Vehicles Passenger Vehicles Two wheelers 4 6 9 14

Company
Maruti Suzuki Mahindra & Mahindra Tata Motors Bajaj Auto Ashok Leyland Hero Honda TVS Motors 20 25 31 37 43 49 54

November 13, 2007

For Private Circulation Only - Sebi Registration No : INB 010996539

1

Angel Broking
Service Truly Personalized

TM

Automobile
India Research

THIS PAGE IS INTENTIONALLY LEFT BLANK

November 13, 2007

For Private Circulation Only - Sebi Registration No : INB 010996539

2

2007 For Private Circulation Only .Sebi Registration No : INB 010996539 3 .Angel Broking Service Truly Personalized TM Automobile India Research Industry November 13.

7 39. November 13. performance of the players will continue to depend on their new technological and promotional offerings Exhibit 1: Valuation summary CMP Company Maruti Suzuki M&M Tata Motors Bajaj Auto Ashok Leyland Hero Honda TVS Motors Recos Buy Buy Buy Buy Hold Neutral Neutral (Rs) 1. sustainability in GDP growth at around 8% over the next four-five years would help CV sales to remain strong. there exists enormous opportunity to capitalise on particularly with India being a low-cost car manufacturer.5 30. The government and industry majors are also laying emphasis on making India a ‘small car manufacturing hub’.7 3.The PV segment is expected to clock a CAGR growth of 15-17% over 2007-11E. we expect the Indian Auto sector to consolidate following strong domestic demand.1 16.4 12.3 51.260 952 880 2. 2007.8 16.9 2.1 25.0 19.0 4.1 16.9 11.990 1. We expect the Auto stocks to perform driven by good Volumes and decent Earnings post underperforming in the last 10 months The Automobile sector has been facing challenging times in FY2008 post registering high growth in FY2007.2 33.9 2.5 17.7 14.437 703 1.0 21.746 42 FY07 1.002 1. low penetration. emerging sectors like Retail and continued demand of heavy load transport (on the back of infrastructure development) will continue to augment CV demand in the country.9 7.5 72.2 23.8 3. which is directly linked to industrial growth. Commercial Vehicles: Infrastructure development. The segment is expected to grow at a CAGR of 11% over FY2007-11E on the back of inadequate public transport.3 17.Angel Broking Service Truly Personalized TM Automobile India Research Investment Case We see the current turmoil in the Auto sector as a good Buying opportunity.8 9. At present.0 18.326 FY07 FY08E FY09E FY07 FY08E FY09E FY07 FY08E FY09E 18.1 48. while intensifying competition resulted in leaders launching new products at aggressive price points. model shift to road and economic growth are the likely major factors that would shape up the commercial vehicle (CV) industry over the next four-five years. Passenger Vehicles: Increasing affordability on account of reduction in Entry level prices.8 16.448 3.830 1.6 13.3 11.5 159.3 13.7 11.Sebi Registration No : INB 010996539 4 .9 22. As competition further intensifies.233 1.1 11. Overall. Emerging sectors like Retail and continued demand of heavy load transport will continue to augment CV demand in the country The government and industry majors are also laying emphasis on making India a ‘small car manufacturing hub’ As competition further intensifies. We expect the Auto stocks to perform driven by good Volumes and decent Earnings post underperforming in the last 10 months.9 129.004 708 693 2.1 137.463 1.6 49.2 13.0 10.245 3.6 43. On the export front too. etc. Two Wheelers: The two-wheeler segment has been facing rough weather in recent times. and additional demand from the rural and replacement markets.4 17. High double-digit motorcycle sales came to a screeching halt.391 26.6 17.0 22.975 13.2 55. The Auto companies are reeling under the pressure of high input costs and Interest rates (albeit on a high investment base).153 135 FY08E 2.7 10.9 3. Against this backdrop. increasing disposable income and diminishing average age profile of car buyers will continue to be the demand drivers for the passenger vehicles (PV) segment over the next four-five years.6 19. Hence.7 43. We believe the PV segment has clear visibility of growth and would mainly be driven by the small cars.5 10.1 17. Regulatory policies.3 11.638 4.236 132 FY09E 3.628 1. competition in the segment is expected to heat up.356 168 FY07 54..5 14.003 17.7 2.0 13.0 P/EPS (x) EV/EBITDA (x) RoCE(%) (Rs cr) 29.126 2.4 22.5 14.0 18.2 6. the key demand drivers remain intact. which made finance companies cut down loan disbursements to the industry.5 17.3 9.0 22. going ahead by 2011.2 Source: Company.706 23. and began to decline in FY2008. The scenario worsened on account of inflationary pressures and high Interest rates.5 5. increasing job opportunities in BPOs. CV volume growth is typically linked to freight demand.2 14. which are impacting volumes.6 7.9 16.1 1.9 8. However. Retail.3 38.5 18.336 37 661 56 MCap EBITDA (Rs cr) Target 1. reasonable interest rates and sustained business confidence. competition in the small car segment is low with only five players in the dominant compact segment.5 18. Trends in the domestic market has not been very rosy as Margins were already under pressure due to spiraling raw material costs.7 9.654 792 1. 2007 For Private Circulation Only .4 14.5 3. Nonetheless. CMP as on November 13.1 22.3 36. performance of the players will continue to depend on their new technological and promotional offerings. Angel Research.8 14.968 894 1.2 17.0 40.2 15.8 13.6 EPS (Rs) FY08E FY09E 60. Optimal utilisation of new capacity and intensifying competition remain the major constraining factors for the auto companies.0 15.194 1.

3) (23.8) (16. we see the current turmoil in the sector as a good Buying opportunity.3) (11.4 5. improving affordability is resulting in higher volumes in the four-wheeler segment compared to two-wheelers.9) 1 year (30.9) (10.4) (35. Buoyed by rising domestic demand players have embarked on an expansion spree.6) (25. In sum.9) (59.1) 6 month 26.2) (14.6) (20. Tata Motors. Angel Research Exhibi 3: Relative Performance Price (Rs) Stock (13/11/2007) 1. A good September 2007 quarter has pushed back the worrying trend and the players are entering the second half of FY2008 with a lot of optimism. November 13.6 (15. the BSE Auto Index has underperformed the benchmark sensitive index.8) (49.1) 0.5) (84.0) (19.Angel Broking Service Truly Personalized TM Automobile India Research On the bourses too. over the last one year.2) Source: Capitaline.4 (6.004 708 693 2. Companies are increasing capacities to meet both the domestic and global demand and avail of the fiscal sops in states like Uttarakhand. Sentiment for the Auto stocks has also turned positive with concerns over Interest rates easing and players expected to register better volumes going ahead.7 2.3 3.8) (3.336 37 661 56 Maruti M&M Tata Motors Bajaj Auto Ashok Leyland Hero Honda TVS Motor Absolute Returns (%) 3 month 14. the Auto sector is estimated to witness investments to the tune of Rs300bn. Our preferred bets in the sector include Maruti Suzuki.9) (26.8) (7.7) (35.1) (33. the BSE.4) (30.4) (35.4 0. Bajaj Auto and Mahindra & Mahindra.2 (1. 2007 For Private Circulation Only . Over the next three-four years.7) (56.7) (47.3) (55.8) (22. the Auto majors turned in a better relative performance towards end of the September 2007 quarter on the back of better valuation vis-à-vis the broader markets.6) (25. Exhibit 2: Auto Index v/s Sensex A good September 2007 quarter has pushed back the worrying trend and the players are entering the second half of FY2008 with a lot of optimism Underperforming broder market Source: Capitaline.Sebi Registration No : INB 010996539 5 .6) (32.1) 1 year 9.6) (44.1) 6 month (21.4 0.3) Relative Returns (%) 3 month (11.2 (0. Angel Research Pertinently. However.

In the CV space.2-1. Pertinently. Regulatory policies. model shift to road and economic growth are the major factors that are expected to shape up the commercial vehicle (CV) industry over the next 4-5 years. sustainability in GDP growth at around 8% over the next 4-5 years would help CV sales to remain strong. Exhibit 5: Freight rate movement Source: TCI. Angel Research Demand drivers intact We believe that the CV segment sales would start improving by end of FY2008 Profitability of truck operators improved post the Supreme Court (SC) ban on overloading of trucks.Angel Broking Service Truly Personalized TM Automobile India Research Commercial Vehicles: Impending recovery Sustainability in GDP growth at around 8% over the next 4-5 years would help CV sales to remain strong Infrastructure development. In most developing countries. which is directly linked to industrial growth. Angel Research November 13. Freight rates increased by 12. Hence. CV volume growth is typically linked to freight demand. 2007 For Private Circulation Only . IOCL. We believe that the CV segment sales would start improving by end of FY2008.Sebi Registration No : INB 010996539 6 . Cris Infac. emerging sectors like Retail and continued demand of heavy load transport like steel and cement (on the back of infrastructure development) will continue to augment CV demand in the country. Truck operator profitability remains sensitive to the fluctuation in diesel prices and interest rates.October 2007 even as the diesel prices declined simultaneously by 3. which resulted in improvement in truck operators’ profitability.3% between November 2005 . our preferred bet is leader Tata Motors. Exhibit 4: Goods CV sales volume v/s GDP growth Source: Cris Infac. Overall.3%. which has a diversified CV portfolio. banks have once again started looking at truck operators to sell CV loans. freight demand has increased at 1.7x GDP given that CV demand is derived from economic activity. The finance rates have also declined in the last 2-3 months from 13% to 10%.

Angel Broking Service Truly Personalized TM Automobile India Research Improving Road infrastructure to overtake Railways Renewed thrust by the government on road infrastructure in the last 10 years is expected to continue and further support demand Road infrastructure on the move . heavy CVs (HCVs).4bn passengers in 2012 as against 726mt load and 6. which are expected to come into force over the next few years. This measure however. Exhibit 6: Increasing Road Freight movement Source: Cris Infac.90. remains partially implemented. Hence. would also help fuel demand for the CVs Regulation against overloading and usage of vehicle above certain age are in place. Also. Fortunes of the CV industry could change dramatically post proper implementation of such Regulatory norms. However. 35% of the present CV fleet is above 10 years old.100mt freight load and 8.100mt freight load and 8. if this Regulation is strictly implemented and all vehicles over 15 years replaced.80. which could increase to 2. which are expected to come into force over the next few years.2bn passengers at present Renewed vigour in reviving Indian Railways The Railway Budget 2007-08 laid emphasis on renewing focus on reducing per unit cost by increasing efficiency.4bn passengers in 2012 as against 726mt load and 6. Nonetheless. these measures have been partially implemented. negotiability and claim-processing time. then 1. This would substantially add to the demand potential of commercial vehicles. Regulatory Policy. on the back of lower penetration and improving infrastructure. we believe passenger CV (bus) segment will clock moderate growth of 5-6%. The new Emission norms. Analysing a trend in road freight movement over the last 35 years clearly indicates a visible moderate shift towards road transport.2bn passengers at present. intermediate CVs (ICVs) and small CVs (SCVs) are expected to capture high proportion of demand in the long run. For Private Circulation Only .000 vehicles in 2011-12. Indian Railways (IR) is targeting 50% reduction in the per unit cost over the next five years. connectivity. As per industry sources. which is visible from the growth that these segments registered in FY2007. Thus. Railways compares unfavourably vis-à-vis Roadways on most evaluation criteria particularly ease of payments. However. which is much lower for Roadways. The government has set an ambitious target in the XI Five-Year Plan and proposes to achieve 1. In fact. roads carry 61% of the total freight traffic and 85% of the total passenger traffic.000 vehicles would have to be replaced in 2007-08.slowly but steadily Renewed thrust by the government on road infrastructure in the last 10 years is expected to continue and further support demand as there is a strong correlation between development of the road network and per unit volume growth. However. 2007 . Emission norms to elevate Replacement demand The new Emission norms. The government has barred vehicles over 15 years from plying in the National Capital Region (NCR) along with barring vehicles above eight years from plying in Mumbai. The development of roads has been leading the road transport industry to adopt a ‘hub-and-spoke’ model. the large projects planned by IR could well take a fairly longer period of time before it becomes fully operational. This could prove to be a challenge for road transportation growth. Angel Research The government has set an ambitious target in the XI Five-Year Plan and proposes to achieve 1. would also help fuel demand for the CVs.Sebi Registration No : INB 010996539 7 November 13. regulation may continue to dampen growth in bus demand.

98. November 13.000 36.36. 400 cr.000 160. Note: 35% of the present CV fleet is above 10 years old Utilisation levels likely to taper off as fresh capacities get added Robust sales growth on the back of pick up in the investment cycle and strong growth in the IIP resulted in capacity utilisation levels spiking sharply to above 90% during 2006-07 Capacity of CVs has grown at a CAGR of 16% over FY2003-06.400 10.000 Eicher Motors 38.400 93.000 Swaraj Mazda 18.000 Force Motors-Man 15.000 39.000cr over the next three-four years towards expansion of CV and PV capacities. Exhibit 8: Planned capacity and Investment announcements Company Tata Motors 2006-07 295.000 Investment and Remarks To invest around Rs12. Dedicated Railway freight corridors and dynamic freight pricing policies by Railways.000 24.Angel Broking Service Truly Personalized TM Automobile India Research Exhibit 7: Replacement demand Source: Cris Infac.87.800 38. Angel Research.400 Source: Industry.000 39.000 Mahindra Intl 20.000 120.000cr in FY2008. Robust sales growth on the back of pick up in the investment cycle and strong growth in the Index of Industrial Production (IIP) resulted in capacity utilisation levels spiking sharply to above 90% during 2006-07.000 39. Capacity addition will be led by the LCV segment in 2007-08 and by the HCV segment in 2009-10. Tata Motors.000 Others 17. Capacity addition was led by market leader. installed capacity of the CV industry is expected to grow at a CAGR of over 28% over 2007-10E.400 8.800 6. Capacity addition at a CAGR of over 28% Ashok Leyland 84. 2007 For Private Circulation Only . particularly in the LCV segment.000 140.000cr capex over the next four years including Rs1.000 20.Sebi Registration No : INB 010996539 8 . Company.000 110.000 2007-08E 420. and a large part of the increase was due to additions to the product portfolio. Hardening Interest rates.000 38.200 Total (Units) 4.000 550. Planned Rs4. To invest around Rs.000 53. Significant correction in freight rates or increase in fuel prices. High capacity build up and competition.000 20.200 38.000 18.000 68. Input cost hikes. Key Concerns Cyclical pressure to restrain growth.000 2008-09E 2009-10E 485. Angel Research As per the current plans.14.

On the export front too. The relatively faster growth in income levels in lower age brackets has also been diluting the average age profile of the car buyers.02 2009-10E No.Sebi Registration No : INB 010996539 9 . Company.3 75. there exists enormous opportunity to capitalise on particularly with India being a low-cost car manufacturer. The government and industry majors are also laying emphasis on making India a ‘small car manufacturing hub’. The PV segment is getting to be more and more affordable following the increase in per capita income levels. of households (mn) 132. which we believe will continue to dominate the small car segment over the next two years. This trend is expected to continue over the next four-five years given the low penetration levels.7 3. 2007 For Private Circulation Only . increasing disposable income and diminishing average age profile of car buyers will continue to be the demand drivers for the passenger vehicles segment over the next four-five years. Angel Research November 13.2 114. rising disposable income is expected to be one of the key growth drivers for the PV segment. However. going ahead by 2011. competition in the small car segment is low with only five players in the dominant compact segment. ACMA. Cris Infac. At present. 65% of the population is below 35 years of age of which half are below 25 years.3 10. We believe the PV segment has clear visibility of growth and would mainly be driven by the small cars. Growing number of households in higher salary brackets coupled with increasing affordability.4 28. of households (mn) 135. Angel Research Favourable demographics and low penetration levels A younger population earning higher income augurs well for rising demand for PVs Robust volumes clocked by PVs over the last three-four years were driven by favourable demographic changes and low penetration levels. low penetration. Exhibit 9: PV sales volume v/s Per capita GDP (US $) Source: SIAM. competition in the segment is expected to heat up.2 2001-02 Ownership per household (mn) 0 0.000 Total No.32 0. We remain positive on Maruti Udyog. Exhibit 10: Rise in size of Great Indian Middle Class Annual household income (Rs'000) Upto 90 90 to 200 201 to 1.75 0.99 103.5 1.3 16. IMF.7 0.10 2.6 222 Source: Industry. The PV segment is expected to clock a CAGR growth of 15-17% over 2007-11E.4 53.Angel Broking Service Truly Personalized TM Automobile India Research Passenger Vehicles: Joy ride to continue We believe the PV segment has clear visibility of growth and would mainly be driven by the small cars Increasing affordability on account of reduction in Entry level prices. Hence. a younger population earning higher income augurs well for rising demand for PVs.8 188.4 41.000 Above 1. Overall.83 0.8 203.04 0.03 2005-2006 Car penetration (%) 0 0.

Sebi Registration No : INB 010996539 10 . we expect higher demand for PVs to emerge from the small cities and towns. Angel Research We expect higher demand for PVs to emerge from the small cities and towns. which prefer compact cars with low cost and maintenance. Exhibit 12: Rapid expansion in addressable households Source: Cris Infac. Angel Research High selling Small car segment Small car is currently the highest selling segment accounting for 77% of total annual car sales in 2006-07 Good things in small packages Small car is currently the highest selling segment accounting for 77% of total annual car sales in 2006-07. which prefer compact cars with low cost and maintenance Low penetration and rising income levels at younger age are increasing the number of first time car buyers who usually prefer to go for small cars. we do not expect Tata’s Rs1lakh car to cannibalise marketshare of the existing mini / A2 segment cars as there is a significant difference in the ownership cost of the product. Tata’s Rs1lakh car is expected to play a significant role in expanding the small car market going ahead. players are expanding their network and providing easy access to service centres in the small cities and towns. However. November 13. NCAER. 2007 For Private Circulation Only . Exhibit 11: Car density of Developing and Developed countries PV penetration in India is abysmally low at 8-10 vehicles per 1. Hence. The average median age is around 25 years and increasing per capita income assures incremental growth in the segment. Going ahead.000 households compared to some other under developed/developed countries Source: Cris Infac. The small car market in India is supported by favourable demographics. This is because reduction in Entry level prices in the addressable market will be much faster leading to higher penetration. In this respect.Angel Broking Service Truly Personalized TM Automobile India Research PV penetration in India is abysmally low at 8-10 vehicles per 1.000 households compared to some other under developed/developed countries. The small car buyers are usually first time car buyers below the age of 30.

Attractive scenario adding capacities amidst escalating competition Robust sales growth at a CAGR of 18% over FY2003-07 along with relatively sedate capacity addition of around 10% over the same period led to high capacity utilisation . the PV segment is expected to witness maximum investments and capacity is expected to be added by more than 92% over FY2007-10E compared to around 48% in FY2003-07.062 20 12 48 2400 12000 1000 8. Going ahead. Reduction in duty further reduced the car prices and increased affordability. Exhibit 14: Ownership costs Average on road price of car (Rs) % of Finance Interest Rate (%) Tenor (Yr) Amount of Loan (Rs) EMI (Rs) Usage per day (km) Milage (km per liter) Average fuel price (Rs) Fuel cost per month (Rs) Annual maintenance cost (Rs) Monthly maintenance cost(Rs) Ownership cost per month (Rs) Source: Industry. 2007 For Private Circulation Only . Angel Research 12 months back 250000 80 9 5 200000 4. low maintenance costs and increasing fuel efficiency has given a fillip to PV sales volumes in the last five years Ownership cost Easy availability of financing.Segment-wise % contribution to Total Sales Source: Cris Infac.000 car 110000 80 13.025 20 12 48 2400 12000 1000 5.almost 80% in FY2007.652 At present 275000 80 13.152 20 12 50 2500 12000 1000 7. the Tata car will add a new segment in the PV market and is not expected to cannibalise marketshare from the existing players due to the extensive price difference. It is expected to bridge the affordability gap between motorcycles and passenger cars.462 Rs.5 5 220000 5.5 5 88000 2. Car finance rates have declined from 17% in 2000-2001 to 11% in 2005-06 and averaged 13.425 Tata’s 1lakh car will most likely compete with the Executive motorcycle segment and public passenger three wheelers transport system Tata’s 1lakh car to create a new segment in PV market We expect Tata’s Rs1lakh car to expand the passenger car market significantly. low maintenance costs and increasing fuel efficiency due to better technological offering by the PV companies has given a fillip to PV sales volumes in the last five years. Competition is also expected to intensify mainly due to the entry of new players. In fact.Angel Broking Service Truly Personalized TM Automobile India Research Exhibit 13: Passenger Cars. November 13. The product will most likely compete with the Executive motorcycle segment and public passenger three wheelers transport system. Angel Research Easy availability of financing. 100. This is because ownership cost of the Tata car will be 35% lower than the average ownership cost of a compact/small car currently available in the market.Sebi Registration No : INB 010996539 11 .5% in 2006-07. Easy financing and a better distribution network also increased the target population in turn pushing up PV sales.

00.500 1. 2007 For Private Circulation Only . However.200 16.000 30.3 Rs2.000 50.000 JV) 1.000 7.000 30. Angel Research At present. Nissan 0 M&M UV 1.000 Honda Toyota 60.000 1.3 45.500cr 1.00.700 1.000 -Fiat 1.50.80.70.000 6.500 4. Company.000 30.500-5.00.50. However.00.000 0 1.000cr Tata Motors 2.000 35. especially Maruti Udyog. a strategy demanded by the attractive market scenario and a differential duty structure that favours small cars.000 0 75.Sebi Registration No : INB 010996539 12 .000 50.00.000 2.000 Rs2.31.000 3.000 75.50.50.250 4.000 45. We do not expect a significant dent in the marketshare of large players like Maruti and Hyundai in the passenger car segment at least for the next couple of years Exhibit 16: Company-wise planned capacity and investment announcements Company (Units) FY2007 FY2008E FY2009E FY2010E Maruti Hyundai 6.000 2.000 3.00.Angel Broking Service Truly Personalized TM Automobile India Research Exhibit 15: Growing capacities with moderate utilisation levels The PV segment is expected to witness maximum investments and capacity is expected to be added by more than 92% over FY2007-10E compared to around 48% in FY2003-07 Source: Industry.50.00.25.000 4.000 50.000 35. as the global OEMs are focusing on India’s small car market.00.10.000cr Rs4.000 3. Company.200 20.000 50.000 3.50.41.000 1.000 10.00.00.5 27.000 2.000 1.000 Investment Remarks To increase presence in diesel segment and enhance export base To make India a sourcing base for small cars To address market by reducing price and increasing affordability 9.000 45.000 0 0 2.00.000 30.50.000 19.500 1. Angel Research November 13.000 Rs1.000 GM 85.50.000 1.50.000 1. In anticipation of moving up the value chain.000 2.000 5.000 3. new launches over the past four-five years have taken place in the Sedan and utility vehicle (UV) segments. three players account for 86% of the car market and 75% of the total PV market in India.000 1. we do not expect a significant dent in the marketshare of large players like Maruti and Hyundai in the passenger car segment at least for the next couple of years as most of the global OEM are expected to launch their product in FY2009.00.000 30.00.000 0 75.500cr To launch new small car by 2009-10 Source: Industry.58.000 Tata Motors -Small Car 0 Tata Motors -UV 60.000 (Rs4.00.000 Rs8.700 1.000 2.000 Hindustan Motors Skoda Volkswagen Daimler Chrysler BMW Force Motors Others Installed Capacity % growth To meet domestic demand for Chevrolet Spark To cater to the growing demand of existing models New launch in small car segment by 2009-10 Manufacture cars for Renault and Nissan to sell in domestic and export market 45.000-8.000 30.50.200 38. A challenge going ahead for the existing players.000 85. Hyundai and Tata Motors would be to maintain marketshare in a competitive scenario.00.700 35.25.000 Rs4.000 Ford 65. Renault.000cr 6.00.000 1.1 26.000 Rs4.000 Fiat 60. this is set to change in the near future.700 35.000 1.500cr 90.950 25.000 2.000 30.41.000cr in next 3 years M&M.000 50.25.

Company. Industry players also shifted and shifting production base to low-cost countries (for instance. 2007 For Private Circulation Only .3%. Going ahead.000 units mark by 2011-12 growing at a CAGR of 28-30% in the mentioned period. Also. the share of exports from domestic production is expected to go up to around 20% by 2011-12 is from the current 13. and would contribute 80-85% to total volumes over the next five years. High competition.5% levels. However. Maruti.. production and additional capacity being set up by these players over the next four-five years will continue to cater to domestic demand. Tata Motors and M&M-Renault are players with dedicated export targets. there exists vast export opportunity for the three domestic players viz. Hyundai. due to supply side constraints and higher domestic demand. Angel Research Global OEMs are also making their intention clear to set up small car plants in India.Key to additional growth Going ahead. Hyundai and Tata Motors through enhanced capacity additions. Top-five players Toyota. growth in the last two years had slowed down to around 8. Dearer fuel price and hike in road tax. These global OEMs are also making their intention clear to set up small car plants in India.Sebi Registration No : INB 010996539 13 . Increase in raw material prices. Ford and Honda have already entered the Indian markets and plan to set up manufacturing facilities in India or add to existing capacities. Volkswagen. Key Concerns Hardening Interest rates.00.3% Indian passenger car exports have been growing at a CAGR of 30. India enjoys a less than 1% share in the global passenger car export volumes. the share of exports from domestic production is expected to go up to around 20% by 2011-12 is from the current 13. and expect commercial production to commence in 2009-10. Thus.2% in the last five years. However. Maruti. Maruti shifted Swift’s production base from Europe to Hungary). and expect commercial production to commence in 2009-10 Industry is targeting passenger car exports to cross the 7. Exhibit 17: Export volume and growth Source: Industry. GM.Angel Broking Service Truly Personalized TM Automobile India Research Exports and Outsourcing . November 13.

Trends in the domestic market has not been very rosy as margins were already under pressure due to spiraling raw material costs. The segment is expected to grow at a CAGR of 11% over FY2007-11E on the back of inadequate public transport. and began to decline in FY2008. Success of the new launches would determine their position in the market. Further.. As a result. The scenario worsened on account of inflationary pressures and high interest rates. performance of the players will continue to depend on their new technological and promotional offerings The two-wheeler industry has been facing rough weather in recent times. Hence. Exhibit 18: Two-wheeler Sales volume and Growth trend Source: Cris Infac. which made finance companies. cut down loan disbursements to the industry.Angel Broking Service Truly Personalized TM Automobile India Research Two Wheelers: Riding on rugged terrain Going ahead. as competition is expected to further heat up in the most dominant Executive segment. though the companies were facing Margin pressure due to an increase in input costs. as competition is expected to further heat up in the most dominant Executive segment Players are in scuttle to gain marketshare through new products launches. Exhibit 19: Changing customer preferences in Motorcycle segment Source: Industry. Cris Infac. Margins have declined in turn impacting Profitability of these companies. as competition further intensifies. 2007 For Private Circulation Only . players have not fully passed on the prices to the customers. We expect the industry to be dominated by the top-three players who will continue to struggle to maintain/increase their marketshare. we expect the industry to continue to face pressure in Bottom-line. increasing job opportunities in BPOs. High double-digit motorcycle sales came to a screeching halt. Angel Research Amidst intensifying competition players in a major rush to grab marketshare In the near term. Retail. Angel Research November 13. and additional demand from the rural and replacement markets. as competition further intensifies.Sebi Registration No : INB 010996539 14 . we expect the industry to continue to face pressure in Bottom-line. which are coming with better technology and at aggressive price points. almost all players have launched or announced new products in the higher segments. performance of the players will continue to depend on their new technological and promotional offerings. It has become very difficult for investors to pick winners and shun losers in the two-wheeler segment. In the near term. while intensifying competition resulted in leaders launching new products at aggressive price points. etc. Going ahead.

Cris Infac.000) 35 Executive (Rs40. Hero Honda. Exceeds TVS Motor 5 Victor. Pulsar 220.3% over 2001-02 to 2006-07. affordability and mileage. and is currently hovering at around 80% levels. overall demand in the two-wheeler segment would continue to be driven by accelerated growth in motorcycle sales. However. higher advertising costs and promotional expenses and consequently lower margins.Angel Broking Service Truly Personalized TM Automobile India Research Nonetheless.000) Key Players % Marketshare Models Hero Honda 65 CD Dawn. Pulsar 180. Exhibit 20: Key players and marketshare Segment % Contribution Economy (Rs30. Hero Honda. There could well be a shift to better mileage and on-road performance by motorcycles and increasing affordability. players are keeping an eye on the basic needs of the Indian customer viz.. Avenger Hero Honda 4 CBZ Extreme.000 to 50. Further. Pulsar 200. Glamour. Exhibit 21: Segment-wise % contribution to Motorcycle Sales volume Source: Industry.Sebi Registration No : INB 010996539 15 . Apache TR 45 Premium (Rs50. Platina TVS Motor 11 Star City Hero Honda 70 Splendor Plus. Motorcycles dominate two-wheeler market. Splendor NXG. This implies that gain of one player can be a loss for another. Super Splendor. high competition has led to strong pricing pressure. Passion Plus. Bajaj Auto and TVS Motor command more than 90% marketshare in the domestic motorcycle industry The top-three players. Falling price differential between scooters and motorcycles and change in consumer preference to fuel-efficient and stylish models have resulted in motorcycles growing at a CAGR of 19. which are raising issues regards the Economy segment holding volumes in the medium to long run. Glamour FI Bajaj Auto 20 Discover. viz.000 & above) 20 Source: Industry. Bajaj Auto and TVS Motor command more than 90% marketshare in the domestic motorcycle industry.. viz. 2007 For Private Circulation Only .000 to 35. Karizma TVS Motor 20 Apache. Thus.. Cris Infac. intensifying competition has narrowed the price differential between the Economy and higher segments. Angel Research November 13. top three players in commanding position Overall demand in the two-wheeler segment would continue to be driven by accelerated growth in motorcycle sales Motorcycles have been dominating the two-wheeler segment with over 75% marketshare over the last five years. CD Deluxe Bajaj Auto 20 CT-100. Achiever. Angel Research The top-three players. Victor GLX Bajaj Auto 70 Pulsar 150.

Two-wheeler exports are however. Iran and Philippines.966 7. Two-wheeler penetration levels in India estimated at around 22% in 2005-06 are also reasonable compared to other developing countries.79.256 6.77. The rapid rise in income levels along with low penetration is expected to fuel demand for means of transportation.3% of total sales in 2006-07.079 42.86. 2007 For Private Circulation Only . gradually picking up.138 Source: SIAM. ownership/demand pattern in India Ownership pattern across occupational groups (per '000 household) Urban Rural 2001-02 2009-10 2001-02 2009-10 Salary Earner 495 834 286 755 Professional 859 1. Going ahead.91.19.202 5.5% as against a 14. We expect two-wheeler sales to grow at a CAGR of 20% over the next four-five years and contribute 12% to revenues. Colombia.64. exports are expected to look up as companies are laying emphasis on exports in their bid to reduce domestic market risks.86.03.116 24.Angel Broking Service Truly Personalized TM Automobile India Research Long-term domestic demand drivers intact The rural markets continue to remain under-penetrated and a shrinking replacement cycle is expected to support and result in incremental growth in the two-wheeler segment over the next 4-5 years The two-wheeler industry will continue to register positive growth on account of rising income levels and the young population perking up demand.Penetration.9 4.148 28. where motorcycles dominate two-wheeler demand.386 8. November 13. Exhibit 23: Export trend Exports (Units) Motorcycle Moped Scooter Total 56.234 53.928 28. Both Bajaj and TVS plan to increase their presence in South and Central America.822 7.1 39.873 37.077 54.064 45.66.3 Mopeds 52.19.87.566 35.559 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08E 2008-09E CAGR (%) 2001-07 57.55.1% to 6.2 15. Angel Research Exports to drive better growth Exports in the first five months of FY2008 clocked decent growth of 35.45.137 1.Sebi Registration No : INB 010996539 16 .138 units in 2006-07.880 1. the rural markets continue to remain under-penetrated and a shrinking replacement cycle is expected to support and result in incremental growth in the two-wheeler segment over the next 4-5 years.7 Source: Cris Infac.766 43.685 6.887 17.9 Motorcycles 47.2 57.329 23. Growth in two-wheeler exports was primarily driven by growth in motorcycle exports.287 2. two-wheeler exports accounted for a mere 7.354 Rural Demand will increase its importance Rural Demand 1995-96 2001-02 2009-10 (% of All India) Scooters 33.42. Nevertheless.13. expansion to new geographies is expected to sustain the growth in exports over the next five years.7 43.568 2.0 20. Exports in the first five months of FY2008 clocked decent growth of 35.0 20. However.100 3.539 521 1.330 30. Angel Research The Indian players have been able to sell their products to new export destinations on account of being competitive in terms of design and costs.7 58.8 48.669 3. Exhibit 22: Two-wheelers .122 1. This was on account of rising demand for Indian motorcycles primarily from countries such as Sri Lanka.0 1.1 CAGR (%) 2007-09E 20.3 39.0 20.5% as against a 14.095 51.724 5. NCAER.26. Although companies are mainly exporting to the South Asian countries at present.3% de-growth witnessed in the domestic market. Cris Infac.181 83.3% de-growth witnessed in the domestic market Two-wheeler exports grew at a CAGR of 43.858 60.4 39.

Exhibit 24: Player-wise Capacity addition and Investment plans (in '000) Hero Honda 2006-07 3.400 2.419 15. Note: *Others include idle capacities of LML and Kinetic Motors 2007-08E 4.750 2. Consequently.Sebi Registration No : INB 010996539 17 .900cr by 2010 4. November 13.987 12.000 2.00.Angel Broking Service Truly Personalized TM Automobile India Research Utilisation rate expected to be stable Utilisation levels are expected to remain stable at about 70% levels in this segment unlike the PV and CV segments where a sharp fall is expected.950 Investment and Remarks Total investments together with investment from suppliers will eventually touch Rs1. Increase in input cost.950 2009-10E 5. Intensifying competition.200 1. However.137 Source: Industry.000 HMSI *Others Total 1. albeit from much higher levels.400 2.00.100 4.000 units scalable to 6.450 Bajaj Auto 3. albeit from much higher levels Two-wheeler companies are augmenting capacities driven by the lure of fiscal sops being offered by the ‘special zones’.000 TVS Motor 2. additional capacity is expected to shore up margins along with catering to the new target markets and increasing marketshare.000 units at an initial investment of Rs120cr 1.069 2.600 To spend Rs150cr towards expansion of plant at Pantnagar in FY2008 2.450 2008-09E 4. Key Concerns Rise in Interest rate and Inflation.6% over the next three years Angel Research.294 16. Rising Income levels lowering affordability cost of four wheelers.600 New plant in Himachal Pradesh with an annual production capacity of 4.000 4. Company.094 2. 2007 For Private Circulation Only .500 1.230 14. utilisation levels are expected to remain stable at about 70% levels in this segment unlike the PV and CV segments where a sharp fall is expected.880 Total capacity growing at a CAGR of 11.

Sebi Registration No : INB 010996539 18 . 2007 For Private Circulation Only .Angel Broking Service Truly Personalized TM Automobile India Research THIS PAGE IS INTENTIONALLY LEFT BLANK November 13.

2007 For Private Circulation Only .Angel Broking Service Truly Personalized TM Automobile India Research Company November 13.Sebi Registration No : INB 010996539 19 .

4 19.5 1. with a Target Price of Rs1. This gives Maruti a competitive edge over other players.2 FY2008E 18. and exports' contribution to total sales is expected to double from 5.5 1.6 13. At the CMP of Rs1.8 23.6 15.5 41.004.7 16. Its timely placed diversified fuel options by way of diesel-Swift and LPG .2 28.260. 2007 For Private Circulation Only . Key Financials Y/E March (Rs cr) Net Sales % chg Net Profit % chg OPM (%) EPS (Rs) P/E (x) P/CEPS (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x) FY2006 12.0 18.7 Automobile 29.035 5.7 13. We believe that Maruti will maintain its marketshare of over 50% at least over the next 2-3 years.6 11.058 23.9 14. the stock is trading at 16. SX4 and Omni with an improved technology are already catching attention.8 4. in view of having the strongest and preferred brand image in the domestic market.6 54.3 13. Nevertheless.5 13.9 1.7 5. We maintain a Buy on the stock.6 60. Strongly Positioned: We expect Maruti to clock a CAGR growth of 15% in domestic volumes over FY2007-09E.jajoo@angeltrade.004 Vaishali Jajoo Tel: 022 .695 532500 MARUTI MRTI. Growth will be mainly driven by Maruti's newly launched products in the A2 and A3 segments.4 2.445 covering 1.8 20.2 1.9 14.2 22.8 72.754 12.562 31.03 1252/713 222377 5 19.4 13.000 units of the same car to Europe in FY2010.5x FY2008E and 13. completion of capacity addition will provide it additional support to expand in the overseas market and increase its exports.753 20.3 13. Export story to unfold: We expect the company's exports to grow at a CAGR of around 40% over FY2007-09E.3 3.9 2.Sebi Registration No : INB 010996539 20 .654 21.8% in FY2007 to 12% by FY2010 Suzuki is increasing production in India to become the largest manufacturing base by 2009.com Buy Target Price: Rs1.Angel Broking Service Truly Personalized TM Textile Sector India Research Maruti Suzuki CMP: Rs1.2 2.4040 3800 Ext: 344 E-mail:vaishli. Maruti has plans to export 50. and another 50.3 21.003 1.1 24.8 22.8x FY2009E EPS.3 9.4 20. the key concern is volume growth after a slew of competitive car launches in 2009.7 22. We expect Maruti's valuation to be largely determined by its ability to maintain marketshare amidst the intensifying competition.058 10.4 FY2009E 21.0 1.WagonR-DUO. For the new players it would be a formidable task to put in place such a huge network.099 19.8 11.3 Stock Info Sector Market Cap (Rs cr) Beta 52 Week High / Low Avg Daily Volume Face Value (Rs) BSE Sensex Nifty BSE Code NSE Code Reuters Code Bloomberg Code Shareholding Pattern (%) Promoters MF / Banks / Indian FIs FII / NRIs / OCBs Indian Public / Others 54. However. Angel Research November 13.260 (12 Months) Good things in small packages Maruti has been playing a significant role in the motorisation of India.3 17. Over and above this.000 units of a new small car model in FY2009 to Nissan.189 39.5 2. Vast and well-entrenched domestic dealership network: Maruti has a vast dealership network of 500 outlets covering 312 cities and a service network of 2. we believe that Maruti will continue to be a dominant player in the PV segment.BO MUL IN Source: Company.172 cities.0 1.2 22.0 FY2007 14.

048 7.32. Versa A2: Alto. WagonR.36.9.402 4.2 (12.038 34.824 FY2009E CAGR(%) 67.74.198 5.04.899 5.533 5.27.408 3.9 21.8. These launches together with the expected launch of the Swift sedan will drive volume growth for Maruti in FY2009-10.606 7.117 3. This is in line with our industry growth estimates.Angel Broking Service Truly Personalized TM Maruti Suzuki India Research Maruti has been playing a significant role in the motorisation of India. Strongly Positioned: We expect Maruti to clock a CAGR growth of 15% in domestic volumes over FY2007-09E. We believe that Maruti will maintain its marketshare of over 50% at least over the next 2-3 years. Swift A3 : SX4.91.000 7.221 6.87.994 (12. the company is now positioning itself in the mid size segment with the recent launch of SX4.94. Zen.019 2.280 29.9) 13.375 29.40. we believe that Maruti will continue to be a dominant player in the PV segment.295 6.1 Source: Cris Infac.9. the company is now positioning itself in the mid size segment with the recent launch of SX4 Source: Cris Infac.07. Exhibit 1: Volume and Marketshare The company is well-placed in a competitive scenario having successfully launched new products in the last two years Moving up the ladder.396 50. the key concern is volume growth after a slew of competitive car launches in 2009.16.781 5.22.60.366 3.374 5.82.06.71.262 65.000 7.629 3.9) 8.000 8.35. These will include the recently unveiled small car Splash and a new small car called A Star.738 5.091 4.776 53.Sebi Registration No : INB 010996539 21 .35.223 66.637 4. Over and above this.117 84. The A Star will also be launched in India.82.8 13. Angel Research Exhibit 2: Product volumes Product A1 : Maruti 800 C: Omni.8. Growth will be mainly driven by Maruti’s newly launched products in the A2 and A3 segments.819 FY2007 79.1 13. Nevertheless.664 4.924 FY2008E 70.776 3.301 FY2006 89.78.939 5. However.000 91. Moving up the ladder. Esteem Total Passenger cars MUV: Gypsy. due completion of capacity addition will provide it additional support to expand in the overseas market and increase its exports. in view of having the strongest and preferred brand image in the domestic market. The A Star is the new small car that has been designed for the export market.0 14. We remain positive on Maruti.188 7.WagonR-DUO and Omni with an improved technology is already catching attention and enjoys sizable position in the market. November 13.136 31. Angel Research Maruti will launch two new compact segment cars in second half of FY2009.245 83.204 4.431 3.0 14.877 8. Vitara Domestic Export Total Sales FY2005 1. 2007 For Private Circulation Only . The company is well-positioned in a competitive scenario having successfully launched new products in the last two years. Its timely placed diversified fuel options in terms of diesel-Swift and LPG .697 6.61.

Maruti plans to export 1. Maruti is expected to play a significant role in Suzuki’s global plans as well.Angel Broking Service Truly Personalized TM Maruti Suzuki India Research Export story to unfold: We expect Maruti’s exports to grow at a CAGR of 40% over FY2007-09E.2 in FY2009 from Rs54 and Rs63. This will ultimately expand infrastructure and capability at a breath taking place.. Maruti plans to export 50.8% in FY2007 to 12% in FY2010 Suzuki is increasing production in India to become the largest manufacturing base by 2010. Also. which is among the top players globally. For the new players it would be a formidable task to put in place such a huge network. Maruti along with Suzuki plan to invest around Rs9. as a percentage of sales. Suzuki is in the process of shifting production from Hungary to India. November 13. However. The Sales Satisfaction Survey conducted by J D Power Asia Pacific has rated Maruti as first three years in a row.000 units of the same car to Europe on its own in 2010. Competition is intensifying as the global OEMs have plans to enter the Indian market.00. better realisations and an improving product mix are the primary reasons why we expect Maruti's revenues to outpace volumes. This gives Maruti a competitive edge over other players. Visible domestic growth. 2007 For Private Circulation Only . which indicates it enjoys the preferred and strong brand image at least in the domestic market. This entails no change to the existing capital structure and RoCE also remains unchanged at 23% during FY2007-09E.445 covering 1.000cr over the next 3-4 years Overall. Concerns Currency fluctuation could adversely impact the company as going ahead export's contribution is expected to increase.000. We expect the company to clock a 22% CAGR growth in Operating Profit over FY2007-09E. Maruti plans to fund capex through internal accruals in the next two years.Sebi Registration No : INB 010996539 22 .000 units of its newly built export model annually. Delay in capacity ramp up could exert pressure on supplies. with Maruti having one of the most competitive manufacturing bases ensures continued and increasing focus by parent.6 and Rs88. Overall. and exports’ contribution to Total Sales is expected to nearly double from 5.172 cities. more specifically the small car segment. could restrict further improvement in OPM.000cr over the next 3-4 years. Maruti having one of the most competitive manufacturing bases ensures continued and increasing focus by parent Maruti along with Suzuki plans to invest around Rs9. We expect Maruti's EPS and Cash EPS to increase to Rs72. overseas supply order of 50. to 1. It is also targeting to export an additional 1. Maruti’s efforts to come closer to its customers and meet all their needs will reinforce the trust in Brand Maruti. We expect an 8% drop in M800 volumes and a 15% and 30% CAGR growth in the volumes of both the A2 and A3 segment offerings.8% by FY2009E.4cr and Rs262.000 units by FY2010. better realisations and an improving product mix are the primary reasons why we expect Maruti's revenues to outpace volumes Building up capacities: Maruti has been operating at over 100% capacity utilisation since the past eight years.000 units pa.4 in FY2007 respectively. an increase in exports.000 units of a new small car model in FY2009 to Nissan. Financial Performance We estimate Maruti to clock a CAGR growth of 22% in revenues over FY2007-09E on the back of an estimated CAGR growth of 15% in volumes over the same period. and another 50. despite aggressive capex undertaken by the company.000 units from Nissan and expanding footprint in the export market with the help of the parent. Vast and well-entrenched domestic dealership network: Maruti has a vast dealership network of 500 outlets covering 312 cities and a service network of 2.50.6% in FY2007 to around 13.8cr. has resulted in Maruti ramping up capacity from 6. We estimate Maruti's free cash flow generation to dip marginally in FY2008 and FY2009 to Rs169.000 units to the non-European countries in FY2010. Maruit's OPM is expected to improve on the back of enhanced localisation and increased productivity. Hence.00. We expect OPM to improve from 13. as the company would be incuring capex towards capacity expansion (brownfield and greenfield ) and in the Suzuki Power train JV. Going ahead.

Sebi Registration No : INB 010996539 23 . 2007 For Private Circulation Only . Exhibit 4: P/E Band Source: C-line. We maintain a Buy on the stock with Target Price of Rs1.8x FY2009E Earnings. RoCE. Angel Research Outlook and Valuation We expect Maruti's valuation to be largely determined by its ability to maintain marketshare amidst an uncertain interest rate regime and intensifying competition. the stock is available at 16.5x FY2008E and 13. Cris Infac. Free Cash Flow and Capital expenditure Source: Industry. Angel Research November 13. At the CMP of Rs1.260.004.Angel Broking Service Truly Personalized TM Maruti Suzuki India Research Exhibit 3: RoE.

3 3.2 1.6 5.8 11.753.754.0 1339.585.6 71.5 5308.9 1.6 1.4 4.853.9 11.5 1.6 13.5 18.) Tax (% of PBT) PAT % chg FY2006 12.2 6.5 12. Tax) Others Cash Flow from Financing Others Inc.626.Sebi Registration No : INB 010996539 24 .5 7.2 22.0 19.) in Cash Opening Cash balances Closing Cash balances FY2006 1.166.9 (188.63 2.6 10.652.7 2262.5 237.6 1.4 13.3 9.7 306.0 3.4 (176.5 560.4 200.5 1.7 32.7 1.058.514.6 Rs crore FY2009E 3.0 50.3 2.8 2.6 13.073.8 10.2 92.) in Fixed Assets Free Cash Flow (Inc)/Dec in Investments Issue of Equity Inc.463.602. 2007 For Private Circulation Only .9 5.8 (116.4 20.8 167.3 20.401.580.4 (399.0 260.7 19.057.1 (149.5 6709.763.2 285.9 11.1 1.431.1 (17.0 3.2 10.750.8 1.4 271.3 3.487 2.3 2130.9 8. Depreciation Net Block Capital Work-in-Progress Investments Current Assets Current liabilities Net Current Assets Total Assets 4.073 4.9 147.74 2028.0 31.6 1271.9) 348.6 88.6 11.8 1.39 1.8 Key Ratios Y/E March Per Share Data (Rs) EPS Cash EPS DPS Book Value Operating Ratio (%) Inventory (days) Debtors (days) Creditors (days) Returns (%) ROE ROCE Dividend Payout Valuation Ratio (x) P/E P/E (Cash EPS) P/BV EV / Sales EV / EBITDA 24.6 45.3 825.9 4.051.4 37.8 2.9 -224./(Dec.5 22.1 130.7 75.6 717.2) 825.8 167.7 5.0 18.8 18.7 238.7) 372.11 3.5 9.9 32.116.845.8 2000.9 559.4 419.5 1961.409.6 (534.458./(Dec.0 8.8 FY2006 FY2007 FY2008E FY2009E Cash Flow from Operations 1222.3) (319.750.0 1.4 19.501.1 13.9 630.5 429.2 3.1) 230.1 39.8 5.8 22.3 17.086.4 7.0 14.4 6.5 13.0 63.977.2 6.368.3 21.5 20.4 1.1 51.029.5 450.7 Profit & Loss Statement Y/E March Net Sales % chg Total Expenditure EBIDTA (% of Net Sales) Other Income Depreciation& Amortisation Interest PBT (% of Net Sales) Extraordinary Expense/(Inc.3 FY2009E 21.9) 430./ (Dec.001.0 430.496.740.9 21.4 717.4 5.9 14.6 17.8 1.5 14.9) 101.5) 188.0 430.695.147 4.5 358.189.6 144.279.2 1.683.8 1.5 8314.Angel Broking Service Truly Personalized TM Maruti Suzuki Textile Sector India Research Rs crore FY2007 FY2008E 14.6 598.1 10224.579.5 188.2 60.7 22.147 4.6 1.594.8 23.358.0 285.086.0 54.256.1 18.2 144.452.7 12.0 (53.8 4.2 292.659.6 50.0 (0.1 5.7 77.0 (286.2 16.0 2.2 8.2 73.4 13.397.8 167.2 987.0 8.751.5 630.990.9 9.147 3.) in loans Dividend Paid (Incl.2 (235.9 31.166.0 10.9 3.6 9.0 19.3 21.02 2.5 8.3 Balance Sheet Y/E March SOURCES OF FUNDS Equity Share Capital Reserves& Surplus Shareholders Funds Total Loans Deffered Tax Liability (Net) Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc.8 Cash Flow Statement Y/E March Profit before tax Depreciation (Inc)/Dec in Working Capital Interest (Net) Direct taxes paid Others Inc.602.0 450.6) (1.9 2.8 19.422.0 2.344.2 1.0 14.7) 149.802.259 1.0 18.2 15.0 41.566 5.7 72.653.5 3.663.6 15.4 1.279.8) 560.7 200.3 32.955 3.579.438.1 1.1 688.753.5 1.7) (44.5 FY2006 FY2007 FY2008E Rs crore FY2009E 144.9 23.0) 987.5 630.0 26.652.0 50.2 20.256.562.0) November 13.2 144.6 600.0 3.7 54.496.8 15.93 -48.401.0 65.702.422.1 169.6 3.6 FY2007 FY2008E 2.1 1.2 3.4 2.098.8 600.4 18.0 262.8 271.

4 5. targets to grow its revenues to $1bn by FY2010E from the current $830mn. Middle East. which could add value.1 4.6 17.2 11. Our SOTP Target Price for M&M works out to Rs952.4 20.7 14.5 22. Leader in core business: M&M is a leader in tractors with a marketshare of around 40% (post acquisition of Punjab Tractors).059 9.6 Automobile 17.2 17. China.4 1. wherein its core business fetches Rs586 and subsidiaries Rs366 per share.7 1.5 13.7 40.7 25.BO MM IN Source: Company.6 43.1 27.8 966 (0.989 22. Key Financials Y/E March (Rs cr) Net Sales % chg Net Profit % chg OPM (%) EPS (Rs) P/E (x) P/CEPS (x) RoE (%) RoCE (%) P/BV (x) EV/Sales (x) EV/EBITDA (x) FY2006 7.2 17. We expect M&M to outperform the UV segment clocking a CAGR growth of 10-11% over the next two-three years.9 FY2009E 12. diversifying product portfolio to reduce risks and value of its investment in subsidiaries.1 19.391 0.6 22.4 12. A view on the potential investments in its subsidiaries and joint ventures is important while evaluating investment in the M&M stock as its core business analysis. Increasing infrastructure activities has stepped up tractor sales in India in the last three-four years.5% in FY2006.7 31.jajoo@angeltrade.4 11.com Buy Target Price: Rs952 (12 Months) Value the group Mahindra & Mahindra’s (M&M) ambitious strategies are at the verge of take off and could give back recurring benefits.7 11. Exports to contribute significantly: YTD.0 1. Auto Ancillary business to unfold: M&M's Auto Parts Division.4% in FY2007 as against around 5.035 5.481 12.628 20. MSAT has done few acquisitions to expand its operations over the last two years and is scouting around for more acquisitions.0) 11. We maintain a Buy on the stock with a long-term outlook on its core business.8 16.5 966 49.3 18.7 FY2008E 11. M&M is the leader in the domestic utility vehicle (UV) market with a 30% marketshare. Latin America and Spain.1 1. Clearly.2 27.1 FY2007 9.695 500520 M&M MAHM.6 11. This multi-coherent model will keep the stock at lower downside risks despite a decline in tractor volumes and UV sales. provide technology and customer access. South Africa.6 15.3 647 29. Mahindra Systems & Technologies (MSAT).97 1002/608 201441 10 19. 2007 For Private Circulation Only . CIS.7 35.6 4.4040 3800 Ext: 344 E-mail: vaishali.0 13.146 15. We expect M&M's exports to grow at a better CAGR of around 16% over FY2007-09E on the back of its aggressive move to have a presence in new geographies like Europe.0 10. Australia.7 2.5 15.Angel Broking Service Truly Personalized TM Textile Sector India Research Mahindra & Mahindra CMP: Rs708 Vaishali Jajoo Tel: 022 .2 39. export volume contribution to Total Sales has risen to 14.9 Stock Info Sector Market Cap (Rs cr) Beta 52 Week High / Low Avg Daily Volume Face Value (Rs) BSE Sensex Nifty BSE Code NSE Code Reuters Code Bloomberg Code Shareholding Pattern (%) Promoters MF / Banks / Indian FIs FII / NRIs / OCBs Indian Public / Others 22. New Zealand.1 3.2 16. Angel Research November 13. Diversifying product portfolio with potential JVs: M&M has entered into a joint venture (JV) with International Truck & Engine Corporation (ITEC) and Renault for the manufacture of CVs and PVs in India. going ahead.7 14.Sebi Registration No : INB 010996539 25 . These JVs will start contributing positively and substantially to M&M's consolidated EPS in FY2009E.

urban and the semi-urban Post the success of Scorpio and Bolero keeping pace with the changes in requirements and scenario. However.non-farm income). volumes are expected to pick up on the back of normal monsoons and higher Kharif minimum support prices (MSPs) announced. Cris Infac. Industry growth driver: Even though tractor penetration in India was estimated at around 20 units per 1.6% yoy higher in FY2008. But. improving irrigation facilities. adjusting for the average global hp (which is significantly higher than the average Indian hp of 35). we conservatively estimate around 6% CAGR growth in tractor volumes over FY2007-09E for M&M. A view on the potential investments in its subsidiaries and joint ventures is important while evaluating an investment in the M&M stock as is core business analysis. We expect the company to outperform the UV segment clocking a CAGR growth of 10-11% over the next two-three years. It is no more a tractor or UV manufacturing company but its diversified different arms have the potential to grow at a much faster pace and can be valued at a better price than its core business. Angel Research. rural. which will help it retain its leadership position in the UV segment. and we believe that M&M will benefit from relatively low penetration levels and the government’s thrust on increasing rural and agricultural contribution to the total GDP of India. M&M is also expected to launch an all new platform called Ingenio in FY2008. Leader in core business M&M’s ambitious strategies are on the verge of take off and give back recurring benefits M&M’s ambitious strategies are on the verge of take off and give back recurring benefits Tractors: M&M is a leader in tractors with a marketshare of around 40% (post acquisition of Punjab Tractors. easy availability of credit. Crop production is expected to be 2. M&M is also expected to launch an all new platform called Ingenio in FY2008 Exhibit 1: Volume and Marketshare Source: Industry. good ground water levels.Sebi Registration No : INB 010996539 26 . 2007 For Private Circulation Only . nearly normal monsoons.000 hectares. We believe that the company’s strong product portfolio caters to the different user segments including taxis. post the success of Scorpio and Bolero keeping pace with the changes in requirements and scenario. Note: Marketshare in Tractor segment for the period of Jan 07 to Oct 07 is an average market share for the period as monthly data is not available segments. Increasing infrastructure activities has stepped up tractor sales in India in the last three-four years. Domestic sales have declined in the last two quarters on the back of tightening in credit by financial institutions.000 hectares of the net sown area as compared with the world average of around 21 units per 1. Further. which is taking care of its ability to outperform industry growth. Even in the near term. being a leader in tractors in the UV market should be the first investment rationale to be taken into consideration. Utility vehicles: M&M is a clear leader in the domestic utility vehicle (UV) market with 30% marketshare.Angel Broking Service Truly Personalized TM Mahindra & Mahindra India Research M&M’s ambitious strategies are on the verge of take off and give back recurring benefits. increased player thrust and rising income from custom-hiring . penetration in India seems to be fairly lower. In view of these factors. which provides ample potential for the Indian tractor players to increase their sales. Industry growth driver: UV industry sales are likely to grow on the back of growth in the November 13. long-term drivers remain intact and would keep volume growth intact.

Latin America and Spain Exports to contribute significantly: M&M has been recording strong growth in exports in both tractors and UVs during FY2008.953 2. New Zealand.4% in FY2007 as against around 5. * Selling & Distribution in India through existing M&M dealers and new JV dealers.070 38.791 36. Australia.965 3. South Africa. * Localisation 50%. aided by new launches. South Africa. Australia. Thus.718 2.972 FY2007 1.2.1 12. Aggressive move to have a presence in new geographies like Europe. * JV will manufacture Renault products to address the Indian market. * Become a full service provider of Engineering Services.419 2.13. China. New Zealand. Exhibit 2: Product Volume Product Auto Tractor Three Wheelers Total Volume FY2005 12. YTD the company’s export volume contribution to total sales has risen 14. * Production is expected to begin in mid 2009.9 14. Diversifying product portfolio with potential JVs: M&M has entered into a joint venture (JV) with International Truck & Engine Corporation (ITEC) and Renualt for the manufacture of CVs and PVs in India.35.390 1.24. Middle East.02.556 22. Exhibit 3: JVs and Alliances CompanyM&M Holding ITEC 51% Investment (Rs cr) 400 Remark * Become a full-line CV company in India.5% in FY2006.62. Angel Research M&M is looking at de-risking its product portfolio through segment diversification. * Renault will bring in its engineering skills while M&M will contribute with its large supplier base and its sales network. Angel Research November 13.Sebi Registration No : INB 010996539 27 . CIS. * Capacity 500.07.82.02.69.797 33.425 CAGR(%) 10.34.6 15. Three-wheeler segment: We believe that the competitive pressure in three-wheeler segment will be limited as a large number of players have entered or are planning to enter the segment in the near future. Middle East. Personal vehicle segment growth is expected to be in line with growth in the mid-size and large car segments. China. We expect the company’s exports to grow at a better CAGR of around 16% over FY2007-09E on the back of its aggressive move to have a presence in new geographies like Europe.751 FY2006 1. * Establish Contract Sourcing business.000 units. Latin America and Spain.055 FY2009E 1.6 Source: Company. Renault 51% 700 Source: Company.997 81.Angel Broking Service Truly Personalized TM Mahindra & Mahindra India Research commercial segment from tour operators and BPOs.707 99.222 FY2008E 1. 2007 For Private Circulation Only . M&M is looking at de-risking its product portfolio through segment diversification. CIS.848 1.415 3. * Products to be branded as Mahindra International.727 22. These JVs will start contributing positively to M&M’s consolidated earnings in FY2009E and the potential upside is expected to be substantial.071 62.28. We conservatively estimate M&M’s three-wheeler segment to clock a CAGR growth of 6-7% over FY2007-09E.

3 in FY2009 from Rs40.Angel Broking Service Truly Personalized TM Mahindra & Mahindra India Research The M&M-Renault JV has launched its first car the Logan in India. which is expected to commence production in 2009. However. We expect M&M's EPS and Cash EPS to improve to Rs43. Potential investment in subsidiaries: M&M has substantial investments on its Books including in some of its key subsidiaries. increasing exports. We estimate M&M's free cash flow generation to dip in FY2008 and FY2009 as the company would be investing in brownfield and greenfield capacity expansion. The company's OPM is expected to improve thereafter on the back of increased localisation and higher productivity. The company has made strong headway in positioning MSAT. It is currently being sold in 51 countries around the world.4% and 7. could restrict further improvement in OPM. which could add value.5% respectively. MSAT has done few acquisitions to expand the Division in the last two years . We believe that M&M's Non-Automotive subsidiaries like Tech Mahindra. The company has already announced listing of its highly profitable subsidiary Mahindra Holidays in the next 2-3 months. The company proposes to take the localisation content up to 70% by FY2009E. We estimate M&M to register a 12.582cr (Rs1. but will enhance valuations too. The Logan is a low-frills car platform that Renault has developed specifically for emerging economies.335cr). However. as a percentage of sales. Competition. provide technology and customer access The increase in value of its investments will restrict the downturn of the stock on the bourses Auto Ancillary business to unfold: M&M's Auto Parts Division. provide technology and customer access. M&M reported consolidated EPS of Rs63. This is despite the aggressive capex program undertaken by the company. Concerns Too many diversified projects could reduce the hold on core business.7 in FY2007. viz. The company is looking at product development through acquisitions in forging.. We estimate the company's Auto. Tractor and Three-wheeler segments to clock a CAGR growth of 16%.6% CAGR growth in Operating Profits over FY2007-09E.6% in FY2009E.5% respectively. We believe that the localisation content of ‘Logan’ is 55% due to which profitability in FY2008 will be relatively muted.2 and Rs57. an increase of 42. the company's consolidated revenues stood at Rs17. targets to improve its revenues to $1bn by FY2010E from the current $800mn.4% and 7. Mahindra Systems & Technologies (MSAT). a fully equipped auto component entity. Tractor and Three-wheeler segments to clock a CAGR growth of 16%.617cr (Rs12.Sebi Registration No : INB 010996539 28 . Mahindra Financial Services (MMFSL) and Mahindra Gesco will not only add significantly to its consolidated financials. the significant capital expenditure is resulting in M&M's RoE and RoCE declining in FY2008E. some of which are performing much better than the parent. respectively. design and engineering software solutions to add value to its offering. joint venture with ITEC and Renault-Nissan. The company has invested in other Mahindra group companies too. Adverse changes in the Interest Rate scenario and credit flow.070cr).6 and Rs53. A successful launch will translate into greater traction for M&M’s second joint venture in cars with Renault and Nissan.3 for FY2007. 6. in volumes over FY2007-09E. We expect M&M's stock to do well despite weakening UVs and tractor sales if the overall market is strong. In this case. Financial Performance M&M's Auto. 2007 For Private Circulation Only . which could add value. in volumes over FY2007-09E We estimate M&M to clock around 13% CAGR growth in revenues over FY2007-09E on the back of an estimated 11. the increase in value of its investments will restrict the downturn of the stock on the bourses. MSAT has done few acquisitions to expand the Division in the last two years and is scouting around for more acquisitions. For FY2007. 6. However. Success of the Logan is crucial for M&M given its aspirations in the passenger vehicle market. November 13. a growth of 48%.8%. We expect OPMs to be stable at 11. capacity expansions are crucial to tap the upcoming opportunities in the medium to long term. Consolidated PAT was at Rs1.5% CAGR growth in volumes over the mentioned period.

8 CMP (Rs) 240 567 1. Exhibit 5: SOTP Valuation Key Subsidiaries No. Angel Research November 13.398 712 7. 2007 For Private Circulation Only . We maintain a Buy on the stock.Sebi Registration No : INB 010996539 29 . Free Cash Flow and Capital expenditure Source: Industry.234 Value (Rs cr) 1. Angel Research (cr) 5.144 10.3 5. Our SOTP Target Price for M&M works out to Rs952 wherein its core business fetches Rs586 and subsidiaries Rs366. RoCE. Cris Infac.8 1.362 24 366 586 952 Exhibit 6: P/E Band Source: Cris Infac. of Shares held Mahindra Financial Services Mahindra GESCO Tech Mahindra Other major subsidiaries at BV Total Value No of share o/s of M&M (cr) Per share value of Investments Intrinsic value of M&M M&M's Target Price with investments in subsidiaries (Rs) Source: Company.108 1.Angel Broking Service Truly Personalized TM Mahindra & Mahindra India Research Exhibit 4: RoE. Angel Research Valuation High growth potential of M&M’s subsidiaries is expected to unlock actual value of the stock.

2 17.0 174.9 1.3 2140.5 1.8) 207.7 14.8 FY2006 FY2007 FY2008E Rs crore FY2009E 245.5 17.4 885. 2007 For Private Circulation Only .8 22.0 3.233.7 337.6 (67.2 11.014.154.1 19.3 39.1 4.2 1.4 FY2007 FY2008E 1.6 2.5 2.0 6.6 31.8 (169.6 1.7 1.5 7.9 27.8 16.7 1.2 Key Ratios Y/E March Per Share Data (Rs) EPS Cash EPS DPS Book Value Operating Ratio (%) Inventory (days) Debtors (days) Creditors (days) Returns (%) RoE RoCE Dividend Payout Valuation Ratio (x) P/E P/E (Cash EPS) P/BV EV / Sales EV / EBITDA 25.445.665.0 697.5 965.038.40) 889.9 (6.7) 29.5 209.8 7.5 8.7 1.0 (18.908.590.0 22.1 3.96) 1.1 69.4 2.6 53.0 11.6 1.0 211.3 1.0 2.4 1.418.6 324.939.7 (784.6 300.0) 27.525.5) (102.6 49.9) (2.1 29.7 102.9 209.9 16.5 357.4 18.0 Tax (% of PBT) Adj.0 238.748.6 5.5 1.4) 26.4 146.237.4 1.314.) in Cash Opening Cash balances Closing Cash balances 254.1 1.4 200.6 40. PAT % chg 242.1 26.1 4.082.8) 862.669.7) 350.7 Profit & Loss Statement Y/E March Net Sales % chg Total Expenditure EBIDTA (% of Net Sales) Other Income Depreciation& Amortisation Interest PBT (% of Net Sales) FY2006 7.652.6 5.0 391.035.4 568.0 483.3) 294.4 4.0 70.4 (210.984.2 1.0 2.3 121.154.297.8 233.1 2.4 1.4 12.2 4.5 15.255.7 11.0 207.441.0 70.1 27.6 2.0 357.6 479.761.9 11.3 7./ (Dec.6 11.7 2.0 13.1 1.4 4.4 27.0 7.441.9 11.) in loans Dividend Paid (Incl.6 280.3 12.2 300.7 20.1 Extraordinary Expense/(Inc.0 524.675. Tax) Cash Flow from Financing Inc.29) 1.8 50.4 391.6 50.770. Depreciation Net Block Capital Work-in-Progress Investments Current Assets Current liabilities Net Current Assets 2.3 52.0 124.208.4 1.2 242.885.7 19.216.536.208.6 1.2) 328.099.5 22.4 (572.636.256.2 20.8 350.1 26.4 2.5 395.8 11.4 150.145.1 106.0 Rs crore FY2009E 1.9 4.6 160.0 1.151.108.9 15.4 2.732.982.5 11.2 57.6 270.850.2 (1.0 (22.3 25.4 11.368.096.0 FY2009E 12.0 2.975.604.347.4 4.982.059.510.7 331.0 3.6 965.2 (0.6 679.0 445.7 13.217.5 200.481.8 6.Angel Broking Service Truly Personalized TM Mahindra & Mahindra Textile Sector India Research Rs crore FY2007 FY2008E 9.4 19.6 73.8 9.0 51.4 1.245.045.488.1 185.2 2.7 45.7 4.5 0.6 Misc Expenditure Total Assets Cash Flow Statement Y/E March Profit before tax Depreciation Interest(1-T) (Inc)/Dec in Working Capital Direct taxes paid FY2006 1.627.7 (456.6 5.0 649.) 210.0 579.1 17.0 19.787.832.7 2.1 29.041.1 9.5 4.3 504.125.229.3) 1./(Dec.315.4 27.1 Balance Sheet Y/E March SOURCES OF FUNDS Equity Share Capital Reserves& Surplus Shareholders Funds Total Loans Deffered Tax Liability (net) Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc.5 27.234.3 10.375.5 1.2 2.0 297.7 18.8 5.616.7 26.120.9 Inc.586.Sebi Registration No : INB 010996539 30 .939.7 1.1 1.3 11.7 FY2006 FY2007 FY2008E FY2009E Cash Flow from Operations 1.0 149.2 17.7 November 13.0 20.639.988.3 1.564.1 3.988.650.0 (24./(Dec.5 7.9 3.447.5 (2.5 1.6 15.064.7 245.0 2.5 3.) in Fixed Assets Free Cash Flow (Inc)/Dec in Investments Issue of Equity Inc.0) 28.8 297.9 883.733.6 752.7 14.727.4 395.475.4 3.3 647.4 12.029.2) 278.281.7 14.552.8 3.7 294.0 270.8 862.5 43.0 4.1 12.2 710.7 1.5 13.45) 1.3 179.4 2.1 (1.0 (2.

We have valued the core business at Rs620 or 7x FY2009E EV/EBITDA equivalent to 11x FY2009E P/E.8 16.529 23.8 Stock Info Sector Market Cap (Rs cr) Beta 52 Week High / Low Avg Daily Volume Face Value (Rs) BSE Sensex Nifty BSE Code NSE Code Reuters Code Bloomberg Code Shareholding Pattern (%) Promoters MF / Banks / Indian FIs FII / NRIs / OCBs Indian Public / Others 33.7 10.293 17.8 10. A real-time example is its successful product ACE.6 14. This is expected to help the company renew its product portfolio.9 4.914 25. 2007 For Private Circulation Only .8 FY2009E 34.7 7.3 24.4 17. Tata Motors expects its export contribution to increase from the current 18% to 25% by FY2011 on the back of its global launches. Value of the subsidiaries and embedded value works out to Rs260 per share.8 27.4040 3800 Ext: 344 E-mail:vaishali. which have attained maturity in their respective businesses and have clocked robust performance. Key Financials Y/E March (Rs cr) Net Sales % chg Net Profit % chg OPM (%) EPS (Rs) P/E (x) P/CEPS(x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x) FY2006 20.com Buy Target Price: Rs880 (12 Months) Giant on the move Tata Motors is gearing up for the next league of CVs and PVs and has been progressively beefing up its competitive positioning through acquisitions and JVs.9 10.Angel Broking Service Truly Personalized TM Textile Sector India Research Tata Motors CMP: Rs693 Vaishali Jajoo Tel: 022 .138 7.000cr.9 17. Successful launch of its Rs 1 lakh car could set a benchmark in the PV industry. with a long-term perspective.Sebi Registration No : INB 010996539 31 .2 1. Management has also shown interest in unlocking value in subsidiaries.3 2.8 Automobile 26.BO TTMT IN Source: Company.3 0. We believe Tata's next generation product will have a big impact on industry and will help it re-define itself from being a CV manufacturer to becoming an automobile manufacturer.6 38.8 8.jajoo@angeltrade.99 975/616 346234 10 19.5 55.062 33.695 500570 TATAMOTORS TAMO.0 10.035 5. These JVs are long-term positives for Tata Motors and are expected to significantly improve its competitive position in the domestic market. The current weakness in the stock due to near-term growth concerns is an excellent opportunity to Buy the stock.7 1.5 9.5 49.7 51.4 1.3 3.0 19.2 10.7 3.2 13.0 0.5 10.4 2. have segment and technological diversification and arrest marketshare declines.6 10. Based on SOTP valuation.4 0.7 18.4 12.213 11.556 14.5 13. investments in subsidiaries would unlock real value for the stock.12. Advantageously positioned: The company has six new platforms across segments.5 12. Angel Research November 13.9 22.2 10.985 3.0 FY2008E 30. which are expected to be launched in the next couple of years at regular intervals. Short-term cyclical pressures in the CV segment are exerting pressure on the cash flow.6 17.6 1.9 28.7 39. In the long term. we have arrived at a Target Price of Rs880 for the stock. Investment value along with subsidiary companies accounts for almost one-fourth of Tata Motors current valuation. Tying up for technology and market: Successful tie ups with MNCs across segments have given a sense of the company's aggressive capex plans of Rs.0 FY2007 27.706 0. Investment Portfolio: Tata Motors has strategic investments in several subsidiaries.

Sebi Registration No : INB 010996539 32 .52.785 2. convertible at Rs960.97. Exhibit 1: Truck and Bus Volumes and Marketshare We believe Tata’s next generation product will have a big impact on industry and will help it re-define itself from being a CV manufacturer to becoming an automobile manufacturer as well The company has six-seven new platforms across segments.44.4 Source: Company. However.67.831 61.101 2.565 30.032 1.89.355 48. and has been progressively beefing up its competitive positioning through acquisitions and JVs. We believe Tata’s next generation product will have a big impact on industry and will help it re-define itself from being a CV manufacturer to becoming an automobile manufacturer as well.772 3. The company has also grabbed attention of the global majors with the announcement of its Rs1lakh car.09. November 13. The company is not only expanding capacities but is also broadening its focus on the global market.08.151 FY2007 1.59. Angel Research Exhibit 2: Product volumes Product M&HCV LCV Total CVs UVs Cars Total PVs Total Volume Exports (Inc above ) FY2005 1.783 1.Angel Broking Service Truly Personalized TM Tata Motors India Research Tata Motors is gearing up for the next league of commercial and passenger vehicles.884 4.92.763 3.627 3.382 2.53.496 FY2006 1.53.337 74.7 12. which are expected to be launched in the next couple of years at regular intervals Source: Cris Infac. which are expected to be launched in the next couple of years at regular intervals.69. Angel Research Tata Motors plans to invest Rs12. A real time example is its successful product.055 52.888 49.91. Tata Motors recently issued zero coupon foreign currency convertible alternative reference securities (CARS) of US $450mn.7 11.12.83.975 3.934 2.08.487 207. Short term cyclical pressures in the CV segment is surely exerting pressure on the company’s cash flows.838 50. This is expected to help the company renew its product portfolio.2 11.40.000cr towards capacity addition and new product launches over the next three-four years.89.325 58.776 6. ACE.69.428 1.36.167 6.38.253 2.35.5 25.96 per share where outstanding CARS would be redeemable at 31.86.533 5.554 1. have segment and technological diversification and arrest marketshare declines in the short term.000cr towards capacity addition and new product launches over the next three-four years Ambitious expansion plans: The company plans to invest Rs12.283 FY2009E CAGR(%) 1. This will help the company to open up new markets in the long run.85.954 39.590 37. Advantageously positioned: Tata Motors has initiated some strategic measures to beef up its competitive positioning in the market.018 FY2008E 1. In the long term.8% premium on maturity.599 1.45.104 2. The company has six-seven new platforms across segments. investments in subsidiaries would unlock real value for the stock.8 26.493 75.850 1. Successful launch of this could well set a benchmark in the PV industry.8 14.943 1.29. 2007 For Private Circulation Only .289 2.592 1.96.99.9 16.514 9. To fund this capex. the giant is on the move slowly but steadily.

25.000 including 200. manufacturing. These JVs are long-term positives for Tata Motor and are expected to significantly improve its competitive position in the domestic market. Investment value along with subsidiary companies accounts almost one-fourth of Tata Motors’ current valuation.Sebi Registration No : INB 010996539 33 .65. Angel Research Management intends to commence the process of de-merging its subsidiaries by end FY2008 Investment Portfolio: Tata Motors has strategic investments in several subsidiaries.000cr on capacity expansion Passenger Vehicle 2. November 13. Exhibit 4: Joint Ventures and Alliances Joint Venture FIAT Tata Motors' Product/Segment Focus Remarks share 50% Fiat and Tata vehicles and * 1. Fluctuation in Interest and Freight rates.000cr on new product development and Rs4.000 UV 3. Management intends to commence the process of de-merging its subsidiaries by end FY2008 with HV Transmissions and HV Axles being the businesses to be initially listed. Angel Research Commercial Vehicle 2.000 ACE ACE Passenger Variant Global Truck Global Pick-up Successful tie ups with MNCs across segments have given a sense of the company’s aggressive capex plans Tying up for technology and market: Successful tie ups with MNCs across segments have given a sense of the company’s aggressive capex plans.000.000 cars and 2.00 car New product range jointly with Fiat Source: Company. Aggressive move by the Railways and new competitors.00.000 engines the Fiat branded cars * Distribution through the Tata-Fiat dealer network * Investment of Rs4. It will also pave the way for better access to new products and technology for Tata Motors and give it access to the global markets. Concerns Lack of moderate demand will impact earnings negatively as the company has chalked out significant capex.000 cars + 60.11. Tata Motors expects its export contribution to increase from the current 18% to 25% by 2010 on the back of its global launches.000cr IVECO MoU Commercial Vehicle * To analyse feasibility of co-operation in engineering.00.000 5.000 small car+ 90.50. sourcing * Distribution of products in the CV space across markets Morcopolo 51% Buses and Coaches * Initial capacity of 7.000 +2.000 UV New Indica platform Rs1. Management has also shown interest in unlocking value in subsidiaries either through induction of a strategic partner or through public listing of the same going ahead when these businesses are able to garner more value.000 units annually * Investment of Rs150-200cr * Targeting Domestic and Export market Thonburi Automotive * Focus on Thailand and nearby country Company of Thailand 70% Low tonne pick-up trucks * Assembly Plant at an investment of Rs120cr Source: Company. 2007 For Private Circulation Only .00.Angel Broking Service Truly Personalized TM Tata Motors India Research Exhibit 3: Capital expenditure Capex Segment Current capacity Capacity after addition Products Rs8. which have attained maturity in their respective businesses and have clocked robust performance.

the significant capex is resulting in a decline in the company’s RoE and RoCE.5%.2% over FY2007-09E. We estimate the company’s free cash flow generation to turn positive once again in FY2008 to around Rs721. we expect new product launches to boost volumes and improve realisations of the company.Sebi Registration No : INB 010996539 34 .Angel Broking Service Truly Personalized TM Tata Motors India Research Financial Performance OPM is expected to be stable at around 10. Further. OPM is expected to be stable at around 10.The company’s Operating Profits are expected to grow at a CAGR of 13. Cris Infac. However.1%.3 for FY2007. Nonetheless. The recently issued CARS would also help the company improve its cash flow.7cr and subsequently improve in FY2009. Exhibit 5: RoE.3%.7 respectively. Free Cash Flow and Capital expenditure Source: Industry. In FY2007. Tata Motors reported consolidated EPS of Rs56. an increase of 24. We estimate the company’s Profits to grow at a CAGR of 6. We expect the company’s standalone EPS and Cash EPS to increase to Rs55. Consolidated PAT at Rs649. RoCE.5 and Rs74. Angel Research November 13.5% over FY2007-09E We expect Tata Motors’ revenues to grow at a CAGR of around 12% over FY2007-09E on the back of an estimated 10% CAGR growth in volumes over the mentioned period.7% in the mentioned period.8cr (Rs523cr) recorded a growth of 24. 2007 For Private Circulation Only . the company’s consolidated revenues stood at Rs9.759cr (Rs7865cr).9 in FY2007 despite the aggressive capex. capacity expansions are crucial to capitalise on the huge opportunities likely to emerge in the medium to long term. in FY2009E from Rs49.6 and Rs64.

The current weakness in the stock due to near-term growth concerns is an excellent opportunity to Buy the stock with a long-term perspective. we arrived at a Target Price of Rs880 for the stock. Value of the subsidiaries and embedded value works out to Rs260 per share. The reduction in our Target multiple reflects the rising risks to growth in both commercial vehicles and passenger cars in the near-term.Angel Broking Service Truly Personalized TM Tata Motors India Research Valuation Based on SOTP valuation. We have valued the core business at Rs620 or 7x FY2009E EV/EBITDA equivalent to 11x FY2009E P/E. 2007 For Private Circulation Only .Sebi Registration No : INB 010996539 35 . Angel Research November 13. Exhibit 6: P/E Band Source: Capitaline.

3 368.1 786.9) 230.137./ (Dec.1 12.061.6 17.784.2 4.7 39.9 10.3 6.3 2.3 10./(Dec.Sebi Registration No : INB 010996539 36 .2) 250.0 5.091.0 1.2 382. Depreciation Net Block Capital Work-in-Progress Investments Current Assets Current liabilities Net Current Assets Total Assets 7.9 14.0 33.568.927.5 Rs crore FY2008E FY2009E 2.0 676.212.6 10.7 368.1 468.3 4.8 679.8 FY2009E 34.9 5.2 33.2 3.7 25.7 7.5 500.655.5 1.9 1.6 4.2 7.304. 2007 For Private Circulation Only .7 693.) in Cash Opening Cash balances Closing Cash balances FY2006 2.075.5 33.546.0 242.4 2.665.0 24.8 7.5 143.1 22.3 1.487.513.5 8.8 34.1 Balance Sheet Y/E March SOURCES OF FUNDS Equity Share Capital Reserves& Surplus Shareholders Funds Total Loans Deffered Tax Liability (net) Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc.8 4.4 9.3 3.071.664.909.707.9 8.4 3.1 13.500.2 9.4 520.8 8.7 30.5 3164.4 3.2 679.174.341.869.4 9.7 15.137.7 25.401.5 10.537.125.8 3.9 2.154.5 3.4 515.4 6.5 14.509.0 177.2 2.9 4.9 8.388.0 19.0 951.1) 2005.280.6) 2.3 731.3 5.8 586.7 3.5 (500.015.4 7.0) 3.3 587.9 614.6 26.2 5.5 67.1) 250.4 659.6 8.5) 375./(Dec.6 36.2 1.132.3) 61.0 10.9 28.0 669.1 8.2 81.484.6 Cash Flow Statement Y/E March Profit before tax Depreciation (Inc)/Dec in Working Capital Interest (Net) Direct taxes paid Other Current Assets Cash Flow from Operations Inc.366.2 13.5 4.7 114.009.6 3.5 3.254.5 11.3) (461.0 1860.7 2.8 9.8 518.9 18.5 25.3 55.500.0 209.3 (114.985.4 FY2007 2.119.) 145.9 524.3 453.628.9 3.5 693.3 6.015.9 49.6 15. Tax) Interest Paid Cash Flow from Financing Inc.0 110.1 1.9 53.8 12.8 27.8 622.3 30. PAT % chg 524.2 24.7 2.4 (109.5 1.5 226.4 9.8 2.7 472.780.243.5 25.082.8 9.9 103.2 6.5 2.8 1.4 Tax (% of PBT) PAT % chg Ad.6 64.141.4 24.6 51.869.1 973.7 Profit & Loss Statement Y/E March Net Sales % chg Total Expenditure EBIDTA (% of Net Sales) Other Income Depreciation& Amortisation Interest PBT (% of Net Sales) FY2006 20.) in loans Dividend Paid (Incl.096.4 6.4 1860.4 FY2006 FY2007 FY2008E Rs crore FY2009E 385.555.7 10.7 (600.4 721.9 953.979.093.5 (3.985.5 2.) in Fixed Assets Free Cash Flow (Inc)/Dec in Investments Others Issue of Equity Inc.829.775.2 2.3 0.418.5 (98.9 18.3 311.9 2.0 30.173.3 2.4 30.5 74.7 500.7 17.702.5 1.8 10.7 (343.4 659.976.5 13.5 1.2 12.0 740.0 7.9 Key Ratios Y/E March Per Share Data (Rs) EPS Cash EPS DPS Book Value Operating Ratio (%) Inventory (days) Debtors (days) Creditors (days) Returns (%) RoE RoCE Dividend Payout Valuation Ratio (x) P/E P/E (Cash EPS) P/BV EV / Sales EV / EBITDA 17.184.158.7 453.9 293.009.5 740.5 2.6 (599.0) 2.8 385.664.257.9 0.9 403.7 1.6 1.9 103.0 13.8 12.528.1 2.9 15.7 6.000.5 36.9 (836.1 2.6 293.663.3 17.570.509.1 1.9 520.8 7.383.9 FY2006 FY2007 FY2008E FY2009E November 13.936.0 2.5 518.9 10.3 4.9) 1975.3 731.7 34.7 18.5 12.9 1.1 4.3 Extraordinary Expense/(Inc.4 3164.521.3 2.881.0 84.614.477.293.941.5 80.071.155.9 586.908.8) 896.357.072.232.1 9.5 8.8 16.053.5 11.3 2.877.9 23.026.5 15.4 12.894.4 29.9 441.1 35.5 385.002.5 4407.8 10.053.231.568.249.0 14.5 14.7 (538.0 1.971.7 10.5 1975.2 870.869.7 18.9 0.0 614.1 2.075.3 11.Angel Broking Service Truly Personalized TM Textile Motors Tata Sector India Research Rs crore FY2007 FY2008E 27.6) (37.4 10.5 2.2 (30.5 9.034.

'XCD'.9 21.8 21.2 5. Key Financials Y/E March (Rs cr) Net Sales % chg Net Profit % chg OPM (%) EPS (Rs) P/E (x) P/CEPS (x) RoE (%) RoCE (%) P/BV (x) EV/Sales (x) EV/EBITDA (x) FY2006 7.5 Stock Info Sector Market Cap (Rs cr) Beta 52 Week High / Low Avg Daily Volume Face Value (Rs) BSE Sensex Nifty BSE Code NSE Code Reuters Code Bloomberg Code Shareholding Pattern (%) Promoters MF / Banks / Indian FIs FII / NRIs / OCBs Indian Public / Others 30.0 23.8 17. BAL has already initiated steps and expanding its footprint in countries like Indonesia.3 1.7 19. Sri Lanka and Iran.1 15.5 18. Columbia. which are expected to unfold value in the long run.035 5.4 1.62 3172/2063 80101 10 19. the company's potential investments in its Insurance and Finance arms are doing well.520 27.2 2. All these initiatives should pay off in the long run. it has also improved its marketshare despite intense competition.3 1.1 1.1 18.0 14.hope to drive: The company expects its new 125CC motorcycle XCD to deliver market share gains and improve profitability over the next year.746 (12 Months) Value in investments but will Exceed Growth!!!!! Bajaj Auto (BAL) is back to tap the growth and enhance marketshare with its new launch in the Executive segment.6 15. In its bid to tap the overseas market.1 13. Angel Research November 13.4040 3800 Ext: 344 E-mail: vaishali.2 4.BO BJA IN Source: Company. in the above 125cc segment.336 Vaishali Jajoo Tel: 022 . which is currently 16%. We maintain a Buy on stock.9 3.8 23. in Bajaj's view.jajoo@angeltrade.0 14. Any cannibalization from the 'Discover 135CC' and the 'Platina' would be offset by market share gains from Hero Honda by FY09. However. The company is also in talks with Renault-Nissan for a $3.2 FY2009E 12. New initiative to diversify and beat competition: BAL has lined up new launches like a six-seater 3W 'Mega'.307 18.638 0.Nigeria.Our SOTP Target Price based on FY2009 estimates works out to Rs2.5 23.8 26.4 15.8 18.Angel Broking Service Truly Personalized TM Textile Sector India Research Bajaj Auto CMP: Rs2.0 FY2007 9.4 108.1 15.3 23. Insurance and other subsidiaries have substantial value: Bajaj Allianz Life has not only maintained its position as the second largest private life insurer.6 17.394 6. Bajaj is reiterating its focus on 125CC and above motorcycles going forward.2 Automobile 23.7 15. We believe the company is positioning itself in line with its strategy of 'value and price product'. In the three-wheeler segment also BAL is countering intense competition.7 2.com Buy Target Price: Rs2.2 137.7 12. The company is back again in the limelight with its new launch.1 129.4 159.102 43.6 FY2008E 10.608 15. a low tonnage goods 4W vehicle similar to Tata Motors' Ace by FY2010.3 2.9 21. XCDs ….7 17. The company's strategy has been to tap the higher bike segment where growth and realisations are better.1 15.778 17. 2007 For Private Circulation Only . Bajaj is targeting Exports to touch 35% of Total Revenues by FY2010. We have arrived at Rs663 per share value for BAL's Insurance arm based on 20x NBAP for its Life Insurance business and 18x its General Insurance business.695 500490 BAJAJAUTO BJAT.0 20.Sebi Registration No : INB 010996539 37 .0 3.0 3.896 14.488 30.5 16.000 small car product manufacturing plant in India.746. Export performance to further improve: BAL is targeting 30-35% of Revenues from Exports over the next three years.

Angel Broking
Service Truly Personalized

TM

Bajaj Auto
India Research Bajaj Auto (BAL) is back to tap the growth and enhance marketshare with its new launch in the Executive segment. The company’s strategy has been to tap the higher bike segment where growth and realisations are better. The company is back again in the limelight with its new launch, XCD, in the above 125cc segment. We believe the company is positioning itself in line with its strategy of ‘value and price product’. We believe that BAL’s closest rival, Hero Honda (HH), may find the going tough particularly in this segment. HH may not be able to offer its products at aggressive pricing points as it is already facing pressure at the operating level. As for BAL, similar offerings from TVS and HMSI could threaten its position in the two-wheeler space. In the three-wheeler segment also BAL is countering intense competition. However, the company’s potential investments in its Insurance and Finance arms are doing well, which are expected to unfold value in the long run. XCDs ….hope to drive: The company expects its new 125cc motorcycle XCD to deliver marketshare gains and improve profitability over the next year. BAL expected volumes to reach 50,000 units per month by December 2007. However, XCD sales crossed 63,000 units within two months of launch, leading to Bajaj Auto deciding to increase the manufacturing capacity of the bike from 50,000 units to 75,000 units in November 2007. BAL is reiterating its focus on 125cc and above motorcycles going forward. BAL believes that going forward industry sales mix will shift in favour of 125cc+ motorcycles and is aiming at upgrading 100cc customers to 125cc by offering superior features at similar price points. BAL has stated that currently 100cc bikes account for 60% of industry volumes but only 35% of industry profits, hence it would focus on the 125cc+ bikes going forward. Exhibit 1: Volume and Marketshare

We believe BAL is positioning itself in line with its strategy of ‘value and price product’

BAL has stated that currently 100cc bikes account for 60% of industry volumes but only 35% of industry profits, hence it would focus on the 125cc+ bikes going forward

Source: Cris Infac, Angel Research

Exhibit 2: Product Volume
Product Motorcycles Geared Scooters Ungeared Scooters Step thrus Total Two Wheelers Three Wheelers Grand Total Export out of above FY2005 14,49,677 1,02,575 30,931 19,165 16,02,348 2,21,987 18,24,335 1,96,710 FY2006 FY2007 FY2008E FY2009ECAGR (%) 19,12,224 23,85,995 25,29,155 28,32,653 18.2 62,860 5,253 52,612 13,765 23,401 3,0421 (0.4) 870 20,28,566 24,05,013 25,52,555 28,63,074 15.6 2,52,006 3,24,220 3,27,462 3,53,659 12.3 22,80,572 27,29,233 28,80,017 32,16,733 15.2 2,50,204 4,38,768 5,70,398 7,12,998 38.0

Source: Cris Infac, Angel Research

November 13, 2007

For Private Circulation Only - Sebi Registration No : INB 010996539

38

Angel Broking
Service Truly Personalized

TM

Bajaj Auto
India Research New initiative to diversify and beat competition: BAL has lined up new launches like a six-seater 3W ‘Mega’ to counter the unregulated rural 3W market and a CNG version of cargo 3Ws. BAL will also be launching a low tonnage goods 4W vehicle similar to Tata Motors Ace by FY2010. This will be followed by a passenger version of the vehicle. Bajaj has developed new three-wheeler models scheduled for launch over the next few quarters. We believe that some of these products would also find acceptance in the export markets. However, due to the high base effect, we expect BAL’s three-wheeler volumes to be flat in FY2008. The company is also in talks with Renault-Nissan for a $3,000 small car product manufacturing plant in India. All these initiatives should pay off in the long run. Export performance to further improve: BAL is targeting 30-35% of Revenues from Exports over the next three years, which is currently 16%. In its bid to tap the overseas market, BAL has already initiated steps including plans to set up an Assembly operation in Indonesia predominantly for three wheelers and high-end-motorcycles. Bajaj Auto Indonesia, BAL’s majority owned subsidiary, commenced operation during Q3FY2007. BAL has also begun selling motorcycles in Nigeria since Q2FY2007. BAL has forayed into Nigeria with a more rugged version of the Boxer. Currently, it is in the process of setting up an Assembly line for two-wheelers in Nigeria. The company is also expanding its footprint in countries like Columbia, Sri Lanka and Iran. Bajaj is targeting Exports to touch 35% of Total Revenues by FY2010. Capacity expansion to fuel potential volume growth: BAL plans to increase its capacity to 5.1mn units from the current 3.5mn units over the next three years. It is also setting up a plant in Uttarakhand for the manufacture of motorcycles. Total capacity of the plant will be 1mn units pa., which will be increased in a phased manner. BAL is also planning a Greenfield project for three-wheelers and light cargo four-wheelers in Chakan, Pune, which is expected to witness strong demand in the domestic market on account of the emerging hub and spoke transportation model. The company plans to spend Rs1,500cr towards expansion, R&D, new model developments and pro biking showrooms over the next three years. Funding will be entirely from internal accruals. The company needs to expand capacity as it has had to deal with supply shortages for some time now. De-merger plan: BAL has announced de-merger of its Auto and Finance businesses which entails setting up two 100% subsidiaries viz., Bajaj Holdings & Investment (BHIL) and Bajaj Finserv (BFL). This far only three shareholders have raised objections to the demerger - one being Shishir Bajaj brother of Rahul Bajaj - Chairman of BAL, and two other small shareholders. BAL expects the court ruling to come in its favour and expects the new companies to get listed by the end of FY2008. This is a deviation from the previously conveyed timeline of January 2008. Exhibit 3: Plan of De-merger

BAL is in talks with Renault-Nissan for a $3,000 small car product manufacturing plant in India

BAL is targeting 30-35% of Revenues from Exports over the next three years, which is currently 16%

BAL plans to increase its capacity to 5.1mn units from the current 3.5mn units over the next three years

BAL has announced de-merger of its Auto and Finance businesses, which entails setting up two 100% subsidiaries

Source: Cris Infac, Angel Research

November 13, 2007

For Private Circulation Only - Sebi Registration No : INB 010996539

39

Angel Broking
Service Truly Personalized

TM

Bajaj Auto
India Research Insurance and other subsidiaries have substantial value: BAL’s Insurance business was given premium valuation in the market prior to the disclosure made by the company. Considering the strong growth in the company’s life insurance business along with the higher NBAP margin of over 20%, we expect Bajaj Allianz Life’s valuation to increase. Bajaj Allianz Life has not only maintained its position as the second largest private life insurer, it has been able to improve its marketshare despite intense competition. We have arrived at Rs663 per share value for BAL’s Insurance arm based on 20x NBAP for its Life Insurance business and 18x its General Insurance Business. We have assumed BAL’s 26% economic interest in Bajaj Allianz Life as against 51% economic interest. Concerns If the new launch of the 125cc bike, XCD, fails to garner marketshare from existing player and below the 125cc segment. Further increase in Interest rate. Financial Performance We expect BAL's Net Sales to grow at a CAGR of 16% on the back of 9% estimated growth in volumes during FY2007-09E. We estimate realisations to grow at a CAGR of 7% over the same period. We estimate revenues to outpace volumes following better realisations and product mix. We estimate BAL’s Operating Profits to grow at a CAGR of 17% over FY2007-09E, while OPMs would improve from 15.1% in FY2007 to around 15.4% by FY2009E. BAL has set an ambitious target to increase its OPM to 20% levels over the next couple of years. This is in line with the company’s policy to target Profits to enhance shareholders’ value. We estimate BAL’s PAT to grow at a CAGR of 11% over the mentioned period. We expect the company’s RoCE to improve as the incremental cash generated will be utilised for capex. We expect BAL to fund its capex through internal accruals requiring no changes to its existing capital structure. We expect BAL to invest Rs1,500cr towards capacity addition in India and for the assembly plant in Indonesia and Nigeria. We expect BAL’s free cash flow generation to improve in FY2008E and FY2009E. Exhibit 4: RoE, RoCE, Free Cash Flow and Capital expenditure

Bajaj Allianz Life has not only maintained its position as the second largest private life insurer, it has been able to improve its marketshare despite intense competition

BAL has set an ambitious target to increase its OPM to 20% levels over the next couple of years

Source: Industry, Cris Infac, Angel Research

November 13, 2007

For Private Circulation Only - Sebi Registration No : INB 010996539

40

Angel Research November 13.4% stake in Bajaj Auto Finance (@15% discount to market value) 27 Cash 80 Bajaj Holdings (Shareholder's stake 100%) 1. Our SOTP Target Price based on FY2009 estimates works out to Rs2.539 1. Angel Research Exhibit 7: P/E Band Source: Industry.5x FY2009E Earnings (Rs) Current Value of Insurance Business on FY2009 basis (Rs) Other Investments at cost (Rs) SOTP Target Price (Rs) Source: Company.746 Source: Company. The higher margin bike will help the company suppress the input cost pressure. Angel Research The higher margin bike will help the company suppress the input cost pressure 1.130 30% stake in Bajaj Auto (@30% discount) 323 30% stake in Bajaj Finserve (@30% discount) 162 Cash 645 Total (Rs) 2.389 Cash 150 Bajaj Finserve (Shareholder's stake of 70%) 770 539 Insurance 663 38.746 We are also valuing BAL on the basis of its de-merger plan.077 Auto Business (Fair Value) 1.130 1. We have arrived at Rs663 per share value for BAL’s Insurance arm based on 20x NBAP for its Life Insurance business and 18x P/E for its General Insurance Business. We estimate BAL’s OPMs to further improve in 2HFY2008 as volumes of the new 125cc bike starts coming in.746.Sebi Registration No : INB 010996539 41 . We maintain a Buy on stock.539 663 544 2. Exhibit 6: Valuation post De-merger Company Business Value for Value Shareholder (Rs) Bajaj Auto (Shareholder's stake of 70%) 1. 2007 For Private Circulation Only . Cris Infac. Exhibit 5: SOTP Valuation Value of Auto Business @13.Angel Broking Service Truly Personalized TM Bajaj Auto India Research Valuation We expect Bajaj’s two-wheeler volumes to pick up in the second half of FY2008 on the back of the new launch in the 125cc segment.

570.7 14.608.269.7 (525.3 57.9 766.3 6.2 1.7 15.580.9 237.1 573.0 (89.121.039.6 6.669.6 17.8 18.3 10.) in Cash Opening Cash balances Closing Cash balances 329.5 1.7 FY2006 FY2007 FY2008E FY2009E (Inc)/Dec in Working Capital (457.4 1.0 65.2 14.3 6.8 157.446.5 23.9 127.7 1.153.5 1.0 6.857.3 15.0 21.849.585.101.0 8.2 Key Ratios Y/E March Per Share Data (Rs) EPS Cash EPS DPS Book Value Operating Ratio (%) Inventory (days) Debtors (days) Creditors (days) Returns (%) RoE RoCE Dividend Payout Valuation Ratio (x) P/E P/E (Cash EPS) P/BV EV / Sales EV / EBITDA 21.0 20.7 1.6 190.1 5.967.8 1.0 137.0 181.0 108.7 18.9 101.327.154.9 3.0) 504.9 6.2 404.7 165.1 147.5 17.595.2 (597.796.) in Loans Dividend Paid (Incl.332.040.0 547. Depreciation Net Block Capital Work-in-Progress Investments Current Assets Current liabilities Net Current Assets Misc Expenditure Total Assets 2.8 (514.423.0 14.233.4 1.5) 108.7 Balance Sheet Y/E March SOURCES OF FUNDS Equity Share Capital Reserves& Surplus Shareholders Funds Total Loans Deffered Tax Liability (net) Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc.8 3.1 15.2 6.447.6 158.2 4.322.0 15.2 21.9 3.6 17.6 4.6 43.3 (4.4 17.5 18.4 504.7 59./ (Dec.5 7.0 9.9 6.9 4.2 191.818.0 37. 2007 For Private Circulation Only .5 200.8) 573./(Dec.1 November 13.3 2.898.325.7 82.4 15.3 1.654.3 3.520.7 159.5 15.7 1.3 3.0 230.3 Others Inc.7 (2.4 74.5 16.922.7) 87.1 83.4 617.0 70.0 5. Tax) 478.6 5.262.9 173.2 5.5 15./(Dec.9) Direct Taxes paid Cash Flow from Ops Inc.1 (86.306.Sebi Registration No : INB 010996539 42 .256.4 74.9 164.7 FY2009E 12.3 Cash Flow Statement Y/E March Profit before Tax Depreciation Interest FY2006 1.6 26.213.2) (6.544.7 1.0 191.3 1.2 4.9 FY2006 FY2007 FY2008E Rs crore FY2009E 101.123.0 200.3 5.1 1.325.5 3.393.2 FY2007 FY2008E 1.34 1.4 450.625.7 1.1 (26.1 26.7 19.6 1.7 4.2 31.0 4.1 13.5 23.4 2.34 1.0 1.321.122.580.3 5.625.9 490.5 129.0 471.4 240.8 1.0 733.9 8.2 2.467.123.181.5 101.0) 5.796.9 Rs crore FY2009E 2.0 26.3 82.2 36.898.6 1.5 50.2 87.6 2.433.296.2 9.1 8.3 404.1 1.4 1.6 10.0 607.7 Cash Flow from Financing 1.241.1) 10.6 4.7) 1.3 21.4 27.770.3 76.9 1.810.5 7.8 40.436.7 23.2 26.0 3.6 30.1 27.625.2 590.7 24.534.3 1.8 4.6 26.8 1.4 230.6) 83.6 18.1 478.181.131.7 12.3 1.473.8 (688.4 505.7 60.4 Profit & Loss Statement Y/E March Net Sales % chg Total Expenditure EBIDTA (% of Net Sales) Other Income Depreciation& Amortisation Interest PBT (% of Net Sales) Extraordinary Expense/(Inc.333.7 2.6 1.9 3.8 14.2 5.45 1.5 76.0 18.892.178.1 15.6 1.9 101.9 417.9 40.895.0 0.1 30.2 7.272.083.0 2.2 8.0 634.9 5.39 2.7 190.) Tax (% of PBT) PAT % chg FY2006 7.856.9 1.1 555.) in Fixed Assets Free Cash Flow (Inc)/Dec in Investments Issue of Equity Inc.8 15.434.2 7.9 7.Angel Broking Service Truly Personalized TM Textile Sector Bajaj Auto India Research Rs crore FY2007 FY2008E 9.532.0 5.488.2 6.608.1) 17.833.5 5.422.057.1 1.7 17.6 1.6 288.778.761.121.845.4 9.941.1 1.233.0 4.1 827.5 3.3 1.4 74.6 115.686.750.0 0.2 490.9 36.3 1.1 17.2 450.1 3.

BO AL IN Ashok Leyland (ALL) has been trading lacklustre on the bourses on fears of a slow down in the CV industry. which contributes one/fourth of its sales.3 11.6 6.1 0.3 20. focus on infrastructure spending and a strong replacement cycle.jajoo@angeltrade.6 441 34.2x FY2009E EPS.0 21. ALL targets to increase contribution from these businesses to around 30% over the next three-four years. New Model launches: New models expected to be launched in Q3FY2008 include 49T tractor trailer.97.com Stock Info Sector Market Cap (Rs cr) Beta 52 Week High / Low Avg Daily Volume Face Value (Rs) BSE Sensex Nifty BSE Code NSE Code Reuters Code Bloomberg Code Shareholding Pattern (%) Promoters MF / Banks / Indian FIs FII / NRIs / OCBs Indian Public / Others 38. However. towards end of FY2008 it is expected to recover on the back of healthy growth outlook in commercial vehicles.3 11.000 vehicles a year initially and the production facility will be expanded to manufacture 40.500cr.9 10.975 0. Management has guided sales target of 90. 2007 For Private Circulation Only .4 FY2007 7.2 2.6 19. We maintain a Hold on the stock with a Target Price of Rs42. Key Financials Y/E March (Rs cr) Net Sales % chg Net Profit % chg OPM (%) EPS (Rs) P/E (x) P/CEPS (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x) FY2006 5.4 2.8 Source: Company. which are expected to help ALL expand its product portfolio and intensify its hold in the overseas market.1 485 9.2 8.1 4.0 1.4040 3800 Ext: 344 E-mail: vaishali.6 23. and the new players who pose a high risk to the company’s volume growth guidance. The company will set up a vehicle assembly and cab facility to manufacture 25.2 23.0 2.0 9.000 vehicles including 8.2x FY2008E and 9. growth in the agriculture.035 5.4 30.2 7.656 1 19.3 FY2008E 7.7 10.5 FY2009E 8.168 36. ALL is also trying to increase its focus on non-cyclical businesses like buses.Angel Broking Service Truly Personalized TM Textile Sector India Research Ashok Leyland CMP: Rs37 Long way to go Hold Target Price: Rs42 (12 Months) Vaishali Jajoo Tel: 022 .3 10.896 12.7 2.5 327 30.7 Automobile 4.000 units of exports in FY2008E implying a growth of 8%.90 51/34 10.695 500477 ASHOKLEY ASOK. the stock is trading at 10.1 3. a new luxury bus and a CNG bus.8 540 11.5 20.7 7.3 22.0 0. ancillary and Defence through new JVs and acquisitions.2 0.7 10. sustained pick-up in economic activity. Moreover.1 9.6 5. New facilities and Capex: ALL has announced plans to set up a vehicle manufacturing unit in Uttaranchal at an investment of over Rs1. infrastructure and manufacturing sectors – all of which have positive linkages to the freight business – is expected to remain positive.9 9.8 3.2 18.2 7.0 10.Sebi Registration No : INB 010996539 43 . New joint ventures and acquisitions to pay off in the long run: ALL has recently signed few Vs and made some acquisitions.2 20. At the CMP. Though demand for CVs is expected to remain subdued in the near term. This is expected to strengthen its presence in the northern region.248 23.890 10.0 3.7 14. competition from railways. Angel Research November 13.000 vehicles per annum. it may be noted that CV sales were the worse-hit due to the rising interest rates.

acquisitions and exports could emerge as growth drivers for ALL.0 Source: Company.193 797 4.812 54.r..4 4. ALL will likely to benefit from revival in domestic CV demand.148 FY2009E 26. Angel Research Exhibit 2: Product Volume Product MDV Passenger MDV Goods LCV Export (Inc above) Total FY2005 12. Though demand for CVs is expected to remain subdued in the near term. Fundamentally.030 FY2008E 23. In October 2006. acquisitions and exports could emerge as growth drivers for ALL. This partnership is a positive development for ALL as it has near-zero presence in the LCV space. July 16.628 88.2 15.296 289.126 432 7. AVIA Ashok Leyland Motors s.14 6. growth in the agriculture. which could help it leverage its low-cost competitive advantage to enter foreign markets. However. new JVs. manufacture and distribution of LCV products. Exhibit 1: Volume and Marketshare In the long term. the company’s wholly-owned foreign subsidiary. In the long term. for the development.738 CAGR (%) 20.879 61. new JVs. last few months have seen passenger M&HCVs driving growth for the company against lackluster goods M&HCV segment sales. Angel Research ALL has recently signed few JVs and made some acquisitions.423 95.2 13.8 2.s. ALL has entered into an initial agreement to set up three JVs with Nissan Motor Co. Cris Infac.179 69.445 67.680 FY2006 15. towards Q4FY2008 it is expected to pull back.800 359 6. which could help it leverage its low-cost competitive advantage to enter foreign markets Source: Industry.168 64.Sebi Registration No : INB 010996539 44 . the key reasons for a healthy growth outlook in CVs include a sustained pick-up in economic activity. ALL will likely benefit from CV industry growth while buses beginning to go up: Being a pure commercial vehicle play. 2007 2007 For Private Circulation Only .521 41. which are expected to help it expand its product portfolio and strengthen its hold in the overseas market. focus on infrastructure spending and a strong replacement cycle.655 FY2007 15. ALL is raising capacity by around 30% over the next two years to meet demand and also plans to launch new products.665 45.Angel Broking Service Truly Personalized TM Ashok Leyland India Research ALL has been trading lacklustre on the bourses on fears of a slow down in the CV industry. completed acquisition of the truck business unit of Avia a. The subsidiary has begun its November 13. Moreover. which are expected to help it expand its product portfolio and strengthen its hold in the overseas market New JVs and acquisitions to pay off in the long run ALL has recently signed few JVs and made some acquisitions. infrastructure and manufacturing sectors – all of which have positive linkages to the freight business – is expected to remain positive. in the Czech Republic in pursuance of the framework agreement signed earlier.025 83.604 376 6. ALL has lost marketshare to Tata Motors in FY2007 in the passenger M&HCV segment.o.

At present.500cr.000 vehicles a year initially and the production facility will be expanded to manufacture 40. Fluctuation in Interest and Freight rates.Angel Broking Service Truly Personalized TM Ashok Leyland India Research business operations post acquisition in Q3FY2007. and. Concerns Lack of presence in LCV segment is exerting pressure on volumes.Sebi Registration No : INB 010996539 45 . Other recent announcements: (i) Partnership with Shriram Transport Finance for Ashley Transport Services. Rs350cr on completing the facility in Ennore. (iii) a JV with the Alteams group to manufacture HPDC products for the automotive and telecommunications sectors. a new luxury bus and a CNG bus. The Ennore unit will manufacture 50. develop and adapt infotronic products and services for the transportation sector. The investments will avil Excise duty and Income Tax sops for five-ten years. It plans to complete the Uttranchal expansion by 2010. ALL targets to increase contribution from these businesses to around 30% over the next three-four years. which include Rs80cr to be spent on Defiance Testing & Engineering Services. The company said it plans to manufacture two range of trucks from the Avia unit. it may be noted that CV sales were the worse-hit due to rising interest rates.000 units of exports in FY2008E implying a growth of 8% New models expected to be launched in Q3FY2008 include 49T tractor trailer. Rs100cr on new product development and the balance Rs150cr on regular capex. (ii) a JV with Siemens VDO Automotive AG to design. New Model launches Management has guided a sales target of 90. With the Avia acquisition offering a presence in MCVs. The company has also outlined investments of Rs400cr.000cr by Q3FY2008. Detroit and Rs300cr has been set aside for future acquisitions. ALL will be able to boast of a complete portfolio of CVs once the JVs with Nissan get operational. which contributes one/fourth of its sales.000 existing ones.000 vehicles per annum. Competition from railways and new players also pose a high risk to the company’s volume guidance . It plans to raise debt to the tune of Rs1. ancillary and Defence through new JVs and acquisitions. The company has incurred Rs388cr towards capital expenditure including Rs100cr for the Uttranchal land payment YTD.000cr for FY2008. However.000 vehicles including 8. 2007 2007 For Private Circulation Only .000 vehicles including 8. ALL is also trying to increase its focus on non-cyclical businesses like buses. ALL plans to fund its capex requirement largely through debt. This is expected to strengthen its presence in the northern region. Aggressive move by Railways and new competitors. Around Rs400cr will be spent on the facility in Uttranchal.000 vehicles a year. ALL will be able to boast of a complete portfolio of CVs once the JVs with Nissan get operational New facilities and Capex The company has planned capex of Rs1.000 units of exports in FY2008E implying a growth of 8%. ALL raised Rs500cr worth of loans in Q1FY2008.000cr for FY2008 ALL has announced plans to set up a vehicle manufacturing unit in Uttaranchal at an investment of over Rs1. July 16. ALL will set up a vehicle assembly and cab facility to manufacture 25. thus more than doubling its production capacity to 5.000 more engines by mid-2007 and gear boxes by the end of the next fiscal in addition to the 85. November 13. Management has guided a sales target of 90. The company has planned capex of Rs1.

these expenses are expected to reduce over a period of time.5 in FY2007 respectively. We estimate ALL’s free cash flow generation to once again turn positive in FY2008E to Rs2.4% over FY2007-09E on the back of an estimated CAGR growth in volumes of 7.8% in FY2007 to 10. This is being financed by an ECB of US $250m at an estimated 7% interest rate. Exhibit 3: RoE. despite its aggressive capex program.3cr and improve to Rs34.3 and Rs4. RoCE.3cr in FY2009E. But.000 towards capex in FY2008E for capacity expansion. We expect OPMs to improve from 9. We expect the company’s EPS and Cash-EPS to increase to Rs4. Angel Research November 13.1 and Rs5. ALL’s OPM is currently lower than its peers due to high inventory days and SG&A expenditure. thereby impacting Profitability. This would result in a sharp increase in interest costs and higher depreciation expenses. Cris Infac. ALL plans to incur Rs1. July 16.4 in FY2009E from Rs3. We expect ALL’s new product launches to boost its volumes and improve realisations.Sebi Registration No : INB 010996539 46 . Free Cash Flow and Capital expenditure Source: Industry. We expect Operating Profits to grow at a CAGR of 12.8% over FY2007-09E. Growth could exceed this band if sentiment changes for the better and deferral of vehicle purchase ends along with interest rates settling down.5% over the mentionded period.Angel Broking Service Truly Personalized TM Ashok Leyland India Research Financial Performance ALL’s OPM is currently lower than its peers due to high inventory days and SG&A expenditure We estimate ALL to grow its revenues at a CAGR of 11.1% by FY2009E. 2007 2007 For Private Circulation Only .

2x FY2008E and 9. July 16. Exhibit 4: P/E Band Source: C-line.Sebi Registration No : INB 010996539 47 .1 in FY2009. At the CMP. We maintain a Hold on the stock.Angel Broking Service Truly Personalized TM Ashok Leyland India Research Valuation We estimate ALL to clock an EPS of Rs3. The stock will likely perform only towards end FY2008 as there is reasonable confidence that FY2008 will see better CV volumes growth due to softening of interest rates.7 in FY2008 and Rs4. 2007 2007 For Private Circulation Only .2x FY2009E EPS. with a Target Price of Rs42. the stock is trading at 10. Angel Research November 13.

4 625.45 662.3 34.3 141.2 160.5 2.6 0.5 691.4 172.0 40.9 FY2009E 8.5 20.7 2.40 617.139 1.0 3.0 (69.2 1./ (Dec.9 126.9 10.8 (77.5 79.7 3.071.0 0.195 943.8 23.1 3.7 1.1 60.3 4.2 2.168.0 62.1) 828.0 Rs crore FY2009E 739.4 5.4 702.2 45.001.558.8 150. 2007 For Private Circulation Only .1 3.1 Balance Sheet Y/E March SOURCES OF FUNDS Equity Share Capital Reserves& Surplus Shareholders Funds Total Loans Deffered Tax Liability (Net) Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc.4 1.0 2.1 40.3 11.889.810.9 3.4 2.1 FY2007 FY2008E 617.0 55.9 7.1 2.3 450.247.5 823.4 2.4 441.0 22.9 2.5 499.7 16.2 8.6 1.4 2.0 221.9) Tax (% of PBT) PAT % chg 125.8 (87.9 179.6) November 13.1 55.0 44.5 199.7 2.9 Extraordinary Expense/(Inc.2 1.5) 159.710.0 48.412.1 10.147.2 (51.0 160.7 FY2006 FY2007 FY2008E Rs crore FY2009E 132.810 1.697.0 192.0 70.894.7 194.0) 5.) (24.2 10.509.0 3.3 828./(Dec.2 1.8) 147.6 Key Ratios Y/E March Per Share Data (Rs) EPS Cash EPS DPS Book Value Operating Ratio (%) Inventory (days) Debtors (days) Creditors (days) Returns (%) ROE ROCE Dividend Payout Valuation Ratio (x) P/E P/E (Cash EPS) P/BV EV / Sales EV / EBITDA 14.617.284.6 762.) in Fixed Assets Free Cash Flow (Inc)/Dec in Investments Issue of Equity Inc.6 6.8 8.8 9.8) 170.6 49.7 27.0 9.5) 198.4) 197.0 9.0 39.3 1.8 29.5 3.313 1.9 577.2 8.6 6.2 2.6 19.486.0 167.053.290. Tax) Others Others Inc.2 327.5 4.0 2.9 1.2 (188.560 1.3) 406.0 540.1 100.) in loans Dividend Paid (Incl.7 7.0 80.) in Cash Opening Cash balances Closing Cash balances FY2006 427.8 412.1 7.0) (539.5 1.7 1.6 150.3 121.5 26.2 36.8 170.5 (139.617.1 3.232.5 9.4 1.9 3.2 2.0 29.755.0 (72.7 23.0 FY2006 FY2007 FY2008E FY2009E Cash Flow from Financing (257.8 23.895.6 640.7 3.2 26.0 (290.2 7.3 20.7 Miscellaneous Exp.3 146.2 7.1 163.8 10.3 8.185. Total Assets Cash Flow Statement Y/E March Profit before Tax Depreciation (Inc)/Dec in Working Capital Interest (Net) Direct Taxes paid Others Cash Flow from Operations Inc.8 1.9 7.0 16.0 34.0 28.8 70.3 199.2 32.6 84.216.4 2.053.9 941.1 200.6 5.837.6 8. Depreciation Net Block Capital Work-in-Progress Investments Current Assets Current liabilities Net Current Assets 2.6 (118.731.731.2 662.9 24.1 289.Sebi Registration No : INB 010996539 48 .2 289.0 (270.0 21.2 336.4 1.9 132.465.620 1.1 132.0 11.5 (289.1 5.6 894.3 10.0) 3.5 125.0 80.6 5.0 10.3 200.3 0.2 216.7 122.8 54.6 13.620 1.0 (274.408.307.0 221.2 414.0 172.5 16.2 30.3 2.5 4.1 2.50 427.2 18.0 237.1 150.284.2 26.7 484.0 28.5 14.2 760.4 368.48 739.377.6 908.3 2.8 12./(Dec.6) 39.560.5) 322.5 129.098.3 3.0 485.3 Profit & Loss Statement Y/E March Net Sales % chg Total Expenditure EBIDTA (% of Net Sales) Other Income Depreciation& Amortisation Interest PBT (% of Net Sales) FY2006 5.2 20.762.4 1.2) 897.0 625.9 135.0 170.2 7.4 11.147.6 3.6 10.5 221.2 791.4 196.4 163.9 (69.7 4.8 8.2) 44.4) (319.120 1.3 126.8 536.Angel Broking Service Truly Personalized TM Ashok Leyland Textile Sector India Research Rs crore FY2007 FY2008E 7.

3 48.4 897 20. HH posted a 385bp yoy decline in OPM for FY2007.2 11.7 38.6 53.Sebi Registration No : INB 010996539 49 . Margins under pressure: HH has witnessed a major decline in Margins over the last four quarters.7 13.2 10. Also.4 5.9mn units.695 500182 HEROHONDA HROH.711 17.7 15.6 44.6 3. We believe that there exist risks of another price war starting among two-wheeler majors.6 777 (13.1 12. HH has also announced plans of setting up its third plant in Jaipur.5 36.1 872 12.000 units each at its Gurgaon and Dharuhera plants have been completed at an investment of Rs47cr and Rs96cr.Angel Broking Service Truly Personalized TM Textile Sector India Research Hero Honda CMP: Rs661 Vaishali Jajoo Tel: 022 .3 28. which sounds a bit lacklustre for the two-wheeler major.51 809/565 74317 2 19.7 Automobile 13.7 27. Expansion of 4.9 14.9 4.1 9.0 8.1 976 11. Even though the company has been clocking better numbers in recent months.9 1.9 17.3 30.3 31. there are few chances of Margins reverting back to FY2007 prior levels as input costs are expected to hover at higher levels. The plant will be funded through internal accruals and is likely to be commissioned within one year.4 29.998 11.9 11.00. going ahead new launches by Bajaj and TVS in the 125cc segment could put an halt to the company’s volume growth. The plant will have a production capacity of 5.5 11. Leader with high marketshare: Hero Honda (HH) is a leader with the highest marketshare of over 40% in the two-wheeler industry. While interest rate and input costs are adding to the woes of the companies.9 1.8 FY2009E 11.5 43.4040 3800 Ext: 344 E-mail: vaishali. Management has already indicated that overall volume growth in FY2008 would come in at lower single digits.0 8. respectively.3) 11.035 5. We believe HH is unlikely to wrest more marketshare from competition from current levels.5 9.000 units per year expandable to one million units per year and entails an investment of Rs320cr. Angel Research November 13. HH continued its capacity expansion initiatives in FY2007 taking its total capacity to 3. We see lack of a strong product pipeline to compete with new launches of rivals as risks to marketshare of Hero Honda.0 14.799 9. We remain Neutral on the stock.3 11.6 44. prizing power seems to have disappeared.7 1. 2007 For Private Circulation Only .9 13.50.1 1.7 Source: Company.895 13. Going ahead.6 FY2008E 10.194 0.2 15.1 6.jajoo@angeltrade.7 FY2007 9. Key Financials Y/E March (Rs cr) Net Sales % chg Net Profit % chg OPM (%) EPS (Rs) P/E (x) P/CEPS (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x) FY2006 8. there is little room for price hikes due to the prevalent low sentiment and intensifying competition. Hero Honda and TVS Motor post launch of Bajaj Auto's and TVS's new bike in the 125cc segment.1 33.com Neutral Stock Info Sector Market Cap (Rs cr) Beta 52 Week High / Low Avg Daily Volume Face Value (Rs) BSE Sensex Nifty BSE Code NSE Code Reuters Code Bloomberg Code Shareholding Pattern (%) Promoters MF / Banks / Indian FIs FII / NRIs / OCBs Indian Public / Others 55. Capacity addition: To address the growing demand.BO HH IN Need to renew interest We remain negative on the stock in view of more threats than opportunities going ahead for the company. Bajaj Auto.

Hero Honda and TVS Motor post launch of Bajaj Auto’s and TVS’s new bike in the 125cc segment.964.603.Angel Broking Service Truly Personalized TM Hero Honda India Research We remain negative on HH in view of more threats than opportunities going ahead for the company. We see lack of a strong product pipeline to compete with new launches of rivals as risks to marketshare of Hero Honda. New model launches announced by some of its peers at aggressive price points will again test the positioning of the company apart from adversely impacting its Margins. Angel Research Exhibit 2: Product Volume Product Total Volume FY2005 2. However.336. going ahead new launches by Bajaj and TVS in the 125cc segment could put an halt to the company’s volume growth. Angel Research Source In order to improve its portfolio in premium segment.621. 2007 For Private Circulation Only . We believe HH is unlikely to wrest more marketshare from competition from current levels. This launch will help Hero Honda offer a more complete portfolio of bikes.CBZ Xtreme and Karizma with launch of the 150cc Hunk. prizing power seems to have disappeared. Exhibit 1: Volume and Marketshare We remain negative on HH in view of more threats than opportunities going ahead for the company New model launches announced by some of its peers at aggressive price points will again test the positioning of the company apart from adversely impacting its Margins Source: Cris Infac. BAL countered this with the launch of the new 125cc bike at an aggressive price-point in the September quarter in its bid to shift volumes from the traditional 100cc Entry-level bike. Management has already indicated that overall volume growth in FY2008 would come in at lower single digits. Leader with high marketshare: HH is a leader with the highest marketshare of over 40% in the two-wheeler industry.400 FY2006 3. to 56%.696 FY2009E 3. We believe that there exist risks of another price war starting among two-wheeler majors. which sounds a bit lacklustre for the two-wheeler major Strengthening of its Entry level motorcycle offering in December 2006 has helped HH expand marketshare by 800bp over January-May 2007.751 FY2007 3.9 Source: Company. Even though the company has been clocking better numbers in recent months. November 13. Hero Honda has augmented its offerings in the premium segment . which sounds a bit lacklustre for the two-wheeler major. This should put HH’s marketshare gains once again to test. at the expense of BAL and TVS Motor. Bajaj Auto.066 CAGR (%) 10. Management has already indicated that overall volume growth in FY2008 would come in at lower single digits.756 FY2008E 3. Flame.Sebi Registration No : INB 010996539 50 . While interest rate and input costs are adding to the woes of the companies.000. TVS plans to strengthen its offering in the Executive segment in 2HFY2008 with its new launch.

4% CAGR in Operating Profits over FY2007-09E. The plant will be funded through internal accruals and is likely to be commissioned within one year. Concerns Unable to sustain Margins amidst intensifying competition. 100% income tax exemption for the first five years and 30% over the next five years.The significant capital expenditure is also resulting in a decline in the company'sRoE and RoCE. Total investments together with investment from suppliers will eventually touch Rs1. The plant will have an initial capacity of 0. Financial Performance We expect HH to clock around 10% CAGR growth in revenues over FY2006-09E on the back of estimated CAGR growth of 9% in volumes over the same period.7% in FY2007 to around 11. The plant will have a production capacity of 5.Sebi Registration No : INB 010996539 51 .9 and Rs45. HH has also announced plans of setting up its third plant at Jaipur. which also moved up due to higher royalty and advertisement costs. However. The new plant will have flexible production for HH’s entire range of models and will also cater to the export market.9 and Rs56. with a production capacity of 5.000 units per year expandable to 1mn units per year at an investment of Rs320cr Capacity addition: To address the growing demand. The company is likely to enjoy tax benefits for this plant. however. there is little room for price hikes due to the prevalent low sentiment and intensifying competition. HH continued its capacity expansion initiatives in FY2007 taking its total capacity to 3. which could boost profitability as production from the plant scales up. Going ahead.50.000 units per year expandable to one million units per year at an investment of Rs320cr. Angel Research HH has announced plans of setting up its third plant at Jaipur. We note that raw material prices were higher in the recent past apart from high input costs and other expenditure.7cr. The tax sops include a 100% excise duty exemption for 10 years.5mn units by 2010. expect OPMs to decline from 11. We. Exhibit 3: Operating Profit and Margin trend HH has witnessed a major decline in Margins over the last few quarters There are few chances of Margins reverting back to FY2007 prior levels as input costs are expected to hover at higher levels Source: Cris Infac. HH posted a 385bp yoy decline in OPM for FY2007. despite the aggressive capex program. there are few chances of Margins reverting back to FY2007 prior levels as input costs are expected to hover at higher levels.000 units each at its Gurgaon and Dharuhera plants have been completed at an investment of Rs47cr and Rs96cr. We expect HH's EPS and Cash EPS to increase to Rs48.9 in FY2007 respectively.900cr by 2010. HH witnessed a dip in free cash flows as well in FY20007 to Rs150. 2007 For Private Circulation Only . The company has announced an initial investment of Rs300cr for the plant.00. Also.3% by FY2009E.00. we estimate HH's free cash flow generation to improve in FY2008 and FY2009.Angel Broking Service Truly Personalized TM Hero Honda India Research Margins under pressure: HH has witnessed a major decline in Margins over the last few quarters. We expect HH to clock 8.9 in FY2009E from Rs38. Expansion of 4. which will be scaled up to 1.5mn units. respectively.9mn units. November 13. HH has not announced new products to compete with the new launches by competitors in the 125cc segment.

1x FY2008E and 13.Angel Broking Service Truly Personalized TM Hero Honda India Research Exhibit 4: RoE. we remain Neutral on the stock. Angel Research Valuation At the CMP.5x FY2009E Earnings. the stock is trading at 15. Angel Research Exhibit 5: P/E Band Source: Cris Infac. RoCE. HH also faces threat from BAL's new bike launch in the Executive segment in Q3FY2008. Free Cash Flow and Capital expenditure Source: Industry. November 13. Cris Infac.Sebi Registration No : INB 010996539 52 . In view of risks of lower volume growth and Margin pressure. The difficult operating environment remains a key concern for the company. We believe current valuations largely factor in the forecast earnings growth and a further re-rating may not be justified against the backdrop of marketshare and Margin pressures. 2007 For Private Circulation Only .

5 149.5 (474.6) 2.4 150.0 14.124.2 FY2006 FY2007 FY2008E FY2009E (Inc)/Dec in Working Capital (204.6 28./(Dec.763.4 44.1 1.8 Rs crore FY2009E 1.286.9 48.6 659.871.0 829.153.562.7 88.) in loans Dividend Paid (Incl. Tax) Others Others Inc.8 13.6 38.2 (565.7 51.3 30.9 821.0 1.5 150.9 10.763.4 1.908.4 38.8 1.246.2 165.9 30.165.430.0 363.641.8 1.3) 10.6 3.5 189.9 31.0 (20.0 2.6 3.2 (198.236.00 1.9 19.362.9 2430.8 1.8 (175.0 44.5 30.2 128.472 523 949.1 371.6 114.4 310.9 39.7 44.9 39.2 1.479.8 2.3 (152.9 FY2006 FY2007 FY2008E Rs crore FY2009E 39.1 139.0 (35.2 3.6 45.3 65.5 165.2 56.470.285.0 (413.) in Fixed Assets Free Cash Flow (Inc)/Dec in Investments Issue of Equity Inc.61 1.5 13.4 10.3 200.1 139.5 6.8 388.2 3.9 45.1 1.0) 455.0 (81.9 40.246.9 Profit & Loss Statement Y/E March Net Sales % chg Total Expenditure EBIDTA (% of Net Sales) Other Income Depreciation& Amortisation Interest PBT (% of Net Sales) Extraordinary Expense/(Inc.1 349.3 11.6) 397.4) 158.0 10.2 74.2 2.8 (348.9 50.5 36.4 7.8 (741.5 11.8 114.4 50.741.6 53.2 17.) in Cash Opening Cash balances Closing Cash balances FY2006 1.6) 390.2) 2.1 565.313.9 36.0 394.2 28.9 440.2 12.2 114.894.2 15.0 27.4 2.2 128.7 Key Ratios Y/E March Per Share Data (Rs) EPS Cash EPS DPS Book Value Operating Ratio (%) Inventory (days) Debtors (days) Creditors (days) Returns (%) RoE RoCE Dividend Payout Valuation Ratio (x) P/E P/E (Cash EPS) P/BV EV / Sales EV / EBITDA 14.2 Balance Sheet Y/E March SOURCES OF FUNDS Equity Share Capital 39.9 Shareholders Funds Total Loans Deffered Tax Liability (Net) Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc.061.5 200.801 635 1.871.9 12.9 123.9 4.7 51.8 100.0 9.1 6.4 1.8 31.5) 1.9 1.267.7 13.Angel Broking Service Truly Personalized TM Hero Honda India Research Rs crore FY2007 FY2008E 9.394.6 25. 2007 For Private Circulation Only .4) Cash Flow from Financing (471.5 1.1 40.7 234. Depreciation Net Block Capital Work-in-Progress Investments 1.6 2.92 1.0 9.5 11.7 160.5 9.1 165.0 35.2 12.0 363.6 167.9 1.711.285.6 158.201 770 1.7 11.1 29.6) 625.9 250.4 5.3 Reserves& Surplus 1969.2 FY2009E 11.6 1.9 Current Assets Current liabilities Net Current Assets Total Assets Cash Flow Statement Y/E March Profit before tax Depreciation Interest (Net) Direct taxes paid Others Cash Flow from Operations Inc.009.1 2.6 8.7) 1.973.313.0 150.2 1.) Tax (% of PBT) PAT % chg FY2006 8.2 1079.8 440.4) 3.412.3 871.0 1.2 31.9 19.501 875 1.4 2.9 24.2 10.00 1.2 777.7 11.1 12.3 2.2 2.9) 2.9 1.562.5 971.997.6 21.5) (5.4 100.079.3 1.9 913.412.2 896.0 38.2 (122.3 17.4 11.3 348.2 16.6 3538.578.1 9.5 (70.6 2.7 1.1 12.3 17.150.3) November 13.4 (0.3) 113.3 1.1 474.0 9.9 (358.6 22.5 11.1 33.349.9 56.9 51.355.1 (13.9 50.286.4 2953.1) 82.5 11.6 80.5 179.6 2.9 83.0 1.7) 3.7 43.625./ (Dec.394.3 185.3 975.0 394.8) (71.6 15.2 (390.9 50.58 936./(Dec.6) 36.9 141.8 118.0 160.993.Sebi Registration No : INB 010996539 53 .2) (16.6 20.9 FY2007 FY2008E 1.6 11.7 17.798.6 388.2 128.7) 1.

7x FY2009E Earnings. Profitability from this project could take a longer time to contribute and break even.7 1. However.4040 3800 Ext: 344 E-mail:vaishali.5 2.781 (1.4 0. Piaggio and M&M. The new product line includes motorcycles in the Entry and Executive segments. industry slow down and sharply declining Margins compared to its peers.3x FY2008E and 18.095 5. the new ventures like the entry into three-wheelers and foray into exports could prove to be a drag on the company's profitability in the medium to long term. TVS was hit the hardest on account of heightened competition.2 1.8 25.4 12.0 18.8 6.4 3. We view this foray as important from the long-term growth prospects of the company and would pay off in the next two-three years.6 6.5 4.1 Source: Company.80 105/53 292919 1 19.9 0.5 8.9 Automobile 1. At the CMP.2 4.242 12.2 1.7 7. Key Financials Y/E March (Rs cr) Net Sales % chg Net Profit % chg OPM (%) EPS (Rs) P/E (x) P/CEPS P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x) FY2006 3.0) 3.6 7.5 8.3 FY2009E 4. Angel Research November 13. 2007 For Private Circulation Only .5 13.000 units. we believe that the number looks a bit too ambitious.Sebi Registration No : INB 010996539 54 .jajoo@angeltrade. Foraying into the three-wheeler segment: The company plans to set up manufacturing capacity for three-wheelers at its existing Mysore plant with an initial capacity of 90. Going ahead. We believe that TVS Motor will have to counter stiff competition from entrenched players like Bajaj Auto.7 13. An aggressive capex plan and intensifying competition in the two-wheeler segment could also keep Net Profits subdued and the company’s plans under high execution risks.5) 3.0 0.0 1.9) 52.000 incremental motorcycle units every month October 2007 onwards. the stock trades at 25.0 1.4 11.3 8.855 19. The company is betting on selling 40. Going ahead.BO TVSL IN To be or not to be TVS Motor has been a clear underperformer in every aspect in the two-wheeler industry in the last one year.Angel Broking Service Truly Personalized TM Textile Sector India Research TVS Motor CMP: Rs56 Vaishali Jajoo Tel: 022 .2 60.000 units. the company will continue to focus on exports. which have become more active in the three-wheeler space. The company is now exporting its products to over 44 countries.5 103.2 25. seven new countries were added to the company's global presence.com Neutral Stock Info Sector Market Cap (Rs cr) Beta 52 Week High / Low Avg Daily Volume Face Value (Rs) BSE Sensex Nifty BSE Code NSE Code Reuters Code Bloomberg Code Shareholding Pattern (%) Promoters MF / Banks / Indian FIs FII / NRIs / OCBs Indian Public / Others 56.5 8.326 0. During FY2007.235 12. besides two-stroke and four-stroke three-wheelers.5 14.9 FY2008E 3.5 22.0 2. We remain Neutral on the stock.2 35.6 (12. a scooterette and an electric scooter.8 12.1 9.3 4.1) 6. Focusing at increasing International focus: The company is putting in place its strategy to go global by leveraging on its development and manufacturing facility.695 532343 TVSMOTOR TVSM.3 FY2007 3.4 0. taking its total monthly sales to 90. New initiative building hopes: TVS Motor recently announced launch the 11 new models by April 2008.2 (42.0 3.5 2.2 71.7 (6.

2007 For Private Circulation Only . Piaggio and M&M.06. Angel Research Exhibit 2: Product Volume Product Motorcycles Scooters Mopeds Grand Total FY2005 6.92. TVS was hit the hardest on account of heightened competition. New initiative building hopes: TVS Motor recently announced the launch of 11 new models by April 2008.40. industry slow down and sharply declining Margins compared to peers.390 11.79.043 4.867 FY2009E 8.25.483 CAGR(%) 4. The company did gain some marketshare for a brief period on the back of the success of Star City and TVS Victor GLX.Angel Broking Service Truly Personalized TM India Research TVS Motor has been a clear underperformer in every aspect in the two-wheeler industry in the last one year. But. a scooterette and an electric scooter.7 13.67. We do not foresee the company garnering any marketshare given that it is yet to come up with a product that dominates any of three segments of the motorcycle market. which is expected to cap the Margin pressure which the company has been experiencing since the last twelve months. Profitability from this project could take a longer time to contribute and break even.24. Angel Research TVS plans to set up manufacturing capacity for three-wheelers at its existing Mysore plant with an initial capacity of 90.513 FY2008E 7.943 5.655 2.45.707 2.78. However. November 13.016 FY2006 8. we believe that the number looks a bit too ambitious on the back of recently launched or expected to launch bikes in the Executive segment. but was unable to hold on to the same for a long time.273 FY2007 9. besides two stroke and four-stroke three-wheelers.134 Source: Company. The new product line includes motorcycles in the Entry and Executive segments.4 6. Exhibit 1: Volume and Marketshare TVS Motor has been a clear underperformer in every aspect in the two-wheeler industry in the last one year We do not foresee TVS garnering any marketshare given that it is yet to come up with a product that dominates any of three segments of the motorcycle market Source: Cris Infac.603 14.42.44.47.28.000 units.123 2.90.Sebi Registration No : INB 010996539 55 .527 2.90.967 3.099 2. However.008 16. taking its total monthly sales to 90.9 19.204 15. the stock is witnessing a short-term upswing on the back of possible new launches in the second half of FY2008.58.276 2. We believe that TVS will have to counter stiff competition from entrenched players like Bajaj Auto.06. going ahead the new ventures like entry into three-wheelers and foray into exports could prove to be a drag on the company’s Profitability in the medium to long term. An aggressive capex plan and intensifying competition in the two-wheeler segment could also keep Net Profits subdued and the plans under high execution risks.0 8. which have become more active in the three-wheeler space.000 incremental motorcycle units every month October onwards.28.098 2. The company is betting on selling 40. Currently.000 units Foraying into the three-wheeler segment: TVS plans to set up manufacturing capacity for three-wheelers at its existing Mysore plant with an initial capacity of 90.28.000 units.63.

000 per annum.00. the company had set up a manufacturing unit in Indonesia for two-wheelers in FY2007 with an initial capacity of 3.4cr. the company will continue to focus on exports. The company’s initial investment in this plant is estimated at Rs120cr with a production capacity of 4. In line with this.2 in FY2007. Fluctuation in Interest rates and Inflation. in Himachal Pradesh. The company will avail Excise and Income Tax sops from this plant. 2007 For Private Circulation Only .5% in FY2007 to around 4% by FY2009E.7cr. Expanding capacities: TVS Motor has commenced operations at its new manufacturing facility at Nalagarh. We expect Operating Profits to grow at a CAGR of 15. Intensifying competition. The first phase would entail investments to the tune of US $50mn and TVS plans to increase this amount to US $100mn over the next three years.2% in volumes over the mentioned period.000 motorcycles a year. which can easily be scaled up to 6.00.Sebi Registration No : INB 010996539 56 . TVS is now exporting its products to over 44 countries. TVS is putting in place its strategy to go global by leveraging on its development and manufacturing facility November 13. respectively. New product launches and foray into the three-wheeler segment will also help the company improve Margins.000 units. Going ahead. We expect OPM to move up from 3. TVS’s free cash flow generation also dipped in FY2007 to Rs135. However. We view this foray as important from the long-term growth prospects of the company and would pay off in the next two-three years. we expect it to recover in FY2008 though still negative. which will help it reduce pressure on Margins in the medium term. However. Delay in implementing new initiatives.00. This would be mainly on account of the tax benefits that the new plant and the company’s steps towards reducing the product development cycle. seven new countries were added to the company’s global presence. significant capex over the last two years has resulted in the company’s RoE and RoCE declining. We believe the new products will boost volumes and improve realisations of the company. We expect TVS’ EPS and Cash EPS to increase to Rs3 and Rs8 in FY2009 from Rs2.Angel Broking Service Truly Personalized TM TVS Motors India Research Focusing at increasing International focus: TVS is putting in place its strategy to go global by leveraging on its development and manufacturing facility.5 and Rs6.4% over FY2007-09E. Concerns Lack of moderate demand will impact Earnings negatively as the company has planned significant capex. and turn positive in FY2009 to Rs39. Financial Performance We expect the company to clock a CAGR growth of around 5% in revenues over FY2007-09E on the back of a CAGR growth of 3. During FY2007.

Angel Broking Service Truly Personalized TM TVS Motors India Research Exhibit 3: RoE. RoCE. Free Cash Flow and Capital expenditure Source: Industry.3x FY2008E and 18. Angel Research Valuation At the CMP. The pressure on Margins continues to be a key concern as TVS has not been able to tackle the rising material costs and pricing pressure. Angel Research November 13. Cris Infac. The current valuation is fair and fully captures the Earnings growth prospects. 2007 For Private Circulation Only . Recoveries in volumes and improvement in Margins (due to cost cutting measures and better-than-estimated pricing) pose a risk to our Earning estimates.7x FY2009E Earnings. We remain Neutral on the stock. Exhibit 4: P/E Band Source: Cris Infac.Sebi Registration No : INB 010996539 57 . the stock trades at 25.

107.9 12.5) 79.6 (12.9) 3.2 (42.7 60.9) (58.14 70.0 4.8 50.300.9 35.0 11.2 3.6 159.2 194.1 54.0 110.9 (64.2 35.0 149.2 22.2 933.780.0 38.5 93.2 30.6 0.4 6.3 80.5 135.35 90.8 195.5 120.6 4.0 1.5 633.1 21.3 8.6 0.013 906 1.7 65.8 54.0 10.1 142.2 4.719. 2007 For Private Circulation Only .5 3.0 51.6 6.6) 248.648.3 Cash Flow Statement Y/E March Profit before tax Depreciation (Inc)/Dec in Working Capital Interest (Net) Direct taxes paid Others Cash Flow from Operations Inc.8 866.5 30.2 1.0 34.8 742.0 (14.5 24.3 18.7) (16.0 326.3 51.1 2.2 37.3 1.4 171.6 (1.1 Key Ratios Y/E March Per Share Data (Rs) EPS Cash EPS DPS Book Value Operating Ratio (%) Inventory (days) Debtors (days) Creditors (days) Returns (%) RoE RoCE Dividend Payout Valuation Ratio (x) P/E P/E (Cash EPS) P/BV EV / Sales EV / EBITDA 12.5 5.2 697.5 210.9 22.2 655.5 23.6) 32.7) 33.4 33.2 35.8 (49.833 843 989.0 120.0 38.5) FY2009E 4.0 52.074.99 168.5 25.5 3.4 24.9 1.0 23.8 819.4 35.0 8.5 14.4 6.6 586.3 1.0 71.8 6.4 76.3) 92.8 7.9 20.2 6.9 831.5 139.8 0.0 1. Depreciation Net Block Capital Work-in-Progress Investments Current Assets Current liabilities Net Current Assets Miscellaneous Exp.0 1.5 54. Total Assets 1.0 27.5 85.5 1.0 80.) in Cash Opening Cash balances Closing Cash balances FY2006 168.2 (14./ (Dec.3 167./(Dec.8) 198.5 6.4 24.855.6 100.8 344.235.4 3.623. Tax) Others Cash Flow from Financing Others Inc.3 633.Sebi Registration No : INB 010996539 58 .4 (18.7 843.0 55.5 0.3 2.3 235.0 FY2006 FY2007 FY2008E Rs crore FY2009E 23.7 621.0 (33.577.0 32.0 11.1 9.2 23.2 1.9 68.5 62.300.7 90.2 1.8 18.0 75.7 Rs crore FY2007 FY2008E FY2009E 93.7 633.0 8.) in Fixed Assets Free Cash Flow (Inc)/Dec in Investments Issue of Equity Inc.7 344.2 Profit & Loss Statement Y/E March Net Sales % chg Total Expenditure EBIDTA (% of Net Sales) Other Income Depreciation& Amortisation Interest PBT (% of Net Sales) Extraordinary Expense/(Inc.6 2.5 809.8 1.0 39.2 1.2 1.8 1.0 1.4 8.5 103.9 2.7 92.0 19.7) (0.9 17.9 (24.1 385.6 42.623.4 160.378 612 766.0 55.3 22.) Tax (% of PBT) PAT % chg FY2006 3.6 100.4) (1.8 23.3 3.3 50.8) 32.2 13.3 202.5 13.0 250.5 FY2006 FY2007 FY2008E FY2009E November 13.241.577.5 32.0 40./(Dec.7 822.7 1.6 59.9) 21.4 766.0 12.4 6.0 33.0 889.0 37.7 7.7 24.0) 3.6 120.4 11.7 108.8 35.0 1.5 180.7 58.032.8 (135.9) 42.6) 105.6 (126.0) 17.5 80.5 10.1 13.5 8.1 255.4 75.) in loans Dividend Paid (Incl.7 93.0 1.5) (168.Angel Broking Service Truly Personalized TM TVS Motors India Research Rs crore FY2007 FY2008E 3.3 132.3 2.5 8.483 686 797.1 17.5 (61.601.601.0 2.3 29.3 87.9 25.7 0.4 626.2 110.5 3.3 26.0 1.8 785.1) Balance Sheet Y/E March SOURCES OF FUNDS Equity Share Capital Reserves& Surplus Shareholders Funds Total Loans Deffered Tax Liability (Net) Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc.6 40.3 29.0 70.7 (6.93 93.5 199.0 (25.9 87.1 205.

com vaishali.sekhar@angeltrade. the company takes no guarantee and assumes no liability for any errors or omissions of the information.com prakarsh@angeltrade. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice. Hotel. compliance.com anuj.com rohit. Technical Analyst Sr.kanani@angeltrade.com girish.involve substantial risks and are not suitable for all investors.Investment Advisory ( 022 . Telecom Oil & Gas Metals & Mining Retail.ail@angeltrade.com neha.jajoo@angeltrade.Angel Broking Service Truly Personalized Ajay Jaiswal P.com vaishnavi.walia@angeltrade. investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report. may. Hotel) Research Associate . Cement. on the date of this report. While every effort is made to ensure the accuracy and completeness of information contained. Opinion expressed is our current opinion as of the date appearing on this material only.com hitesh.com anand. 2007 Buy > 15%.com pawan.bhamre@angeltrade.agrawal@angeltrade.com sarabjit@angeltrade.com phani.bagaria@angeltrade. its subsidiaries and associated companies.com surbhi. Sell < . Research Analyst (Bullion) Research Editor Production Fund Management & Investment Advisory Commodities Research Team (Fundamentals) Badruddin Harmit Virvadia Bharathi Shetty Bharat Patil Disclaimer This document is not for public distribution and has been furnished to you solely for your information and must not be reproduced or redistributed to any other person.com amar.shah@angeltrade.agrawal@angeltrade. demand or cause of action.patil@angeltrade.Sebi Registration No : INB 010996539 .10% 59 For Private Circulation Only . may not match with a report on a company's fundamentals.com bharat. Logistics FMCG Mid-cap Banking Power PMS Research Associate (Pharmaceutical) Research Associate (Retail.com kalpesh.com samsonp@angeltrade.futures.jaiswal@angeltrade.sanghvi@angeltrade. Past performance is not a guide for future performance. We do not undertake to advise you as to any change of our views expressed in this document.com ajit.com brijesh. as opposed to focusing on a company's fundamentals and as such.com harit.com sulabh. Media Automobile IT. there may be regulatory.4040 3800 / 2835 9600) ajay.com puneet.joshi@angeltrade.com girish. Angel Broking. or other reasons that may prevent Angel Broking and affiliates from doing so. Angel Broking Limited and affiliates may seek to provide or have engaged in providing corporate finance.vyas@angeltrade.com nitin. internal data and other reliable sources believed to be true and are for general guidance only. have long or short positions in. Shipping. or other reasons that prevent us from doing so. Certain transactions . compliance. Technical Analyst Sr. Phani Sekhar Prakarsh Gagdani Research Team Sarabjit Kour Nangra Hitesh Agrawal Vaishali Jajoo Harit Shah Rohit Nagraj Pawan Burde Girish Solanki Shailesh Kanani Surbhi Chawla Anand Shah Sulabh Agrawal Alpesh Mehta Puneet Bambha Amit Bagaria Akshat Vyas Reena Walia Neha Idnany Sandeep Wagle Ajit Joshi Milan Sanghvi Nitin Kunte Brijesh Ail Vaishnavi Jagtap Siddarth Bhamre Anisha Gupta Kalpesh Gohel Commodities Research Team Amar Singh Samson P Anuj Gupta Girish Patki TM Automobile TVS Motors India Research ( 022 . and buy or sell the securities of the companies mentioned herein or engage in any other transaction involving such securities and earn brokerage or compensation or act as advisor or have other potential conflict of interest with respect to company/ies mentioned herein or inconsistent with any recommendation and related information and opinions.solanki@angeltrade. and from time to time. Price and value of the investments referred to in this material may go up or down.(PMS) Chief Technical Analyst AVP Technical Advisory Services Sr.com Investment Strategist (Kolkata) Fund Manager AVP . Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved).4040 3800 / 2835 9600) VP-Research.burde@angeltrade.com amit.Derivatives & Equities Analyst .nagraj@angeltrade.patki@angeltrade.com anisha. Angel Broking Limited and affiliates.shah@angeltrade.gohel@angeltrade.bambha@angeltrade. as on the date of this report or in the past. Hold 5-15%. Reports based on technical analysis centers on studying charts of a stock's price movement and trading volume. While we endeavor to update on a reasonable basis the information discussed in this material.shetty@angeltrade.com siddarth. options and other derivatives as well as non-investment grade securities .com alpesh.com shailesh.com sandeep@angeltrade.com milan. Ratings (Returns) November 13. and should consult their own advisors to determine the merits and risks of such an investment.com harmit.virvadia@angeltrade.gupta@angeltrade. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice. Pharmaceutical VP-Research.com akshat.com reena. Research Analyst (Agri) Sr. Mid-Cap Capital Goods Aviation.kunte@angeltrade.singh@angeltrade. Technical Analyst Sr. Technical Advisor Technical Advisor Technical Analyst Technical Analyst Fund Manager .com bharathi.chawla@angeltrade. The information in this document has been printed on the basis of publicly available information.jagtap@angeltrade. Recipients of this material should rely on their own investigations and take their own professional advice.com badruddin@angeltrade. their directors and employees are under no obligation to update or keep the information current. No one can use the information as the basis for any claim. While we would endeavor to update the information herein on a reasonable basis.idnany@angeltrade. Also there may be regulatory. including the analyst who has issued this report.(PMS) Associate (PMS) Research Head (Commodities) Sr. Persons into whose possession this document may come are required to observe these restrictions.mehta@angeltrade.gupta@angeltrade. Our proprietary trading and investment businesses may make investment decisions that are inconsistent with the recommendations expressed herein.

Nishith Hemani Tel: (02792) 228 800/231039-42 Anand . MIDC Marol.915 Surat (Parle Point) .Pankaj V. Joshi Tel:(022) 2895 2600 / 1 / 2 Borivali (W) .com e-mail : feedback@angeltrade.Angel Broking Service Truly Personalized Corporate & Marketing Office Wealth Management Investment Advisory Helpdesk Commodities Feedback : : : : : TM Automobile TVS Motors India Research 612.Shikha Saxena Tel: (02766) 222 306 Porbandar . Road No.2527 230 / 31 Nashik .Alipt Doshi Tel: (02762) 645 291 / 92 Nadiad .com Tel : (022) 4000 3600 / 2835 9600 Tel : (022) 4000 3945 / 3900 Tel : (022) 4040 3800 Tel : (022) 4000 3900 / 01 Tel : (022) 2835 5000 Regional Offices: Ahmedabad .Dhiraj Pandey Tel: (080) 4153 6700 .Arpit Shah Tel: (079) 3007 4049 / 50 Surat .400 059 e-mail : wmshelpdesk@angeltrade.Sameet Kapadia Tel: 2402 911 .Vivek Thakker Tel: (079) 4010 1010 .Surender Kumar Tel: (011) 3262 8699 / 8799 New Delhi (Pitampura) .Ashok Kumar Tel: (079) 3048 0241 / 0242 / 0245 Ahmedabad (Ramdevnagar) .Roopal Agarwal Tel: (011) 4700 2380 / 84 New Delhi (Preet Vihar) .Ketan Thanki Tel : (0286) 221 5310 / 31 / 221 5450 Pune .Vishal Kanabar Tel : (0285) 2622 483 /2622 484 Kota .Aasif Hirani Tel: (02772) 241 008 Indore .31 Gondal .400 093 Tel : 2835 8800 / 3083 7700 Angel Broking Ltd : BSE Sebi Regn No : INB 010996539 / CDSL Regn No: IN . 7.Pragnesh Pandya Tel : (02692) 267 041-45 Ankleshwar .Sunita Magnani Tel: (020) 2551 3143 / 2553 0912 . Mumbai .Sebi Registration No : INB 010996539 60 .Pinky Kothari Tel: (0261) 6696 666 Visakhapatnam .Vipul Patel Tel : (0268) .Lenin Trivedi Tel: (02825) 240 693 / 4 Himatnagar .(02632) 645 344 / 45 Vapi . Tel: (0253) 6614 235/236 New Delhi .Jalpa Desai Tel: (0260) 2400 210 / 214 / 236 Vijayawada .Akshay Panwala Tel : (0261) 2257 990 / 909 Surat (Ring Road) .948 / 3208 354 Junagadh .Punit Chopra Tel: (022) 2765 4749 / 2251 Vile Parle (W) .Suchita Krishnani Tel .Rishi Parghi Tel: (079) 4000 1000 Ahmedabad (Shahibaug) .Iftikhar Chouhan Tel : (020) 6620 6591 / 6620 6595 Rajkot (202 Race Cource) Hitesh Rupareliya Tel : (0281) 2921 568.Badrinath Majeti Tel :(0866) 6636900 / 901/ 902 / 903 Angel Broking Limited Central Support & Registered Office:G-1.Sanjiv Dhami Tel: (022) 2878 9401 / 02 Kalbadevi .Nilesh Vora Tel : (0281) 2225 401 / 02 / 03 Secunderabad . 99258 84848 Rajkot (Orbit Plaza) .Kaushik Rathi Tel : (079) 2692 6401 / 51 Ahmedabad (Satellite) . Opp Sangam Cinema.Apurva Dhami Tel: (0278) 2512099 / 755 / 3001717 / 18 Bhopal . Road.Sumit Bhuttan Tel: (011) 41659 711/12 New Delhi (Lawrence Rd.Muskaan Doultani Tel : (022) 2639 2626 / 3255 0987 Andheri (W) .07 Palanpur .Vamshi Krishna Tel :(0891) 6620 572-75 Private Client Group Offices: Mumbai .88 / 2510 1525 Goregaon (W) .Ashwin Thakkar Tel: (022) 6799 3185 .Nilesh Supekar Nashik . Road) .Krunal Pandya Tel : (079) 2692 6401 / 51 Ahmedabad (Sabarmati) .Prashant Ukani Tel : (0281) 2577408 Rajkot (Bhaktinagar) .Manisha Tandel Tel: (0265) 2355 258 / 3080 615 Bhavnagar .Jwalant Shingala Tel : (0288) 266 4941-44.) .Niraj Anand Tel: (022) 2562 2282 Thane (W) .422 002.Paresh Patel Tel : (02742) 645 171 / 72 Patan .V.Piyush Bothra Tel : (0261) 6696 666 Surendranagar .Vijay Kothari Tel: (033) 4009 9899 Nashik .Pankaj Mungre Tel: (022) 4000 3900 Fax: (022) 4000 3999 Branch Offices: Andheri (Lokhandwala) .Hitesh Popat Tel: (0281) 2463 291-94 Rajkot (Star Chambers) .Manish Baradia Tel : (0281) 2233 230 / 50 Rajkot (Star Chambers) .Faruq Wakani Tel: (022) 6643 2694 .Manthan/Rashmikant Tel: (0265) 6624 280 / 2226 103 Baroda (Akota) .Vijay Popat Tel :(0281) 6451929 / 1910 Surat .CDSL . Acme Plaza.Broker Marketing: Acme Plaza .Nilesh Supekar Tel: (0253) 6611 201 / 206 New Delhi (Bhikaji Cama Place) . Mumbai . Shah Tel: (022) 2263 4050-55 Ghatkopar (E) .234 .Ritesh Patel Tel: (079) 4021 4023 Ahmedabad (Gurukul) .Denish Patel Tel : (0281) 2585 751.com e-mail : commodities@angeltrade.) .Akharam Chaudhary Tel: (022) 2846 1267 / 1654 / 2056 / 2076 Malad (E) . 2007 For Private Circulation Only .Sandeep Kothana Tel :(0755) 3256 663 / 4024 000 Gandhinagar .Thiruneer Selvan Tel: (044) 4226 9000 Fax: 2498 1742 Hyderabad .Sumit Maheshwari Tel : (0285) 2622 483 /2622 484 Mehsana . G.Dhaval Dave Tel : (0280) 236 1935 / 329 6881 / 329 8100 Rajkot (Indira Circle) .751 Bangalore .302 001 Tel: (0141) 222 3334 Kolkata .Pramathu Chowksey Tel: (0731) 3013 360 .com e-mail : advisory@angeltrade.Ankit Mathur Tel: (02646) 652 681-85 Baroda .Sandeep Mundra Tel: (0257) 3200 906 Jamnagar .Vipul Kaushik Tel: (011) 4242 1105 .Anit Hake Tel: (022) 2655 5560 / 70 Bandra (W) .Kaivalya Shah Tel: (079) 6522 5510 / 3012 5492-94 Ahmedabad (Kalupur) .Sachin Ghelani Tel: (022) 2867 3800 / 2867 7032 Kandivali (Thakur Village) . 99049 10001 Rajkot (University Rd.Gyan P.Prakarsh Gagdani Tel: (022) 4040 3800 Fax: (022) 4040 3899 Ahmedabad (C.Diksha Khushalani / Rajesh Kumar Tel: (022) 2539 0786 / 0789 / 0796 Vashi .Rajesh Mehta Tel:(022) 6703 0210 / 11 /12 Fort .14 Rajkot .Ali Asgar Rasiwala Mobile : (0261) 6696 666 Sub .2004 / PMS Regn Code: PM/INP000001546 Angel Capital & Debt Market Ltd: INB 231279838 / NSE FNO: INF 231279838 / NSE Member code -12798 Angel Commodities Broking (P) Ltd: MCX Member ID: 12685 / FMC Regn No: MCX / TCM / CORP / 0037 NCDEX : Member ID 00220 / FMC Regn No: NCDEX / TCM / CORP / 0302 November 13. Road) .Harshit Bhavsar Tel: (079) 3007 0749 .DP . Andheri (E).Chirag Raghvani Tel: (079) 22861053 / 5 / 6 Amreli .Dinesh Nihalani Tel: (022) 2635 2345 / 6668 0021 Bandra (W) .65 Jaipur .Prashant Jani Tel : (02752) 325905 / 223305 Udaipur .Srinivas Tel : (040) 6690 5192 / 3 / 4 Surat (Mahidharpura) .03 Chennai .99 Borivali (W) .Tushar Shah Tel: (022) 2880 0960 / 68 Mulund (W) .Amit Kumbhat Tel: (0291) 5100 941 .Satish Kanwarjani Tel: (022) 2880 4440 Malad (W) . M. Andheri (E).Jicky Thomas Tel: (079) 3240 7474 / 75 Ahmedabad (Maninagar) .Anshit Khanna Tel: (011) 4605 6600 / 4151 2555 / 2666 Pune .Alok Rathi Tel: (0731) 4042242 / 4044 366 / 4087 966 Jalgaon .Ranveer Singh Jaipur .Tarun Dhami Tel: (022) 3092 1969 / 2892 8890 Chembur .Viren Ved Tel: (022) 2243 5599 / 2242 5599 Kandivali (W) .Anurag Jain Tel .Milan Kanabar Tel : (079) 3026 0204 / 0205 Ahmedabad (C. Akruti Trade Centre.Shiva Shankar Tel: (040) 6673 3573 / 74 Indore .098870 60723 / 099291 04723 Valsad . 3217 790 Jodhpur . G.Manish Negandhi Tel: (022) 2610 2894 / 95 Ahmedabad (Bapu Nagar) .

Sign up to vote on this title
UsefulNot useful