EQUITY RESEARCH

SAMPLE PRESENTATION
Company Overview
Government Initiatives Vehicles per capita Investment Recommendation
✓ Investment worth Rs. 25 lakh crores in next 3 years in 1000
Infrastructure

Vehicles per 1000 people

✓ Shift from SCR to iEGR – iEGR engines are fuel efficient 800
600
CMP : Rs. 155.8
and economical
400
15.5%
Stock Price movement 200
0
120 Target : Rs. 180
100
Stock Price

80

Industry Growth
60 To achieve
Planning to Ready for Huge
40 domestic export
Positives Drivers
expand spare Government defense
20 target of 2:1 to
part business plans of contracts as
increase
0 and expected Electric defense
domestic and
to grow at buses by industry is
Aug-13

Aug-14

Aug-15

Aug-16
Apr-13

Dec-13
Apr-14

Dec-14
Apr-15

Dec-15
Apr-16

Dec-16
Apr-17

foreign market Increase in credit Easy availability of

15% 2030 lucrative
share allocation to farmers credit for vehicle
purchase
Higher allocation for
Production Vs Sales Monte Carlo Simulation Sales segmentation infrastructure and Development in
transportation in Road Network
4000000 3791540 Expected Price Range Budget 2018
3500000 130 80% Reduction in taxes for
3046727 Rise in GDP fuels
3000000 individuals with sale of vehicles
125 60%
2500000 income below 5 lakhs
Average Price

2000000 40% Reduced input costs Increased spending

1500000 120 in construction and
due to GST and Govt’s
1000000 810286 20% infrastructure
714232 focus on FAME
115
500000
0 0%
110 2013 2014 2015 2016 2017
Production Sales
0 100 200 300
Days
Passenger Vehicles Commercial Vehicles M&HCV LCV
Fundamental & Competitive Analysis
Company Financials

Du Point Analysis Key Ratios Expected Performance

10 2 25.0%
1200000
1000000
8 1.5 20.0%
800000
6 15.0%
1 600000
4 10.0%
400000
2 0.5 5.0%
200000
0 0 0.0%
0
2013 2014 2015 2016 2017 2016 2017 2018F 2019F 2016 2017 2018F 2019F 2016 2017 2018F 2019F

Operating Margin Asset Turnover Leverage Ratio D/E Ratio Current Ratio ROA % ROE % Operating Profit Net Profit

Competitive Analysis

35% 80% 2.50 20

30.89%
30% 2.00
23.70% 60% 15
25% 20.21%
20% 17.58% 1.50
11.67% 40% 10
15%
8.40% 1.00
10% 6.11% 4.41% 20% 0.50
5
5%
0%
0% 0.00 0
Ashok Leyland Eicher M &M Bajaj Ashok Leyland Eicher M &M Bajaj Auto Ashok Leyland Eicher M &M Bajaj
Operating Margin Net Profit ROA ROE ROCE Current Ratio D/E P/B

New Defense contracts and increase in Transfer from BS-III to BS-IV iEGR engines due to fuel
Maintaining a healthy dividend payout of 31.2%
infrastructure spending efficiency and economy in operation
Valuation
Stock Information Beta Variations Financial Snapshot
Market Capitalization (in Rs. Crores) 39018 Partculars 2016 2017 2018E 2019E
Company Long term beta
Sales (in crores) 2248320 2419904 2804998 3279625
P/E (x) 28.42
Equity turnover (x) 3.96 3.47 3.41 3.56
EPS (Rs.) 4.69 Ashok Leyland 1.36
Net Profit % 3.2% 6.7% 2.94% 3.69%
Industry P/E (x) 39.65 Eicher Motors -0.858
ROA % 3.2% 6.2% 3.1% 4.33%
Book Value (Rs.) 20.96 M&M 0.637 ROE % 12.5% 23.4% 10% 13.16%
P/B (x) 6.36 Bajaj Auto 0.812 Total asset turnover (x) 1.01 0.92 1 1.14

Product Light Vehicles (LCV) – DOST, PARTNER, Medium & Heavy Vehicles (M&HV) – Defence Vehicles – Rapid Intervention
Portfolio MiTR Cheetah, JanBus, Viking vehicles, Field Artillery tractors

Conference Call Analysis Valuation Assumptions Shareholding Pattern

❑ Risk Free rate taken as the Indian Government bond rate –

• All time high sales achieved – 145000 units 7.75% Promoters
• Highest Turnover achieved – Rs. 20000 crores ❑ Equity risk premium - 3.20% 12%
• Spare parts business cross 1000 crores ❑ Terminal growth rate assume less than GDP of the nation -5.0% 20% FII
• Was able to achieve positive EBIDTA for Hinduja Foundry 51%
❑ Beta - as per 1-yr historic data – 1.36 Mutual Funds
• Overall market share increase from 34% to 36.3%
• Company is growing at 50% as compared to 30% of Tipper
❑ Proportions are calculated using market weights 9% Others
Industry ❑ Revenue growth rate assumed to be 16-20% based on
management forecast FPI
• Transition from BS-III engines to BS-IV iEGR engines
• 11% growth in volumes of M&HCV volumes ❑ Debt rate taken as Interest percentage on Debt proceed 4% Individuals
• Target of achieving 30% market share in each market ❑ Working Capital taken as a turnover multiple from the past data 4%
Risks associated with the company

REGULATORY RISK CR1 MARKET RISK

High
RR1
LR1 MR1 MR1

PROBABILITY
Change in emission standards High competitive rivalry
RR2

Medium
MR2
Impact of GST on the industry MR3 RR1 High bargaining power of
RR3 customers
FAME till 2020 MR3
Low Higher Volatility

RR3

CREDIT RISK SEVERITY LIQUIDITY RISK

Low Medium High

CR1 LR1
Ease in availability of Finance An event here needs more control measures Demonetization
CR2 LR2
Events in this area needs proper monitoring
Interest Rate Risk Impact of currency
Risk of an event is not high enough
Technical Analysis
ADX
Chaikin Money Flow
Aroon Oscillator
Readings above zero (Aroon up – Aroon Down)
indicate the presence of an uptrend
Average Directional Index
As the DI+ (Green Line) is above the DI- (Red Line),
the trend is deemed to be upward. ADX line is just
around 20 which signals that the upward trend is
strengthening
Aroon Oscillator
Intraday Momentum Index
Average True Range
The ATR value at 2.964 shows stability in price range
movement thus high volatility in price is less likely
Bollinger Bands
Since the current price 130.50 is closer to the upper
band price of 129.95, the bands indicate that the
security is in the overbought zone evident in the
increasing price
Average True Range
MACD
Chaikin Money Flow
CMF value is 0.021 (neither close to 1 or -1). Hence,
we can conclude that there is no buying or selling
pressure created on the security.
Intraday Momentum Index
Intraday Momentum Index does not fully indicate
the security in the overbought zone
Bollinger Bands
Stochastic Oscillator
MACD
The Short term Average is above the Long term
Average line indicating continuation in the price rise
post the recent crossover. But, if the averages
diverge from here, the end of current trend may be
signalled
Stochastic Oscillator
As per the current readings, the security can neither
be considered in the overbought or oversold zones.
Technical Analysis
On-Balance Volume Exponential Moving Average Parabolic SAR

Qstick Relative Strength Index Schaff Trend Cycle

Parabolic SAR Exponential Moving Average Relative Strength Index (RSI)

The dots in the Parabolic SAR signal an uptrend in the security which is The EMA line is exhibiting a rising slope after the recent breakout in RSI indicates that the security is well below the overbought zone
strengthened by the Average Directional Index price

On-Balance Volume Schaff Trend Cycle

Qstick Indicator
Current On-Balance Volume is 247m which is in the highest range The security if goes 75 level downwards in the STC only then we can
Qstick indicator shows that there is a buying pressure on the security since past 3 months think of shorting the security
Appendix : Comparative Benchmarking & Interpretations

Ashok Leyland Interpretations Eicher Motors

Indicators Signal Indicators Signal
❖ Ashok Leyland is performing better on charts when
Simple Moving Average 118.83
compared to Eicher Motors
Simple Moving Average 29920

Exponential Moving Average 119.64 ❖ SMA, EMA, Aroon Oscillator, RSI, On-balance Volume is Exponential Moving Average 29833
better in case of Ashok Leyland
Aroon Oscillator 35.71 ❖ Chaikin Money Flow, ADX, MACD, Bollinger Bands which Aroon Oscillator -71.43
show neutral trend for Ashok Leyland, show negative
Chaikin Money Flow 0.021 trend for Eicher Motors Chaikin Money Flow -0.306
❖ Stochastic Oscillator and Parabolic SAR is positive in case
Bollinger Bands 108.98 – 129.95 Bollinger Bands 27965-31029
of Ashok Leyland which is better than that indicated by
MACD 1.40-2.83 Eicher Motors MACD 148.48-252.55
❖ Average true range indicates higher volatility in Eicher
ADX 19.16 motors than Ashok Leyland ADX 23.13

Relative Strength Index 73.06 Relative Strength Index 36.63

On-Balance Volume Positive Recommendation Priority On-Balance Volume Negative

Average True Range 2.964 Average True Range 645.654

Parabolic SAR
Schaff Trend Cycle
Positive

94.39
1 Ashok Leyland Parabolic SAR
Schaff Trend Cycle
Negative

89.94

Qstick 2.81 Qstick 635.59

Stochastic Oscillator
Intraday Momentum Index
59.13-63.53

42.23
2 Eicher Motors Stochastic Oscillator
Intraday Momentum Index
40.59-41.606

45.02