Two-Wheelers Update 27aug2014

August 27, 2014
Automobiles Two-wheelers Segment Institutional Equities

India Research

2W SECTOR UPDATE

Hero MotoCorp BUY
CMP (Rs) 2,565
Target Price (Rs) 2,950
Upside (%) 15
52 Week High/Low (Rs)
2,788/1,786
3m Avg. Daily Volume (Rs mn)
1,232
TVS Motors SELL
CMP (Rs) 185
Target Price (Rs) 145
Downside (%) 22
52 Week High/Low (Rs) 188/29
3m Avg. Daily Volume (Rs mn)
487
Source; Bloomberg
Performance : Hero MotoCorp
1M 3M 12M YTD
Absolute 0.0 17.0 39.3 24.5
Rel. to Sensex 0.2 1.4 3.2 1.7
Source: Bloomberg
Performance : TVS Motors
1M 3M 12M YTD
Absolute 29.5 49.1 506.7 144.0
Rel. to Sensex 28.0 39.4 325.8 95.4
Source: Bloomberg
Analyst Contact
Mitul Shah
+91 22 6184 4312
mitul.shah@karvy.com

We Prefer Hero MotoCorp over TVS
MotorHMCL to Witness Margins Improvement
with Likely Reversal in Excise Duty in FY16
2W Industry to Record 13% CAGR over FY14-FY16E: Both the major two
wheeler companies Bajaj Auto and Hero MotoCorp have underperformed the
BSE Auto Index as well as BSE Sensex over last one year, primarily due to
volume performance and limited expansion in valuation multiple, as stocks
already traded at fair value. Within the segment, only TVS Motor delivered
strong volume performance, while its price run up is ahead of fundamentals.
We expect two wheeler industry to continue recording healthy volumes,
backed by demand from rural markets and improving sentiment in urban
markets, post formation of stable government at centre. We expect a growth of
13% CAGR for domestic two wheeler industry, 10% CAGR for motorcycle
industry and higher growth of 21.5% CAGR for scooter segment over FY14-
FY16E. We believe that competition will further intensify in the segment on
account of aggressive strategy of other global players like HMSI, Suzuki etc.
Therefore, we expect Hero MotoCorp to underperform the industry growth,
while healthy exports would help TVS Motor to outperform the industry.
TVS - stock price has moved 6x, as against earning soaring ~2x: For TVS
Motor, we expect volume growth of 16.5% CAGR, EBIDTA margin expansion
of 130 bps and EPS CAGR of 44% over FY14-FY16E. However, stock price has
moved 6x, as against earning soaring ~2x over last one year. In our blue sky
scenario, we arrive at its fair value of Rs 174, valuing TVSL at 14xFY16E EPS,
(our base case valuation stands at Rs 145, valuing at 13xFY16E EPS), leaving no
room for upside from current level. For TVS Motors, current valuation is ahead
of fundamentals and risk reward is highly unfavorable. Stock is trading at
higher end of valuation of two wheeler companies, despite single digit margin
profile and smaller size. We reiterate our SELL on TVS with TP of Rs 145.
Likely Reversal of Excise to Benefit Margins: We believe that Hero
MotoCorps various cost cutting initiative coupled with likely reversal of excise
duty by FY16E will help margin improvement for the company. On the other
hand competition, new product launch expenses and increasing advertising
expenses would eat into margins, therefore we expect improvement of only 50
bps in HMCLs EBIDTA margins over FY14-FY16E. Despite loss of some
market share by HMCL, we expect margin improvement on high base to
translate into EPS CAGR of 29% over FY14-FY16E. Strong product pipe-line
and higher volumes may lead to margin upgrade going forward. In view of
better traction for the company and valuation comfort, we reiterate our BUY on
Hero MotoCorp with TP of Rs 2,950, valuing the stock at 17xFY16E EPS.
Valuation Summary
Company Rating
CMP
(Rs)
TP
(Rs)
MCap
(Rs bn)
EPS (Rs) EV/EBIDTA (x) P/E (x)
FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E
Hero MotoCorp BUY 2,565 2,950 516 105.6 147.2 173.6 14.4 12.3 10.4 24.3 17.4 14.8
TVS Motor SELL 185 145 88 5.4 8.5 11.1 19.1 13.3 10.4 34.0 21.7 16.6
Source: Karvy Institutional Research
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Automobiles August 27, 2014

Hero MotoCorp
Bloomberg: HMCL IN
Reuters: HROH.BO

BUY

Institutional Equities
India Research

UPDATE

Recommendation
CMP: Rs2,565
Target Price: Rs2,950
Previous Target Price Rs2,950
Upside (%) 15%
Stock Information
Market Cap. (Rs bn / US$ mn) 516/8,478
52-week High/Low (Rs) 2,788/1,786
3m ADV (Rs mn /US$ mn) 1,232/20.2
Beta 0.9
Sensex/ Nifty 25,908/7,747
Share outstanding (mn) 200
Stock Performance (%)
1M 3M 12M YTD
Absolute 0.0 17.0 39.3 24.5
Rel. to Sensex 0.2 1.4 3.2 1.7
Performance

Source: Bloomberg

Analysts Contact
Mitul Shah
+91 22 6184 4312

Maruti Kadam - Associate
022 - 6184 4322
maruti.kadam@karvy.com
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Sensex (LHS) Hero MotoCorp (RHS)
Likely Excise Reversal to Expand Margins in
FY16E...New Launches to Boost Volumes
Hero MotoCorps recent performance was impacted by reduction in excise
duty post Budget in Q4FY14, lowering the excise benefit enjoyed by HMCL on
its production from Haridwar plant (40% of total production). Company is
exempted from excise duty on its production from Haridwar plant, while it
maintains its vehicle pricing across the products irrespective of its location of
production, which translated into direct benefit of 12% of net revenues from
Hridwar plant to companys financials till Q4FY14. However, lower excise
duty of 8% resulted in loss of benefit to the tune of 4% of net revenues from
this plant. Assuming constant average realization per vehicle across plants and
75% net impact on margins, our back of envelop calculation indicates direct
impact of 120 bps on companys EBIDTA margins. Our adjusted EBIDTA
margins stood at 14.7% as against reported margins of 13.5% in Q1FY15. Our
sensitivity analysis indicates net impact of 30 bps on EBIDTA margins for
every 1% cut in excise duty for HMCL. We believe that lower excise rate would
not continue for longer term and expect its reversal in FY16, benefitting
HMCLs operating margin going forward.
New Launches, Network Expansion and Additional Capacity to Pay off:
HMCLs strong product pipe line with expected launch of 8-10 new models
over next one year would help maintain market shares. Moreover, it expanded
annual production capacity by ~750,000 units at its Rajasthan plant. Companys
strong network of ~6000 touch points would be the key factor to grab the
opportunity arising out of expected economic recovery over next two years.
We expect companys R&D and promotional expenses to go up amid
intensifying competition, while operating leverage, value engineering and
likely excise reversal would compensate for higher expense. Therefore we
expect ~50 bps improvement in HMCLs EBIDTA margins to 14.5% in FY16E.
Outlook & Valuation
We maintain our estimates and we expect margins and return ratios to
improve for HMCL. In view of healthy return ratio and 29% EPS CAGR over
FY14-FY16E, we reiterate our BUY recommendation on HMCL and maintain
our target price of Rs 2,950, valuing the stock at 17x FY16E EPS.

Key Financials
Y/E March (Rs. mn) FY12 FY13 FY14 FY15E FY16E
Net Sales 235,790 237,681 252,755 295,157 334,944
EBITDA 36,330 32,921 35,545 41,432 48,712
EBITDA margin (%) 15.4 13.9 14.1 14.0 14.5
Adj. Net Profit 23,781 21,182 21,090 29,397 34,659
EPS (Rs.) 119.1 106.1 105.6 147.2 173.6
YoY growth (%) 19.2 -10.9 -0.4 39.4 17.9
RoE (%) 57.4 39.6 34.8 41.6 40.1
RoCE (%) 54.7 38.5 34.5 41.7 40.2
PER (x) 21.5 24.2 24.3 17.4 14.8
EV/ EBITDA 14.1 15.5 14.4 12.3 10.4
Source: Company, Karvy Institutional Research


3
August 27, 2014
Hero MotoCorp

Exhibit 1: Hero MotoCorps Key Fundamental Parameters
Y/E March (Rs. mn) Q1 Q2 Q3 Q4 Q1
FY14 FY14 FY14 FY14 FY15
Net Revenue 61,595 57,262 68,768 65,130 70,368
Impact of 4% Excise Cut (at Haridwar plant) 0 0 0 320 940
Adj Revenue 61,595 57,262 68,768 65,450 71,308
Adj Revenue Per Vehicle 39,502 40,433 40,910 41,177 41,576
YoY Growth %

2.3% 5.2%
QoQ Growth %

0.7% 1.0%
Total Expenses 52,443 48,935 59,788 56,188 60,896
Reported EBIDTA 9,152 8,327 8,980 8,942 9,472
Adj EBIDTA 9,152 8,327 8,980 9,262 10,412
Reported EBIDTA Margin (%) 14.9 14.5 13.1 13.7 13.5
Adj EBIDTA Margin (%) 14.9 14.5 13.1 14.2 14.8

Impact Ananlysis of Excise Duty Cut

Production from Haridwar (40% of Total) Units 623,713 566,484 672,376 635,785 686,052
Revenues from Haridwar (Rs mn) 24,638 22,905 27,507 26,052 28,147
4% Excise Reduction with 75% Net Impact (Rs mn) - - - 333 946
Source: Company, Karvy Institutional Research, Note: Q4FY14 witnessed lower excise impact for 40 days only, hence lower impact as against full impact witnessed in
Q1FY15.
Exhibit 2: HMCLs EBIDTA Margin Sensitivity to Excise Duty


12.3
12.6
12.9
13.2
13.5
13.8
14.1
14.4
14.7
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%
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Excise Duty (%)
Current Rate &Margins

4
August 27, 2014
Hero MotoCorp

Financials
Exhibit 3: Profit & Loss Statement (Standalone)
Net revenues 235,790 237,681 252,755 295,157 334,944
Operating expenses 199,460 204,760 217,210 253,726 286,233
EBIDTA 36,330 32,921 35,545 41,432 48,712
EBIDTA margin (%) 15.4 13.9 14.1 14.0 14.5
Other income 3,595 3,945 4,435 4,900 5,619
Interest 213 119 118 120 165
Depreciation 10,973 11,418 11,074 6,218 6,985
Profit Before Tax 28,738 25,330 28,788 39,994 47,181
Tax 4,866 4,110 7,582 10,597 12,522
Reported Net Profit 23,781 21,182 21,091 29,397 34,659
Net Margin (%) 10.1 8.9 8.3 10.0 10.3
Adjusted Net Profit 23,781 21,182 21,090 29,397 34,659
Exhibit 4: Balance Sheet (Standalone)
Equity capital 399 399 399 399 399
Reserves & surplus 42,499 49,663 55,599 68,809 87,281
Shareholders funds 42,898 50,062 55,999 69,209 87,681
Total Loans 0 0 0 0 0
Deferred tax liability 2,148 1,397 48 48 48
Total Liabilities and Equity 45,046 51,460 56,047 69,257 87,729
Gross block 63,083 66,851 69,089 89,331 94,481
Depreciation 25,228 36,141 46,657 52,875 59,860
Net block 37,855 30,710 22,433 36,455 34,621
Capital WIP 388 621 8,541 1,300 1,650
Investments 39,643 36,238 40,888 47,888 67,888
Inventory 6,756 6,368 6,696 7,647 8,626
Debtors 2,723 6,650 9,206 9,704 10,094
Cash & Bank Bal 768 1,810 1,175 2,284 3,426
Loans & Advances 10,821 14,093 12,083 12,768 13,507
Current Assets 21,068 28,921 29,160 32,402 35,654
Sundry Creditors 22,932 18,733 22,906 25,720 29,015
Other Current Liability 30,977 26,297 22,068 23,068 23,068
Current Liability& Provisions 53,908 45,030 44,974 48,788 52,083
Net current assets -32,840 -16,109 -15,815 -16,386 -16,429
Total Assets 45,046 51,460 56,047 69,257 87,729


5
August 27, 2014
Hero MotoCorp

Exhibit 5: Cash Flow Statement (Standalone)
EBIT 25,357 21,504 24,471 35,213 41,727
Other Income 3,595 3,945 4,435 4,900 5,619
Depreciation & Amortisation 10,973 11,418 11,074 6,218 6,985
Interest paid(-) (213) (119) (118) (120) (165)
Tax paid(-) (4,866) (4,110) (7,582) (10,597) (12,522)
Extra Ord Income (91) (38) (116) 0 0
Operating Cash Flow 34,755 32,599 32,164 35,615 41,644
Change in Working Capital (27,609) (15,689) (930) 1,680 1,186
Cash flow from Operations 7,146 16,910 31,234 37,295 42,830
Capex (7,915) (4,505) (10,717) (13,000) (5,500)
Non Strategic Investment 11,645 3,404 (4,649) (7,000) (20,000)
Cash flow from Investing 3,730 (1,100) (15,366) (20,000) (25,500)
Change in borrowing 0 0 0 0 0
Others (380) (750) (1,316) 0 0
Dividends paid(-) (10,444) (14,018) (15,188) (16,187) (16,187)
Cashflow from Financial Activities (10,823) (14,768) (16,504) (16,187) (16,187)
Change in Cash 53 1,042 (635) 1,109 1,143
Opening cash 715 768 1,810 1,175 2,284
Closing cash 768 1,810 1,175 2,284 3,426
Exhibit 6: Key Ratios
Revenue Growth 21.5 0.8 6.3 16.8 13.5
EBITDA Margin 15.4 13.9 14.1 14.0 14.5
Net Profit Margin 10.1 8.9 8.3 10.0 10.3
ROCE (%) 54.7 38.5 34.5 41.7 40.2
ROE (%) 57.4 39.6 34.8 41.6 40.1
Exhibit 7: Valuation Parameters
Y/E March (Rs. mn)
FY12 FY13 FY14 FY15E FY16E
EPS( Rs) 119.1 106.1 105.6 147.2 173.6
P/E (x) 21.5 24.2 24.3 17.4 14.8
P/ BV (x) 11.9 10.2 9.1 7.4 5.8
EV/ EBITDA (x) 14.1 15.5 14.4 12.3 10.4
Fixed Assets Turnover Ratio (x) 6.2 7.6 8.2 7.8 9.2
Debt / Equity (x) 0.0 0.0 0.0 0.0 0.0
EV/ Sales (x) 2.2 2.1 2.0 1.7 1.5

Automobiles August 27, 2014

TVS Motor
Bloomberg: TVSL IN
Reuters: TVSM.BO

SELL

India Research

RESULT REVIEW

Recommendation
CMP: Rs185
Target Price: Rs145
Previous Target Price: Rs145
Downside (%) 22%
Stock Information
Market Cap. (Rs bn / US$ mn) 88/1,456
52-week High/Low (Rs) 188/29
3m ADV (Rs mn /US$ mn) 487/8.1
Beta 0.8
Sensex/ Nifty 26,443/7,905
Share outstanding (mn) 475
Stock Performance (%)
1M 3M 12M YTD
Absolute 29.5 49.1 506.7 144.0
Rel. to Sensex 28.0 39.4 325.8 95.4
Performance

Source: Bloomberg

Analysts Contact
Mitul Shah
+91 22 6184 4312

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Sensex (LHS) TVS Motor (RHS)
Punchy Valuation Breaches Our Blue Sky
Scenario; Reiterate SELL
TVS Motor has outperformed BSE Auto Index and Sensex by 440% and 464%
respectively over last one year. Its price performance is way ahead of its
earnings performance. Its EPS growth was 30% in FY14, while we expect its
EPS to double over FY14-FY16E to Rs 11.1 However price has moved up by
over 5x in a years period. All the positives, even in our blue sky scenario, are
priced in. Current valuation of 16.6xFY16E EPS is expensive for a company
with single digit operating margin and RoE of 25%. We believe that stock
would remain under pressure until it delivers margin performance, despite
expectation of strong volume outperformance in coming quarters. Strong
margin performance is needed for re-rating, along with volumes.
Gaining Volumes and Shares at the Cost of Margins: TVSL outperformed
domestic as well as exports industry across the segments in Q1FY15 with
market shares gain in majority of the segments. However, its margins fell
sequentially and remained flat YoY despite favourable currency, which
indicates lack of competency to maintain profitability in a period of best of the
volume performance. Companys export contribution and three wheeler
contribution to total volume is highest ever at ~16.7% and 4.3% respectively
and exchange rate was favorable during Q1FY15, while its operating margins
remained under pressure indicating absence of product mix benefit. We
believe that companys operating expenses will increase with new launches in
the coming quarters. It may surprise on volumes front, but drastic
improvement operating margins would be a challenge for Company. This
would restrict re-rating of the company and may lead to de-rating in case of
subdued margins.
Expensive even in Blue Sky Scenario: In our blue sky scenario, we assumed
TVSLs EBIDTA margins to improve from current 5.7% to 8% in FY16E and
assigned P/E multiple of 14x (as against our base case assumption of 7.3% and
P/E of 13x) FY16E, we arrive at target price of Rs 174, implying 6% downside
from CMP. Risk reward is highly unfavorable at current valuation and way
ahead of fundamentals. We reiterate our SELL on TVS Motor with a target
price of Rs 145, valuing it at 13xFY16E EPS, potential downside of 22%.
Key Financials
Net Sales 71,415 71,693 79,619 99,158 115,352
EBITDA 4,948 4,229 4,803 6,746 8,370
EBITDA margin (%) 6.9 5.9 6.0 6.8 7.3
Adj. Net Profit 2,491 1,982 2,583 4,043 5,293
EPS (Rs.) 5.2 4.2 5.4 8.5 11.1
YoY growth (%) 28.0 -20.4 30.3 56.5 30.9
ROE (%) 22.2 16.1 19.0 25.0 26.2
ROCE (%) 15.6 11.9 14.0 19.9 23.6
PER (x) 35.3 44.4 34.0 21.7 16.6
EV/ EBITDA 19.2 22.0 19.1 13.3 10.4
Source: Company, Karvy Institutional Research; We do not factor in any financial impact of BMW tie-up.


7
August 27, 2014
TVS Motor

Key Fundamental Parameters
Exhibit 1: TVS Key Financials
Y/E March (Rs. mn) Q1 Q2 Q3 Q4 Q1
FY14 FY14 FY14 FY14 FY15 FY15E FY16E
Sales Volume (units) 475,634 502,000 532,701 563,000 584,000 2,516,377 2,816,928
Growth YoY (%) (11.0) 4.4 3.1 10.0 22.8 21.0 11.9
Net Revenues 17,602 19,884 20,576 21,557 23,054 99,158 115,352
EBIDTA 989 1,171 1,234 1,387 1,312 6,746 8,370
Export Contribution (%) 14.1 15.9 14.5 15.1 16.7 15.7 16.5
Three Wheeler Contributions (%) 3.3 4.6 3.9 3.7 4.3 4.5 4.5
Exchange Rate (Rs/$) 56 60 62 61 61 61 61
Average Realisation per Vehicle (Rs) 36,587 39,084 38,196 37,669 38,754 38,880 40,435
YoY Growth (%) 7.4 11.7 9.5 10.1 5.9 2.9 4.0
EBIDTA Margins (%) 5.6 5.9 6.0 6.4 5.7 6.8 7.3
RM/Vehicle (Rs) 26,319 28,185 27,443 27,429 28,710 28,263 29,115
EBIDTA/Vehicle (Rs) 2,079 2,333 2,317 2,463 2,246 2,681 2,971
As evident in above table, TVS export contribution to total volume grew to 16.7%
and three wheeler contribution was high at 4.3% in Q1FY15. Company failed to
translate this benefit into financial performance, despite favourable exchange rate.
Increase in price per vehicle by Rs 1,085 QoQ is insufficient to compensate increase
of Rs 1,281 QoQ in raw material per vehicle, impacting margins.
Margin and Valuation Scenario Analysis
Exhibit 2: Margin Scenario
Y/E March (Rs. mn) Bear Case Base Case Bull Case
FY15E FY16E FY15E FY16E FY15E FY16E
Revenue 99,158 115,352 99,158 115,352 99,158 115,352
EBIDTA 5,949 8,075 6,746 8,370 6,941 9,228
EBIDTA Margins (%) 6.0 7.0 6.8 7.3 7.0 8.0
EPS (Rs) 7.26 10.6 8.5 11.1 8.8 12.4
Exhibit 3: Valuation Doesnt Justify Even in Blue Sky Scenario
Target Price (Rs)
1 Year Forward P/E 10x 11x 12x 13x 14x
FY16E EPS (Rs)
Bear Case 10.6 106 117 127 138 148
Base Case 11.1 111 123 134 145 156
Bull Case 12.4 124 136 149 161 174


8
August 27, 2014
TVS Motor

In a blue sky scenario of EBIDTA margin improvement of 230 bps from current
level to 8% in FY16E and P/E multiple of 14x (as compared to TVS historical up-
cycle average multiple of 12.5x 1 year forward P/E), we arrive at target price of Rs
174 per share. This implies 6% downside from CMP, resulting in highly
unfavourable risk reward at current valuation. There is no room for upside...even
in our blue sky scenario.
Exhibit 4: P/E Price band

Source: Bloomberg, Company, Karvy Institutional Research
Exhibit 5: Volumes and EBIDTA Margin Trend

Source: SIAM, Company, Karvy Institutional Research
Valuation Surpasses Previous Peak
As evident in above P/E chart for TVSL, the stock has traded at 12.5x during FY11-
FY12, when its volumes surpassed 2 mn mark and sales volume grew by 20%
CAGR over FY10-FY12. Its EBIDTA margins were in the range of 6.5 - 6.9% during
the same period. Historically, its high multiple was backed by strong volumes and
operating margins of ~7%. Current situation resembles the past scenario of volume
and margin performance, however at present stock is trading at 16.6xFY16E EPS as
compared to historical valuation of 12.5x, which is very expensive, we reiterate our
SELL on TVS Motor.
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(Rs)
3.5x
7.5x
12.5x
15.5x
Mean
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Total Volume EBIDTA margin (RHS)
('000 Units) (%) High Volumes and Margins

9
August 27, 2014
TVS Motor

Financials
Exhibit 6: Profit & Loss Statement (Standalone)
Net revenues 71,415 71,693 79,619 99,158 115,352
Operating expenses 66,467 67,464 74,816 92,412 106,982
EBIDTA 4,948 4,229 4,803 6,746 8,370
EBIDTA margin (%) 6.9 5.9 6.0 6.8 7.3
Other income 200 237 279 365 414
Interest 574 483 254 229 151
Depreciation 1,175 1,304 1,317 1,421 1,529
Profit Before Tax 3,165 1,636 3,525 5,461 7,104
Tax 674 476 909 1,418 1,812
Reported Net Profit 2,491 1,160 2,616 4,043 5,293
Net Margin (%) 3.5 1.6 3.3 4.1 4.6
Adjusted Net Profit 2,491 1,982 2,583 4,043 5,293
Adj. Net Margin (%) 3.5 2.8 3.2 4.1 4.6

Exhibit 7: Balance Sheet (Standalone)
Equity capital 475 475 475 475 475
Reserves & surplus 11,221 11,772 13,678 17,056 21,684
Shareholders' funds 11,696 12,247 14,153 17,531 22,159
Total Loans 7,155 5,459 4,759 2,759 259
Deferred tax liability 976 931 1,247 1,247 1,247
Total Liabilities and Equity 19,826 18,637 20,158 21,536 23,665
Gross block 21,545 22,479 24,723 26,959 29,659
Depreciation 11,289 12,365 13,466 14,887 16,416
Net block 10,256 10,115 11,257 12,072 13,243
Capital WIP 525 361 481 945 945
Investments 9,309 8,688 8,959 10,459 10,959
Inventory 5,846 5,097 5,482 6,836 7,914
Debtors 2,080 3,169 3,341 4,075 4,740
Cash & Bank Bal 130 175 826 1,192 1,132
Loans & Advances 2,998 3,752 5,302 4,116 4,886
Current Assets 11,055 12,192 14,950 16,219 18,672
Sundry Creditors 7,117 8,086 9,989 12,659 14,655
Other Current Liability 1,063 1,066 1,211 1,211 1,211
Current Liability& Provisions 11,319 12,720 15,489 18,159 20,155
Net current assets -264 -528 -539 -1,940 -1,483
Total Assets 19,826 18,637 20,158 21,536 23,665


10
August 27, 2014
TVS Motor

Exhibit 8: Cash Flow Statement (Standalone)
EBIT 3,773 2,925 3,486 5,325 6,841
Other Income 200 237 279 365 414
Depreciation & Amortisation 1,175 1,304 1,317 1,421 1,529
Interest paid(-) (574) (483) (254) (229) (151)
Tax paid(-) (674) (476) (909) (1,418) (1,812)
Extra Ord Income (235) (1,043) 14 0 0
Operating Cash Flow 3,666 2,464 3,933 5,464 6,821
Change in Working Capital 1,058 308 662 1,767 (517)
Cash flow from Operations 4,724 2,772 4,595 7,231 6,304
Capex (2,006) (999) (2,579) (2,700) (2,700)
Strategic Investment (2,815) 660 (304) (1,500) (500)
Non Strategic Investment 118 (39) 33 0 0
Cash flow from Investing (4,704) (378) (2,850) (4,200) (3,200)
Change in borrowing 820 (1,696) (700) (2,000) (2,500)
Others (52) 2 381 0 0
Dividends paid(-) (718) (655) (775) (664) (664)
Cashflow from Financial Activities 50 (2,350) (1,094) (2,664) (3,164)
Change in Cash 70 44 651 366 (60)
Opening cash 60 130 175 826 1,192
Closing cash 130 175 826 1,192 1,132
Exhibit 9: Key Ratios
Revenue Growth 13.6 0.4 11.1 24.5 16.3
EBITDA Margin 6.9 5.9 6.0 6.8 7.3
Net Profit Margin 3.5 2.8 3.2 4.1 4.6
ROCE (%) 15.6 11.9 14.0 19.9 23.6
ROE (%) 22.2 16.1 19.0 25.0 26.2
Exhibit 10: Valuation Parameters
EPS( Rs) 5.2 4.2 5.4 8.5 11.1
P/E (x) 35.3 44.4 34.0 21.7 16.6
P/ BV (x) 7.5 7.2 6.2 5.0 4.0
EV/ EBITDA (x) 19.2 22.0 19.1 13.3 10.4
Fixed Assets Turnover Ratio (x) 6.7 6.8 6.5 8.2 8.7
Debt / Equity (x) 0.6 0.4 0.3 0.2 0.0
EV/ Sales (x) 1.3 1.3 1.2 0.9 0.8


Institutional Equities Team
Rahul Sharma
Head Institutional Equities /
Research / Pharma
+91-22 61844310/01 rahul.sharma@karvy.com
Gurdarshan Singh Kharbanda Head - Sales-Trading +91-22 61844368/69 gurdarshansingh.k@karvy.com

INSTITUTIONAL RESEARCH
Analysts Industry / Sector Desk Phone Email ID
Mitul Shah Automobiles/Auto Ancillary +91-22 61844312 mitul.shah@karvy.com
Parikshit Kandpal Infra / Real Estate / Strategy/Consumer +91-22 61844311 parikshit.kandpal@karvy.com
Rajesh Kumar Ravi Cement/ Logistics/ Paints +91-22 61844313 rajesh.ravi@karvy.com
Rupesh Sankhe Power/Capital Goods +91-22 61844315 rupesh.sankhe@karvy.com
Asutosh Mishra Banking & Finance +91-22-61844329 asutosh.mishra@karvy.com
Vinesh Vala Research Associate +91 22 61844325 vinesh.vala@karvy.com
Rajesh Mudaliar Research Associate +91 22 61844322 rajesh.mudaliar@karvy.com
INSTITUTIONAL SALES
Celine Dsouza
Sales
+91 22 61844341 celine.dsouza@karvy.com
Edelbert Dcosta
Sales
+91 22 61844344 edelbert.dcosta@karvy.com
INSTITUTIONAL SALES TRADING & DEALING
Aashish Parekh Institutional Sales/Trading/ Dealing +91-22 61844361 aashish.parekh@karvy.com
Prashant Oza Institutional Sales/Trading/ Dealing +91-22 61844370 /71 prashant.oza@karvy.com
Pratik Sanghvi Institutional Sales/Trading/ Dealing +91-22 61844366 /67 pratik.sanghvi@karvy.com


For further enquiries please contact:
research@karvy.com
Tel: +91-22-6184 4300

Disclosures Appendix

Analyst certification
The following analyst(s), who is (are) primarily responsible for this report, certify (ies) that the views expressed
herein accurately reflect his (their) personal view(s) about the subject security (ies) and issuer(s) and that no part of
his (their) compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views
contained in this research report.
Disclaimer
The information and views presented in this report are prepared by Karvy Stock Broking Limited. The information
contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouch for
the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any
loss incurred based upon it. The investments discussed or recommended in this report may not be suitable for all
investors. Investors must make their own investment decisions based on their specific investment objectives and
financial position and using such independent advice, as they believe necessary. While acting upon any information
or analysis mentioned in this report, investors may please note that neither Karvy nor Karvy Stock Broking nor any
person connected with any associate companies of Karvy accepts any liability arising from the use of this information
and views mentioned in this document.
The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above
mentioned companies from time to time. Every employee of Karvy and its associate companies are required to
disclose their individual stock holdings and details of trades, if any, that they undertake. The team rendering
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Stock Ratings Absolute Returns
Buy : > 15%
Hold : 5 - 15%
Sell : < 5%

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Automobiles Two-wheelers Segment Institutional Equities

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