May 9, 2017
ICICI Securities Ltd | Retail Equity Research
Result Update
Demand scenario seems promising!
Apollo Tyres’ (ATL) Q4FY17, consolidated revenues were at | 3,326
crore (up 10.3% YoY), below our estimate of | 3,418 crore. It is
mainly volume driven - domestic (9% YoY) while Europe (20% YoY)
Revenues from Asia Pacific Middle East & Africa (APMEA) increased
9.2% YoY to | 2,691 crore while revenue from Europe & America
(EA) increased 15.8% YoY to | 991 crore
Consolidated EBITDA margins came in at 11.1% (down 534 bps YoY
& 332 bps QoQ) vs. our estimate of 13.5%, mainly due to 1) higher
raw material cost [natural rubber (NR) prices up 52.3% YoY & 22.5%
QoQ to | 152/kg] and 2) seasonally weak quarter of Reifencom,
(European distributor), which posted negative EBITDA margins of 5%
PAT declined 16.1% YoY to | 228 crore vs. our estimate of | 250
crore. ATL recommended a final dividend of | 3/share for FY17
The management expects double digit volume growth in FY18E.
However, we expect pressure on margins to continue till H1FY18E
mainly due to higher input cost & start-up cost of its Hungary plant
Well placed for demand revival
ATL is well placed to benefit from the radialisation story in India. It enjoys
a 25% market share in truck tyre segment (in both TBB & TBR). ATL is
likely to improve radial volumes, and is increasing its radial capacity,
(phase 1 of radial capacity has been commissioned in Q4CY16) with full
capacity set to come on stream in mid-2018, thus driving its growth.
Further, import of Chinese tyre has declined to <50% of its peak import in
Q2FY16 (impacted by demonetisation) and is benefiting the domestic tyre
industry, especially ATL. Thus, the management is positive on demand
outlook & expects double digit volume growth in FY18E.
Strong brand + distribution = to supports its European performance!
ATL’s overall European operation reported volume growth of 12% YoY in
FY17 & was mainly supported by strong volumes of its Vredestein brand
in the PV space. It continues to expand its PCR capacity in Hungary (has
planned capex of €180 million, | 1,250 crore in FY18E), which is likely to
cater to rising demand, going forward. Apart from that, acquisition of
Reifencom - one of the leading tyre retail chain in Germany (with >37
stores), will enhance brand visibility. Q4FY17 is seasonally weak for
Reifencom, which posted negative EBITDA margins of 5%, thereby
impacting overall margins. However, the management expects Reifencom
margins (~2% per annum) to gradually improve, going forward.
Margin to be impacted in FY18E; though likely to improve, going forward
Average NR prices have been volatile - from lows of | 94/kg in February
2016 to | 159/kg in February 2017 to | 140/kg in May 2017. According to
the management, the impact of raw material price rise was 23% (13% in
Q3FY17 & 10% in Q4FY17) & requires 15% ASP hike (fully passing on) to
maintain its margins. Though, till date, they have increased prices by 6%
(3% each in Q4FY17 & in April 2017). Looking at the inventory and current
NR prices, the management expects its margins to remain under pressure
in H1FY18. It is likely to ease out afterwards. Also, start-up cost in
Hungary is likely to put pressure on European margins. Thus, we expect
lower margins in FY18E with an improvement in FY19E.
Decent business case as valuations remain fair!
ATL is investing in more diversified, rapid growth areas coupled with a
larger scale of business in coming years. Further, the management
expects demand to recover, going forward. Thus, we maintain BUY
rating, valuing ATL at 12x FY19E EPS to arrive at a target price of | 280.
Rating matrix
Rating : Buy
Target : | 280
Target Period : 12 months
Potential Upside : 18%
What’s Changed?
Target Chnaged from | 225 to | 280
EPS FY18E Changed from | 22.9 to | 19.7
EPS FY19E Chnaged from | 25 to | 23.3
Rating Unchanged
Quarterly Performance
(| Crore) Q4FY17 Q4FY16 YoY Q3FY17 QoQ
Revenues 3,325.6 3,014.9 10.3 3,457.9 -3.8
EBITDA 369.9 496.3 -25.5 499.3 -25.9
EBITDA (%) 11.1 16.5 -534 bps 14.4 -332 bps
Reported PAT 228.2 272.1 -16.1 295.7 -22.8
Key Financials
| Crore FY16 FY17E FY18E FY19E
Net Sales 11,793 13,180 15,014 16,420
EBITDA 1,968.3 1,846.4 1,807.8 2,099.8
Net Profit 1,093.0 1,099.3 992.2 1,176.9
EPS (|) 21.7 21.8 19.7 23.3
Valuation summary
FY16 FY17E FY18E FY19E
P/E (x) 11.3 10.9 12.1 10.2
Tgt P/E (x) 12.9 12.8 14.2 12.0
EV/EBITDA (x) 6.4 7.9 8.5 7.4
P/BV (x) 1.9 1.6 1.5 1.3
RoNW (%) 17.1 15.0 12.2 12.9
RoCE (%) 19.9 13.6 11.0 12.0
Stock data
Particular Amount
Market Capitalization (| Crore) | 11997 Crore
Total Debt (FY16) (| Crore) 3,244.5
Cash & Investments (FY16) (| Crore) 731.4
EV (| Crore) 14,510.4
52 week H/L (|) 254 / 139
Equity capital (| crore) | 50.4 Crore
Face value (|) | 1
Price performance (%)
1M 3M 6M 12M
Apollo Tyres Ltd 16.0 34.2 27.3 58.2
JK Tyres 33.6 45.7 29.0 119.2
CEAT Ltd 24.2 39.4 38.3 57.8
MRF Ltd 12.3 33.4 35.8 101.4
Balkrishna Industries Ltd 8.3 33.4 53.2 132.5
Apollo Tyres (APOTYR) | 238
Research Analyst
Nishit Zota
Vidrum Mehta
ICICI Securities Ltd | Retail Equity Research Page 2
Variance analysis- Consolidated
(| crore) Q4FY17 Q4FY17E Q4FY16 YoY (%) Q3FY17 QoQ (%) Comments
Total Operating Income 3,326 3,418 3,015 10.3 3,458 -3.8 The topline growth was largely volume driven - India volume grew ~9% YoY
while Europe volume grew ~20% YoY
Raw Material Expenses 1,869 1,857 1,479 26.4 1,811 3.2 Higher input cost (natural rubber price up 52.3% YoY & 22.5% QoQ to |
152/kg) impacted the gross margin of the company, which contracted 715
bps YoY & 384bps QoQ
Employee Expenses 412 436 427 -3.6 451 -8.6
Other expenses 675 664 613 10.1 697 -3.2
EBITDA 370 461 496 -25.5 499 -25.9
EBITDA Margin (%) 11.1 13.5 16.5 -534 bps 14.4 -332 bps EBITDA margins came in at 11.1% (down 534 bps YoY & 332 bps QoQ)
mainly due to 1) higher raw material cost (both in India & European
operations) and 2) seasonally weak quarter of its Reifencom (European
distributor) operation, which posted negative EBITDA margins of 5%
Depreciation 137 113 121 13.0 113 20.4
Interest 24.8 28.3 24.1 3.1 28 -12.4
Other income 50.0 26.5 20.4 144.4 37.3 33.9 Other income came in higher mainly due to gain in investment and higher
interest income. However, the management expect the same to normalise,
going forward
Tax 30.3 97.1 98.3 -69.2 99 -69.4
PAT 228.2 249.5 272.1 -16.1 295.7 -22.8 Decline in margins impacts profitability
EPS (|) 4.5 5.0 5.3 -15.2 5.9 -22.8
Key Metrics
Revenue (| crore)
India 2,691 2,465 9.2 2,493 7.9 Revenue was mainly driven by volume growth of ~9% YoY. Volumes in PCR
& Farm tyres witnessed good growth while truck tyres remained flat during
the quarter
Europe 991 856 15.8 1,262 -21.4 The growth was mainly supported by volume growth of 20% YoY.
EBIT Margin (%)
India 8.5 14.4 -586 bps 11.2 -266 bps Margins were impacted due to higher raw material cost
Europe 3.8 3.0 84 bps 10.3 -651 bps European margins were impacted due to 1) seasonally weak quarter of
Reifencom (posted negative EBITDA margin of 5%); 2) due to higher raw
material cost
Source: Company, ICICIdirect.com Research
Change in estimates
(| Crore) Old New % Change Old New % Change Comments
Revenue 14,037 15,014 7.0 15,401 16,420 6.6 The management expects the demand scenario to imporve thereby
registering healthy volume growth, going forward
EBITDA 2,149 1,808 -15.9 2,299 2,100 -8.7
EBITDA Margin (%) 15.3 12.0 -327 bps 14.9 12.8 -214 bps Higher raw material prices (NR) & with ATL unable to pass on (100% of
the same) to the consmuers is likely to impact its margins
PAT 1,143 992 -13.2 1,260 1,177 -6.6 Lower margin estimates likely to impact profitabiity
EPS (|) 22.7 19.7 -13.3 25.0 23.3 -6.6
FY18E FY19E
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 3
Key conference call takeaways
The management expects double digit volume growth in FY18E.
However, we expect pressure on margins to continue till H1FY18E
For Q4FY17, the standalone business (India) grew ~10%, as volumes
were up 9% YoY. According to the management, Q4FY17 saw good
volumes from the passenger car & farm segment while CV volumes
remained largely flat. Chinese imports have come down to <50%
from its peak in Q2FY16 (impacted by demonetisation) and is
benefiting the domestic tyre industry, especially ATL
The price difference between Chinese and Indian tyres has reduced to
~6% (against earlier 10-15%), mainly after Chinese player increased
prices by ~10% in the past
The 2-W tyres volumes were at 100,000 per month currently, which
the company plans to increase to 200,000 per month, going forward.
ATL continues to outsource the 2-W tyres and may produce the same
in Andhra Pradesh (AP), assuming volumes moves higher as per its
expectations, going forward
For Q4FY17, revenues from Reifencom were at €27 million (mn).
However, reported negative EBITDA margins were 5%. Revenues of
its existing European operations (Vredestein) came in at €118 mn vs.
€99 mn in Q4FY16 while margins came in at 10.6%. For FY17,
revenues from the Vredestein brand were at €456 mn vs. €423 mn.
According to the management, European business margins will
remain impacted mainly due to 1) higher raw material (as ATL in line
with industry peers has announced price hike of 8% but is yet to
implement the same) and 2) after start-up cost (will result into higher
overheads) in Hungary
According to the management, the impact of raw material price rise in
Indian market is at 23% (13% in Q3FY17 & 10% in Q4FY17) and
requires 15% ASP hike (fully passing on) to maintain its margins. ATL,
till date, have increased prices by 6% (3% each in Q4FY17 and in
April 2017). Thus, the management expects its margins to remain
under pressure till H1FY18
Overall capex for FY18E is expected to be | 2500 crore and is equally
split between India and European operations. For Europe, the
company is likely to spend €180 million, which would be towards
expansion at its Hungary plant and for maintenance purpose. Going
forward, the company will undertake a greenfield expansion in
Andhra Pradesh (AP). However, this will be done in FY19E and will
not have investment in FY18E
On a consolidated basis its gross and net debt stands at | 3400 crore
vs. | 2400 crore in Q3FY17, with leverage ratio (debt/equity) at 0.4x
In terms of revenue break-up, replacement: OEM mix continues to be
75:25, respectively. Segment wise, trucks account for 60% of
revenue, passenger car ~20%, LCV ~9%, farm segment 9% with
remaining 2% from the other segment
The average raw material cost for Q4FY17 for ATL was at – natural
rubber - | 155/kg; synthetic rubber - | 155/kg; carbon black - | 60/kg;
fabric - | 270/kg and steel chord - | 110/kg
ICICI Securities Ltd | Retail Equity Research Page 4
Company Analysis
Global player – with good business diversification across geographies!
A quick glance at Apollo’s consolidated performance shows an increase
in contribution of the European subsidiary from FY10 onwards. Revenue
from Europe has increased from ~24% in FY10 to ~30% in FY15. The
share had dropped to 27% in FY16 primarily due to internal factors
(namely implementation of SAP impacting sales volumes, resulting in
increase in inventory and working capital) and due to external factor
(unfavourable winter season and currency movement). However, the
management remained optimistic on demand, which recovered in FY17
along with large part of internal issues sorted out thereby increasing its
share to >30%. The company is also expanding its capacity with an
investment of ~€500 million in Eastern Europe over FY17-19E. For FY18E,
the management has guided an investment of ~€180 million in Europe,
thereby helping the company to serve the increasing demand, going
forward. The company has completed the restructuring of its South
African operations and closed its operations in FY15. Henceforth, it would
only be a trading subsidiary and would not be contributing meaningfully
to its consolidated revenue.
Exhibit 1: Revenue break-up - Geography-wise
5,0
37
5,4
90
8,1
58
8,5
07
8,7
12
8,9
38
8,6
82
8,9
26
10,1
38
11,0
56
1,9902,234
2,8502,992
3,943 4,0323,284
4,091
4,884
5,364
1,0971,183
1,3081,502
1,271 321
-
-
-
-
-
3,000
6,000
9,000
12,000
15,000
18,000
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17E
FY18E
FY19E
(|
crore)
India Europe South Africa
Source: Company, ICICIdirect.com Research
Exhibit 2: Profitability contribution - Geography-wise
661
413
499 736
930
1,1
06
1,3
46
1,1
78
1,0
72
1,2
38
224
298 386
432
557 479 256
243
349
420
-
400
800
1,200
1,600
2,000
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E
(|
crore)
India Europe
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 5
Revenue growth strong on radial TB side!
We have factored in revenue growth at ~11% CAGR in FY17-19E, mainly
led by volume (9%) growth. We believe the domestic market will improve
but the radialisation trend in the truck bus segment would hurt companies
with higher nylon capacity. The radialisation trend has promoted the
companies for higher capacity within the segment in India. ATL’s truck
bus radial (TBR) capacity is currently operating at >90% utilisation level.
Therefore, it is expanding its capacity from 6,000 units to 12,000 units in a
phased manner over the next 12-18 months. The competition from
cheaper imported Chinese tyre in the M&HCV replacement space has
been impacting Indian tyre manufacturers. However, demonetisation of
currency has impacted Chinese import (which are largely cash based)
favouring domestic players. According to the management, Chinese
import has come down to <50% from its peak in Q2FY16 benefiting ATL.
Any favourable step from the government, which has initiated a probe
into dumping of radial tyres from China, will further be positive for ATL.
Exhibit 3: We build modest revenue growth at 12% CAGR in FY17-19E
8,8
68
12,1
53
12,7
95
13,4
13
12,7
85
11,7
93
13,1
80
15,0
14
16,4
20
9.2
37.0
5.3 4.8
-4.7
-7.8
11.813.9
9.4
-
3,000
6,000
9,000
12,000
15,000
18,000
FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E
(|
crore)
-15
-10
-5
0
5
10
15
20
25
30
35
40
(%
)
Sales % growth
Source: Company, ICICIdirect.com Research
EBITDA margins to remains stable!
ATL’s margins have expanded from 9.6% to 15.1% from FY12 to FY15
and further increased to 16.7% in FY16 on the back of a reduction in raw
material prices. Prices of natural rubber (NR - account for ~40% of raw
material cost) declined from | 250/kg in 2011 to ~| 94/kg in February
2016. From its lows in February 2016 the price moved northwards to
| 159/kg in February 2017 to | 140/kg in May 2017. According to the
management, the impact of raw material price rise was 23% (13% in
Q3FY17 & 10% in Q4FY17) & requires 15% ASP hike (fully passing on) to
maintain its margins. Though, till date, they have increased prices by 6%
(3% each in Q4FY17 & in April 2017). Looking at the inventory and current
NR prices, the management expects its margins to remain under pressure
in H1FY18. It is likely to ease out afterwards. Also, start-up cost in
Hungary is likely to pressurise European margins. Thus, we expect lower
margins in FY18E with an improvement in FY19E.
ICICI Securities Ltd | Retail Equity Research Page 6
Exhibit 5: Margin movement with RM trend
57.2
56.0
52.4
51.9
52.7
57.2
58.6
56.7
56.9
50.8
53.4
49.5
49.9
49.3
14.3
13.2
14.9
15.8
16.6
17.7
16.1
17.2
16.016.3
14.214.4
11.1
16.0
8
10
12
14
16
18
20
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
Q4FY15
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
(%
)
36
40
44
48
52
56
60
64
(%
)
Raw materials/Sales Contribution OPM (LHS)
Source: Company, ICICIdirect.com Research
Exhibit 6: Natural rubber prices have been volatile!
160
94
205
80
100
120
140
160
180
200
220
240
260
Jun-11
Nov-11
Apr-12
Sep-12
Feb-13
Jul-13
Dec-13
May-14
Oct-14
Mar-15
Aug-15
Jan-16
Jun-16
Nov-16
Apr-17
(|
/Kg)
Production cut by
top Natural Rubber
(NR) producing
countries like
Thailand, Indonesia
and Malaysia
resulted into rise in
Floods in Thailand &
demand from China
resulted NR prices to
move northwards.
Source: Company, ICICIdirect.com Research
Exhibit 4: EBITDA margins to sustain over FY15-19E
978
1,1
66
1,4
57
1,8
76
1,9
31
1,9
68
1,8
46
1,8
08
2,1
00
11.0
9.6
11.4
14.0
15.1
16.7
14.0
12.012.8
-
500
1,000
1,500
2,000
2,500
FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E
(|
crore)
-
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
(%
)
EBITDA EBITDA Margins (%)
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 7
Strong capital structure in capital intensive, cyclical business!
Despite the capital intensiveness and cyclicality of the business, ATL has
managed to maintain decent balance sheet strength. With FY16, net D/E
at comfortable ~0.1x levels, we believe this is the company’s greatest
strength in the good RoCE business. We believe that as the company has
a huge expansion plan of over >| 6,000 crore over FY17-19E, with capex
for FY18E likely to be at ~| 2,500 crore, its debt levels are likely to
increase, going forward. Despite this, we believe it would be maintained
at a decent level of D/E of 0.4x. This is because CFO generation remains
strong and would contribute to the bulk of the expenditure.
Exhibit 7: Comfortable debt position in high RoCE business!
0.8 0.8
0.7
0.2
0.0
0.1
0.3
0.40.4
14.8 15.1
17.6
23.2
24.7
19.9
13.6
11.012.0
-
0.2
0.4
0.6
0.8
1.0
FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E
(x)
-
5
10
15
20
25
30
(%
)
Nebt Debt/Equity RoCE
Source: Company, ICICIdirect.com Research
Strong CFO generation with manageable debt levels, despite capex plans!
From ~| 295 crore in FY11, the CFO has increased to ~| 1764 crore in
FY17, mainly due to lower input cost (natural rubber) and more price
discipline maintained by domestic players in the past. With OEM demand
reviving, we expect volumes to improve, going forward. This would
further sustain CFOs, even as ATL embarks on capex in FY17-19E in
Eastern Europe and on enhancing capacity in the domestic business.
Exhibit 8: CFOs on up trend!
1,5
34
1,7
95
1,3
96
1,7
64
1,7
03
1,5
06
1,0
42
907
533
433
380
1,1
31
4,2
89
2,5
00
1,5
002
,222
2,5
50
2,6
51
1,6
13
801 1
,350
3,2
44
4,2
44
4,1
00
295
387
773
-
400
800
1,200
1,600
2,000
2,400
2,800
FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E
(|
crore)
CFO Capex Debt
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 8
Profitability to remain at elevated levels as demand returns!
With the expected demand revival, we believe volumes will improve as
OEM demand is likely to increase, thereby driving its revenue, going
forward. However, we have revised, moderated our PAT estimates mainly
due to lower EBITDA margins, higher debt for funding the capacity
expansion programme that will bring down profitability. Despite the
same, profitability is likely to remain at decent levels, with PAT margins
likely to come in at >7%, going forward.
Exhibit 10: EBITDA growth vs. interest/depreciation trend
978
1,8
76
1,9
31
1,9
68
1,8
46
1,8
08
2,1
00
313
284
183
92
103
142
142
397
411
411
424
462
526
575
1,1
66
1,4
57
185 287
272
326
-
500
1,000
1,500
2,000
2,500
FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E
(|
crore)
EBITDA Interest Depreciation
Source: Company, ICICIdirect.com Research
Exhibit 9: Profit margins to remain as operational improvement kicks in!
440
432 601
1,0
44
1,0
15
1,0
60
1,0
99.3
992.2
1,1
76.9
5.0
3.6
4.7
7.87.9
9.0
8.3
6.6
7.2
-
200
400
600
800
1,000
1,200
1,400
FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E
(|
crore)
2
3
4
5
6
7
8
9
10
(%
)
PAT PAT Margin (%)
Source: Company press release, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 9
Outlook and valuation
ATL’s revenue growth remained subdued in FY15 & FY16. However, it has
seen a recovery in FY17, on the back of a demand revival in the OEM
space. The company is further investing in its TBR capacity (where its
current utilisation is >90% and there is a shift in trend from bias to radial
tyres in India). This is likely to drive its volume growth, going forward.
Similarly, in Europe, its new facility is slated to aid the current capacity
crunch faced by Vredestein coupled with strong domestic demand, which
is expected to improve from FY17 onwards. With a decent D/E profile,
return ratios and strong operating cash flow, the company is much better
placed in this business cycle vis-à-vis previous up cycles due to its largely
diversified and global scale of business.
ATL is investing in more diversified, rapid growth areas coupled with a
larger scale of business in coming years. Going forward, the management
expects demand to recover. Hence, we build in revenue CAGR of 12% in
FY17-19E. The higher input cost is likely to impacts its margins in FY18E.
However, the same is expected to gradually recover in FY19E. Also,
positive development from the government in terms of restricting import
of Chinese tyres will benefit ATL. Thus, we maintain BUY
recommendation and value the stock at 12x FY19E EPS to arrive at a
target price of | 280.
Exhibit 11: Valuation
Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE
(| cr) (%) (|) (%) (x) (x) (%) (%)
FY16 11,793 (7.8) 21.7 14.4 11.0 6.4 17.1 19.9
FY17E 13,180 11.8 21.8 0.6 10.9 7.9 15.0 13.6
FY18E 15,014 13.9 19.7 (9.7) 12.1 8.5 12.2 11.0
FY19E 16,420 9.4 23.3 18.6 10.2 7.4 12.9 12.0
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 10
Recommended history vs. consensus
0
50
100
150
200
250
300
May-17Jan-17Sep-16May-16Jan-16Sep-15May-15
(|
)
0.0
20.0
40.0
60.0
80.0
100.0
(%
)
Price Idirect target Consensus Target Mean % Consensus with BUY
Source: Bloomberg, Company, ICICIdirect.com Research
Key events
Date Event
Oct-10 Rubber prices start moving up on production concerns in Thailand on excessive rains
Aug-11 Rubber prices begin to stabilise as production picks up
Jun-13 Apollo announces Cooper Tire deal acquisition
Oct-13 Cooper deal under pressure on China labour strike
Oct-13 Cooper Tire files suit against Apollo
Dec-13 Cooper Tire terminates deal with Apollo; court dismisses Cooper appeal
Feb-14 Cooper Tire files suit against Apollo
Jun-14 Apollo to invest ~|400 crore at its Kerala facility to expand its Off-highway tyre capacity
Sep-14 Company to invest greenfield facility at Hungary and is likely to invest Euro 475 million over next 4 to 5 years
Sep-14 Apollo Tyre Africa voluntarily decides to cease its business operations
Oct-14 RBI hikes FII limit for investment upto 45% of paid up capital in Apollo Tyre
May-15 Apollo plans to invest |1500 crore to expand its Truck bus radial (TBR) capacity at its Chennai plant from 6000 units/ day to 9000 units/day
Aug-15 Board approves ATL's plans to raise debt of | 2,000 crore by way of rupee term loan, foregin currency term loan, NCDs from time to time
Source: Company, ICICIdirect.com Research
Top 10 Shareholders Shareholding Pattern
Rank Name Latest Filing Date % O/S Position (m) Change (m)
1 Neeraj Consultants Pvt. Ltd. 31-Mar-17 0.14 72.1 29.63
2 Apollo Finance, Ltd. 31-Mar-17 0.07 36.8 0.00
3 Sunrays Properties & Investment Company Pvt. Ltd. 31-Mar-17 0.07 35.7 0.00
4 Sacred Heart Investment Company Pvt. Ltd. 31-Mar-17 0.05 24.4 14.98
5 Templeton Asset Management Ltd. 31-Mar-17 0.04 18.7 -6.31
6 Franklin Templeton Asset Management (India) Pvt. Ltd. 31-Mar-17 0.04 18.7 -11.03
7 Motlay Finance Pvt. Ltd. 31-Mar-17 0.03 16.7 4.11
8 Classic Auto Tubes, Ltd. 31-Mar-17 0.03 14.5 0.00
9 Mehta (Ashwin Shantilal) 31-Mar-17 0.03 13.5 0.00
10 Skagen AS 31-Mar-17 0.02 11.9 0.00
(in %) Mar-16 Jun-16 Sep-16 Dec-16 Mar-17
Promoter 44.2 44.2 44.2 44.2 44.2
FII 32.7 33.0 33.0 33.4 31.6
DII 10.6 10.3 10.9 10.3 11.8
Others 12.5 12.7 12.0 12.2 12.4
Source: Reuters, ICICIdirect.com Research
Recent Activity
Investor name Value Shares Investor name Value Shares
Neeraj Consultants Pvt. Ltd. 95.36 29.63 Constructive Finance Pvt. Ltd. -95.36 -29.63
Sacred Heart Investment Company Pvt. Ltd. 48.22 14.98 Apollo International, Ltd. -53.24 -16.54
Motlay Finance Pvt. Ltd. 13.22 4.11 Franklin Templeton Asset Management (India) Pvt. Ltd. -35.51 -11.03
Sundaram Asset Management Company Limited 7.87 2.45 Dimensional Fund Advisors, L.P. -24.62 -7.65
Amit Dyechem Pvt. Ltd. 5.02 1.56 Templeton Asset Management Ltd. -20.30 -6.31
Buys Sells
Source: Reuters, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 11
.
Financial summary
Profit and loss statement | Crore
(Year-end March) FY16 FY17E FY18E FY19E
Total operating Income 11,793.0 13,180.0 15,014.3 16,420.3
Growth (%) -7.8 11.8 13.9 9.4
Raw Material Expenses 5,962.4 6,890.1 8,200.7 8,995.4
Employee Expenses 1,586.9 1,742.1 1,973.7 2,172.4
Other Expenses 2,275.4 2,701.5 3,032.2 3,152.6
Total Operating Expenditure 9,824.7 11,333.6 13,206.6 14,320.5
EBITDA 1,968.3 1,846.4 1,807.8 2,099.8
Growth (%) 1.9 -6.2 -2.1 16.2
Depreciation 423.9 461.8 525.5 574.7
Interest 91.6 102.9 142.3 141.9
Other Income 70.0 154.1 173.5 175.6
PBT 1,570.6 1,435.9 1,313.5 1,558.9
Exceptional items 0.0 0.0 0.0 0.0
Total Tax 477.6 336.5 321.3 381.9
PAT 1,093.0 1,099.3 992.2 1,176.9
Growth (%) 14.4 0.6 -9.7 18.6
EPS (|) 21.7 21.8 19.7 23.3
Source: Company, ICICIdirect.com Research
Cash flow statement | Crore
(Year-end March) FY16 FY17E FY18E FY19E
Profit after Tax 1,093.0 1,099.3 992.2 1,176.9
Add: Depreciation 423.9 461.8 525.5 574.7
(Inc)/dec in Current Assets -778.6 -450.9 -122.8 -367.1
Inc/(dec) in CL and Provisions 657.8 653.3 307.9 121.6
CF from operating activities 1,396.1 1,763.5 1,702.8 1,506.2
(Inc)/dec in Investments -21.6 -272.8 0.0 0.0
(Inc)/dec in Fixed Assets -1,131.5 -4,289.1 -2,500.0 -1,500.0
Others -839.9 885.4 86.1 22.7
CF from investing activities -1,993.0 -3,676.4 -2,413.9 -1,477.3
Issue/(Buy back) of Equity 0.0 0.0 0.0 0.0
Inc/(dec) in loan funds 549.1 1,894.8 1,000.0 -144.5
Dividend paid & dividend tax -130.2 -193.3 -202.9 -202.9
Others 177.6 -45.9 0.0 0.0
CF from financing activities 596.5 1,655.6 797.1 -347.4
Net Cash flow -0.4 -257.7 85.9 -318.5
Opening Cash 595.0 594.6 336.9 422.8
Closing Cash 594.6 336.9 422.8 104.3
Source: Company, ICICIdirect.com Research
Balance sheet | Crore
(Year-end March) FY16 FY17E FY18E FY19E
Liabilities
Equity Capital 50.9 50.9 50.9 50.9
Reserve and Surplus 6,131.3 7,290.3 8,079.6 9,053.6
Total Shareholders funds 6,182.3 7,341.2 8,130.5 9,104.5
Total Debt 1,349.7 3,244.5 4,244.5 4,100.0
Deferred Tax Liability 596.2 766.1 872.7 954.5
Total Liabilities 8,329.9 11,873.5 13,835.1 14,753.5
Assets
Gross Block 9,267.0 11,658.7 16,531.0 18,131.0
Less: Acc Depreciation 5,158.1 5,619.9 6,145.4 6,720.1
Net Block 4,230.6 6,433.2 10,780.1 11,805.4
Capital WIP 975.0 2,872.3 500.0 400.0
Total Fixed Assets 5,205.5 9,305.6 11,280.1 12,205.4
Investments 122.6 396.2 396.2 396.2
Goodwill on consolidation 471.1 177.4 177.4 177.4
Inventory 1,945.4 2,645.5 2,427.0 2,609.3
Debtors 1,084.3 1,127.5 1,398.6 1,529.6
Loans and Advances 688.6 45.0 51.2 56.0
Other current assets 108.8 460.1 524.2 573.3
Cash 594.6 336.9 422.8 104.3
Total Current Assets 4,421.8 4,615.1 4,823.8 4,872.4
Creditors 1,545.8 1,731.8 1,851.1 1,934.4
Provisions 669.3 438.6 468.9 490.0
Total Current Liabilities 2,215.1 2,170.4 2,319.9 2,424.4
Net Current Assets 2,206.7 2,444.7 2,503.9 2,448.0
Application of Funds 8,329.9 11,873.5 13,835.1 14,753.5
Source: Company, ICICIdirect.com Research
Key ratios
(Year-end March) FY16 FY17E FY18E FY19E
Per share data (|)
EPS 21.7 21.8 19.7 23.3
Cash EPS 30.1 31.0 30.1 34.7
BV 122.6 145.6 161.3 180.6
DPS 2.6 3.8 4.0 4.0
Cash Per Share 11.8 6.7 8.4 2.1
Operating Ratios (%)
EBITDA Margin 16.7 14.0 12.0 12.8
PBT / Net sales 13.1 10.5 8.5 9.3
PAT Margin 8.0 5.0 3.4 4.8
Inventory days 60.2 73.3 59.0 58.0
Debtor days 33.6 31.2 34.0 34.0
Creditor days 47.8 48.0 45.0 43.0
Return Ratios (%)
RoE 17.1 15.0 12.2 12.9
RoCE 19.9 13.6 11.0 12.0
RoIC 26.0 16.0 9.9 10.7
Valuation Ratios (x)
P/E 11.3 10.9 12.1 10.2
EV / EBITDA 6.4 7.9 8.5 7.4
EV / Net Sales 1.1 1.1 1.0 0.9
Market Cap / Sales 1.0 0.9 0.8 0.7
Price to Book Value 1.9 1.6 1.5 1.3
Solvency Ratios
Debt/Equity 0.2 0.4 0.5 0.5
Current Ratio 1.7 2.0 1.9 2.0
Quick Ratio 0.8 0.8 0.9 0.9
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 12
ICICIdirect.com coverage universe (Auto & Auto Ancillary)
CMP M Cap
(|) TP(|) Rating (| Cr) FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E
Amara Raja (AMARAJ) 880 930 Hold 15037 28.5 29.4 37.3 30.8 29.9 23.6 18.1 17.1 13.7 31.2 26.2 27.9 23.2 20.1 21.2
Apollo Tyre (APOTYR) 240 280 Buy 12116 21.7 21.8 19.7 11.1 11.0 12.2 6.5 7.9 8.6 19.9 13.6 11.0 17.1 15.0 12.2
Ashok Leyland (ASHLEY) 83 100 Buy 23561 2.5 4.0 4.8 32.9 20.9 17.4 11.8 11.6 9.6 22.8 20.8 22.6 17.4 17.4 18.8
Bajaj Auto (BAAUTO) 2857 3000 Hold 82672 126.8 142.2 156.3 22.2 19.8 18.0 16.6 16.8 14.7 42.2 38.9 38.1 29.9 28.9 27.9
Balkrishna Ind. (BALIND) 1544 1400 Buy 14926 58.7 77.0 83.8 20.1 15.3 14.1 11.2 9.6 7.6 20.4 22.5 24.7 20.3 22.5 24.7
Bharat Forge (BHAFOR) 1100 1150 Buy 25618 28.0 30.5 44.6 39.3 36.1 24.6 17.6 17.9 13.4 16.5 14.8 19.5 18.3 17.4 21.5
Bosch (MICO) 23392 25250 Buy 73451 410.2 567.0 566.2 55.2 40.0 40.0 36.0 37.5 26.1 15.1 15.8 15.8 22.5 21.4 25.3
Eicher Motors (EICMOT) 26919 28970 Buy 72709 633.4 772.3 927.4 42.5 34.9 29.0 21.8 16.8 13.5 40.2 40.5 38.6 36.4 33.5 30.6
Exide Industries (EXIIND) 239 270 Buy 20315 7.3 8.2 9.4 32.6 29.3 25.3 19.0 17.7 14.4 19.4 18.7 20.4 14.0 14.1 14.8
Hero Mototcorp (HERHON) 3401 3330 Hold 67923 156.9 170.9 181.6 21.7 19.9 18.7 13.4 12.4 11.6 53.6 49.6 46.8 39.4 36.4 34.0
JK Tyre & Ind (JKIND) 177 145 Buy 4014 21.0 15.5 22.5 8.4 11.4 7.9 4.5 4.9 4.3 20.1 14.5 15.9 29.1 19.3 20.7
Mahindra CIE (MAHAUT) 246 280 Buy 7952 4.5 10.3 13.5 55.1 23.8 18.2 16.8 11.5 9.1 5.4 10.8 12.6 6.9 11.1 13.2
Maruti Suzuki (MARUTI) 6631 7200 Buy 200375 151.3 242.9 280.1 43.8 27.3 23.7 21.4 18.6 15.8 23.9 26.3 26.5 16.9 20.3 20.4
Motherson (MOTSUM) 408 370 Hold 57320 9.1 10.4 14.0 45.0 39.2 29.1 15.4 12.0 9.7 19.9 17.8 19.6 30.0 18.8 21.7
Tata Motors (TELCO) 423 535 Buy 128276 37.2 19.2 41.1 12.3 23.9 11.1 3.8 5.1 3.8 17.0 8.7 14.2 15.3 6.7 12.5
Wabco India (WABTVS) 5886 7000 Buy 11183 107.7 118.6 158.4 54.6 49.6 37.2 37.9 32.4 24.8 19.4 17.8 19.4 25.5 24.5 26.8
Sector / Company
RoE (%)EPS (|) P/E (x) EV/EBITDA (x) RoCE (%)
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 13
RATING RATIONALE
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as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
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Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
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ICICIdirect.com Research Desk,
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ICICI Securities Ltd | Retail Equity Research Page 14
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