2QFY2019 Result Update | Automobile
November 15, 2018
Ashok Leyland Ltd.
BUY
CMP
`108
Performance Update
Target Price
`149
(` cr)
2QFY19
2QFY18
% yoy 1QFY19
% qoq
Investment Period
12 months
Revenue
7,608
6,047
25.8
6,250
21.7
Stock Info
EBITDA
790
609
29.7
623
26.8
Sector
Automobile
OPM (%)
10.4
10.1
31
10.0
41
Market Cap (` cr)
31,219
Reported PAT
460
334
37.5
370
24.2
Net Debt (` cr)
3,739
Source: Company, Angel Research
Beta
1.1
For 2QFY2019, Ashok Leyland Ltd (ALL) posted good set of results both on top-
52 Week High / Low
168/103
line as well as bottom-line fronts. Revenue grew by 25.8% yoy to `7,608cr. On
Avg. Daily Volume
12,80,187
Face Value (`)
5
the bottom-line front, ALL reported PAT growth of 37.5% yoy to `460cr on the
BSE Sensex
35,110
back of strong top-line growth and operating margin improvement.
Nifty
10,569
Strong volumes boost overall top-line growth: The company’s top-line grew by
Reuters Code
ASOK.BO
25.8% yoy to `7,608cr on the back of strong volume growth (up ~27% yoy).
Bloomberg Code
AL.IN
During the quarter, MHCV segment grew by ~22% and LCV segment grew by
~42%. However, overall realization has declined by ~1% (higher discount given
Shareholding Pattern (%)
by ALL). Further, the growth pace in Q3FY19E is expected to remain slow owing
Promoters
51.1
to liquidity issues, however, post that strong sales growth is expected. The growth
MF / Banks / Indian
5.8
FII / NRIs / OCBs
22.9
will be led by pre-buying sales (due to introduction of BS6 norms FY2020) and
Indian Public/Others
20.2
government’s push for infra & construction projects (around 45% of ALL’s truck
volumes are from the infrastructure and construction segment).
Abs.(%)
3m
1yr
3yr
Strong revenue, healthy operating performance aids profitability: On the
Sensex
(6.6)
6.4
37.2
operating front, the company’s margin rose by 31bps yoy to 10.4%. Moreover,
ALL
(5.3)
5.1
19.6
ALL reported ~38% yoy rise in its net profit to `460cr on the back of strong top-
line growth.
Outlook and Valuation: We expect Ashok Leyland to report net profit (reported)
CAGR of ~21% to ~`2,303cr over FY2018-20E mainly due to improvement in
pre-buying sales (due to introduction of BS6 norms in FY2020) and replacement
Historical share price chart
demand (implementation of vehicle scrappage policy). Thus, we recommend BUY
180
on the stock with Target Price of `149.
160
140
Key Financials
120
100
Y/E March (` cr)
FY2017
FY2018
FY2019E
FY2020E
80
60
Net sales
20,019
26,248
32,042
37,488
40
% chg
5.7
31.1
22.1
17.0
20
0
Adj. Net profit
1,491
1,571
1,918
2,303
% chg
92.7
5.4
22.1
20.0
EBITDA margin (%)
8.4
9.4
10.3
10.5
Source: Company, Angel Research
EPS (`)
5.1
5.4
6.6
7.9
P/E (x)
21.0
19.9
16.3
13.6
Amarjeet S Maurya
P/BV (x)
5.1
4.4
3.7
3.1
022-40003600 Ext: 6831
RoE (%)
24.3
22.0
22.8
23.0
RoCE (%)
14.0
23.5
29.4
30.5
EV/Sales (x)
1.5
1.0
0.8
0.7
EV/EBITDA (x)
17.7
10.3
8.1
6.5
Source: Company, Angel Research Note
Please refer to important disclosures at the end of this report
1
Ashok Leyland | 2QFY2019 Result Update
Exhibit 1: 2QFY2019 Performance
Y/E March (` cr)
2QFY19
2QFY18
% yoy
1QFY19
% qoq
1HFY19
1HFY18
% chg
Net Sales
7,608
6,047
25.8
6,250
21.7
13858
10334
34.1
Consumption of RM
5529
4,314
28.2
4351
27.1
9,880
7,246
36.4
(% of Sales)
72.7
71.3
69.6
71.3
70.1
Staff Costs
517
492
5.2
493
4.9
1010.4
887.8
13.8
(% of Sales)
6.8
8.1
7.9
7.3
8.6
Other Expenses
772
632
22.1
783
(1.4)
1,551
1,301
19.2
(% of Sales)
10.1
10.5
12.5
11.2
12.6
Total Expenditure
6,818
5,438
25.4
5,627
21.2
12,442
9,434
31.9
Operating Profit
790
609
29.7
623
26.8
1,417
900
57.4
OPM
10.4
10.1
10.0
10.2
8.7
Interest
17
41
(57.7)
12
49.9
29
78
(62.7)
Depreciation
140
141
(0.7)
143
(2.0)
283
273
3.6
Other Income
28
56
(49.4)
53
(47.3)
78
94
(16.9)
PBT (excl. Ext Items)
661
483
36.9
522
26.6
1,182.54
643.13
83.9
Ext (Income)/Expense
-
-
-
-
-
PBT (incl. Ext Items)
661
483
36.9
522
26.6
1,183
643
83.9
(% of Sales)
8.7
8.0
8.4
8.5
6.2
Provision for Taxation
201
148
35.5
152
32.4
353
198
78.5
(% of PBT)
30.4
30.7
29.1
29.8
30.7
Reported PAT
460
334
37.5
370
24.2
829.68
445.50
86.2
PATM
6.0
5.5
5.9
6.0
4.3
Extra-ordinary Items
(16)
(10)
(21)
(8)
Adjusted Profit After Extra-ordinary item
476
334
42.3
380
25.0
850.89
453.27
87.7
Source: Company, Angel Research
November 15, 2018
2
Ashok Leyland | 2QFY2019 Result Update
Outlook and Valuation
We expect Ashok Leyland to report net profit (reported) CAGR of ~21% to
~`2,303cr over FY2018-20E mainly due to improvement in pre-buying sales (due
to introduction of BS6 norms in FY2020) and replacement demand
(implementation of vehicle scrappage policy). Thus, we recommend BUY on the
stock with Target Price of `149.
Downside risks to our estimates
Slowdown in industrial activities could restrict sales volume for ALL.
Delay in implementation of vehicle scrappage policy could restrict the
additional sales growth for company.
Company Background
Ashok Leyland Ltd (ALL) is a holding company. The company is engaged in
commercial vehicles and related components. Through its subsidiaries, it is
engaged in manufacturing and trading in Medium and Heavy Commercial Vehicle
(MHCV), Light Commercial Vehicles (LCV), Passenger Vehicles (PV), automotive
aggregates, vehicle financing and engineering design services. It offers a range of
18 to 80 seater buses under categories such as city application and electric buses.
It offers a range of trucks, which includes long haul trucks, mining and construction
trucks, and distribution trucks. It designs, develops and manufactures defence
vehicles for armed forces. It offers Light Vehicles, which include DOST, PARTNER,
STiLE and MiTR. It offers power solutions for electric power generation, agricultural
harvester combines, earth moving and construction equipment and marine and
other non-automotive applications. It has operations in India, Sri Lanka,
Bangladesh, Mauritius, the Middle East and Africa.
November 15, 2018
3
Ashok Leyland | 2QFY2019 Result Update
Standalone Profit & Loss Statement
Y/E March (` cr)
FY2016
FY2017
FY2018
FY2019E
FY2020E
Net Sales
18,937
20,019
26,248
32,042
37,488
% chg
39.6
5.7
31.1
22.1
17.0
Total Expenditure
17,498
18,341
23,774
28,742
33,552
Raw Material
13,195
13,973
18,621
22,910
26,804
Personnel
1,385
1,543
1,812
2,627
3,074
Others Expenses
2,918
2,825
3,341
3,204
3,674
EBITDA
1,439
1,677
2,474
3,300
3,936
% chg
79.4
16.5
47.5
33.4
19.3
(% of Net Sales)
7.6
8.4
9.4
10.3
10.5
Depreciation& Amortisation
488
518
555
624
680
EBIT
952
1,160
1,919
2,676
3,257
% chg
146.4
21.9
65.5
39.5
21.7
(% of Net Sales)
5.0
5.8
7.3
8.4
8.7
Interest & other Charges
248
155
131
72
60
Other Income
123
326
443
140
140
(% of PBT)
14.8
24.5
19.8
5.1
4.2
Recurring PBT
827
1,330
2,231
2,744
3,337
% chg
86.9
60.9
67.7
23.0
21.6
Tax
437
107
668
851
1,034
(% of PBT)
52.9
8.0
30.0
31.0
31.0
PAT (reported)
390
1,223
1,563
1,893
2,303
Extraordinary Items
(384)
(268)
(9)
(25)
-
ADJ. PAT
774
1,491
1,571
1,918
2,303
% chg
199.5
92.7
5.4
22.1
20.0
(% of Net Sales)
4.1
7.4
6.0
6.0
6.1
Basic EPS (`)
2.6
5.1
5.4
6.6
7.9
Fully Diluted EPS (`)
2.6
5.1
5.4
6.6
7.9
% chg
199.5
92.7
5.4
22.1
20.0
November 15, 2018
4
Ashok Leyland | 2QFY2019 Result Update
Standalone Balance Sheet
Y/E March (` cr)
FY2016
FY2017
FY2018
FY2019E FY2020E
SOURCES OF FUNDS
Equity Share Capital
285
285
293
293
293
Reserves& Surplus
5,123
5,841
6,861
8,107
9,700
Shareholders Funds
5,407
6,126
7,154
8,400
9,993
Total Loans
2,415
2,145
1,002
700
700
Deferred Tax Liability
753
741
726
726
726
Total Liabilities
8,575
9,012
8,882
9,826
11,419
APPLICATION OF FUNDS
Gross Block
5,279
5,858
6,312
6,958
7,658
Less: Acc. Depreciation
487
887
1,338
1,962
2,641
Net Block
4,792
4,971
4,974
4,996
5,017
Capital Work-in-Progress
76
206
401
401
401
Investments
1,980
2,879
5,803
2,774
2,774
Current Assets
5,925
5,744
5,408
10,496
13,901
Inventories
1,625
2,501
1,710
2,897
3,697
Sundry Debtors
1,251
860
980
1,931
2,465
Cash
1,593
912
1,004
2,624
3,802
Loans & Advances
712
709
1,120
1,602
2,062
Other Assets
745
762
593
1,442
1,874
Current liabilities
4,623
5,402
8,131
8,801
10,249
Net Current Assets
1,303
342
(2,723)
1,695
3,652
Deferred Tax Asset
424
614
427
427
427
Mis. Exp. not written off
-
-
-
-
-
Total Assets
8,575
9,012
8,882
9,826
11,419
November 15, 2018
5
Ashok Leyland | 2QFY2019 Result Update
Standalone Cashflow Statement
Y/E March (Rs cr)
FY2016
FY2017
FY2018
FY2019E FY2020E
Profit before tax
390
1223
1563
2744
3337
Depreciation
488
518
555
624
680
Change in Working Capital
(179)
190
2962
(2799)
(778)
Interest / Dividend (Net)
203
88
77
0
0
Direct taxes paid
(441)
(348)
(415)
(851)
(1034)
Others
1223
484
677
0
0
Cash Flow from Operations
1683
2155
5418
(281)
2204
(Inc.)/ Dec. in Fixed Assets
34
(366)
(532)
(500)
(700)
(Inc.)/ Dec. in Investments
330
(1111)
(2800)
3028
0
Cash Flow from Investing
364
(1477)
(3332)
2528
(700)
Issue of Equity
0
0
0
0
0
Inc./(Dec.) in loans
(789)
(883)
(1270)
(302)
0
Dividend Paid (Incl. Tax)
(154)
(325)
(549)
(325)
(325)
Interest / Dividend (Net)
(263)
(151)
(175)
0
0
Cash Flow from Financing
(1205)
(1359)
(1994)
(628)
(325)
Inc./(Dec.) in Cash
842
(681)
92
1619
1179
Opening Cash balances
751
1593
912
1004
2624
Closing Cash balances
1593
912
1004
2624
3802
November 15, 2018
6
Ashok Leyland | 2QFY2019 Result Update
Exhibit 2:
Y/E March
FY2016
FY2017
FY2018
FY2019E FY2020E
Valuation Ratio (x)
P/E (on FDEPS)
40.5
21.0
19.9
16.3
13.6
P/CEPS
35.7
18.0
14.8
12.4
10.5
P/BV
5.8
5.1
4.4
3.7
3.1
Dividend yield (%)
0.5
1.0
0.0
0.0
0.0
EV/Sales
1.6
1.5
1.0
0.8
0.7
EV/EBITDA
21.0
17.7
10.3
8.1
6.5
EV / Total Assets
3.5
3.3
2.9
2.6
2.1
Per Share Data (Rs)
EPS (Basic)
2.6
5.1
5.4
6.6
7.9
EPS (fully diluted)
2.6
5.1
5.4
6.6
7.9
Cash EPS
3.0
5.9
7.2
8.6
10.2
DPS
0.5
1.1
0.0
0.0
0.0
Book Value
18.5
20.9
24.4
28.7
34.1
Returns (%)
ROCE
12.2
14.0
23.5
29.4
30.5
Angel ROIC (Pre-tax)
22.4
25.9
142.2
72.3
79.1
ROE
14.3
24.3
22.0
22.8
23.0
Turnover ratios (x)
Asset Turnover (Gross Block)
3.6
3.4
4.2
4.6
4.9
Inventory / Sales (days)
31
46
24
33
36
Receivables (days)
24
16
14
22
24
Payables (days)
50
56
66
60
60
Working capital cycle (ex-cash) (days)
6
5
(29)
(5)
0
Source: Company, Angel Research
November 15, 2018
7
Ashok Leyland | 2QFY2019 Result Update
Research Team Tel: 022 - 39357800
DISCLAIMER
Angel Broking Limited (hereinafter referred to as “Angel”) is a registered Member of National Stock Exchange of India Limited, Bombay
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Portfolio Manager and Investment Adviser with SEBI. It also has registration with AMFI as a Mutual Fund Distributor. Angel Broking
Limited is a registered entity with SEBI for Research Analyst in terms of SEBI (Research Analyst) Regulations, 2014 vide registration
number INH000000164. Angel or its associates has not been debarred/ suspended by SEBI or any other regulatory authority for
accessing /dealing in securities Market. Angel or its associates/analyst has not received any compensation / managed or co-managed
public offering of securities of the company covered by Analyst during the past twelve months.
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment
decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should
make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the
companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine
the merits and risks of such an investment.
Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and
trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's
fundamentals. Investors are advised to refer the Fundamental and Technical Research Reports available on our website to evaluate the
contrary view, if any
The information in this document has been printed on the basis of publicly available information, internal data and other reliable
sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this
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Disclosure of Interest Statement
Ashok Leyland
1. Financial interest of research analyst or Angel or his Associate or his relative
No
2. Ownership of 1% or more of the stock by research analyst or Angel or associates or relatives
No
3. Served as an officer, director or employee of the company covered under Research
No
4. Broking relationship with company covered under Research
No
Ratings (Returns):
Buy (> 15%)
Accumulate (5% to 15%)
Neutral (-5 to 5%)
Reduce (-5% to -15%)
Sell (< -15%)
November 15, 2018
8
