2QFY2013 Result Update | Automobile

November 9, 2012

Ashok Leyland
Performance Highlights
Quarterly highlights (Standalone)
Y/E March (` cr) Net Sales EBITDA EBITDA margin (%) Adj. PAT
Source: Company, Angel Research

BUY
CMP Target Price
Investment Period
2QFY12 3,115 331 10.6 154 % chg (yoy) 5.8 0.9 (50)bp (7.5) 1QFY13 3,007 241 8.0 67 % chg (qoq) 9.6 38.8 213bp 113.0

`26 `31
12 Months

2QFY13 3,296 334 10.1 143

Stock Info Sector Market Cap (` cr) Net Debt (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Automobile 6,838 3,494 1.0 33/20 836,492 1.0 18,684 5,686 ASOK.BO AL@IN

Ashok Leyland (AL) posted strong results for 2QFY2013 which were ahead of our estimates led by EBITDA margin expansion of 213bp on a sequential basis, higher other income (up 85.5% qoq) and lower tax-rate (8.5% vs 17.3% in 1QFY2013). We revise our volume estimates marginally downwards to account for the continued weakness in the medium and heavy commercial vehicle (MHCV) segment. However, we revise upwards our EBITDA margin estimates to factor in the strong performance during the quarter and also to account for management guidance of 10% EBITDA margin in 2HFY2013. We also lower our tax-rate to 15% for FY2013 from 18% earlier as guided by the management. We maintain our Buy rating on the stock. Strong results for 2QFY2013: AL registered an in-line growth of 5.8% yoy (9.6% qoq) in net sales to `3,296cr driven by a 26.1% yoy (8.2% qoq) growth in volumes. While, Dost volumes sustained momentum (up 19.6% qoq); total volumes ex Dost posted a decline of 10.5% yoy (up 4.2% qoq) due to slowdown in industrial activity, increase in prices and lower freight availability. The net average realization improved 1.3% qoq despite higher discounts on MHCVs (higher by `20,000/vehicle to `80,000) led by better realization on the exports front due to favorable currency movement and strong spare parts sales. The EBITDA margin surged 213bp sequentially to 10.1%, ahead of our estimates of 9.3%, mainly due to a decline in employee costs (down 1.5% qoq) and other expenditure (down 3.6% qoq). The other expenditure was lower on account of forex gain of `12cr, and savings of `15cr and `10cr on ad spends and power costs respectively. Led by a strong operating performance, significantly higher other income and lower tax-rate, the net profit surged 113% qoq (down 7.5% yoy) to `143cr. Outlook and valuation: While the near term outlook for the MHCV industry remains challenging due to slowdown in overall industrial activity; we expect volumes to recover in FY2014E led by likely easing of interest rates by 25-50bp in FY2013. At `26, AL is trading at 9x its FY2014E earnings. We maintain our Buy rating on the stock with a target price of `31.

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 38.6 20.9 29.2 11.3

Abs. (%) Sensex Ashok Leyland

3m 6.4 12.0

1yr 7.6 (9.2)

3yr 13.2 (2.7)

Key financials (Standalone)

Y/E March (` cr) Net Sales % chg Net Profit % chg EBITDA (%) EPS (`) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research

FY2011 11,417 54.1 630 64.2 10.6 2.4 10.9 2.6 16.5 14.4 0.6 6.4

FY2012 13,318 16.6 562 (10.8) 9.4 2.1 12.2 2.4 13.8 12.9 0.5 6.1

FY2013E 14,490 8.8 592 5.3 9.5 2.2 11.6 2.2 13.6 13.1 0.5 5.9

FY2014E 16,606 14.6 759 28.3 9.6 2.9 9.0 1.9 16.1 14.6 0.4 4.9

Yaresh Kothari
022-3935 7800 Ext: 6844 yareshb.kothari@angelbroking.com

Please refer to important disclosures at the end of this report

Ashok Leyland | 2QFY2013 Result Update

Exhibit 1: Quarterly financial performance (Standalone)

Y/E March (` cr) Net Sales Consumption of RM (% of sales) Staff costs (% of sales) Purchase of traded goods (% of sales) Other expenses (% of sales) Total Expenditure Operating Profit OPM (%) Interest Depreciation Other income PBT (excl. Extr. Items) Extr. income/(expense) PBT (incl. Extr. Items) (% of sales) Provision for taxation (% of PBT) Reported PAT Adj PAT Adj. PATM Equity capital (cr) Reported EPS (`)
Source: Company, Angel Research

2QFY13 3,296 2,097 63.6 264 8.0 303 9.2 299 9.1 2,962 334 10.1 104 98 24 156 156 4.7 13 8.5 143 143 4.3 266 0.5

2QFY12 3,115 2,200 70.6 252 8.1 92 3.0 240 7.7 2,784 331 10.6 66 86 13 193 193 6.2 39 20.1 154 154 4.9 266 0.6

% chg (yoy) 5.8 (4.7) 4.9 227.2 24.7 6.4 0.9 57.4 14.5 77.3 (19.2) (19.2) (65.7) (7.5) (7.5)

1QFY13 3,007 1,935 64.4 268 8.9 253 8.4 310 10.3 2,767 241 8.0 83 89 13 81 81 2.7 14 17.3 67 67 2.2 266

% chg (qoq) 9.6 8.3 (1.5) 19.5 (3.6) 7.1 38.8 24.3 10.3 85.5 92.6 92.6 (4.9) 113.0 113.0

1HFY13 6,303 4,032 64.0 532 8.4 556 8.8 609 9.7 5,729 575 9.1 187 188 37 237 237 3.8 27 11.5 210 210 3.3 266

1HFY12 5,628 3,936 69.9 501 8.9 168 3.0 446 7.9 5,052 576 10.2 123 171 21 304 304 5.4 63 20.8 240 240 4.3 266 0.9

% chg (yoy) 12.0 2.4 6.1 231.6 36.4 13.4 (0.2) 52.7 10.0 75.7 (22.0) (22.0) (56.8) (12.8) (12.8)

(7.5)

0.3

113.0

0.8

(12.8)

Exhibit 2: 2QFY2013 Actual vs Angel estimates

Y/E March (` cr) Net Sales EBITDA EBITDA margin (%) Adj. PAT
Source: Company, Angel Research

Actual 3,296 334 10.1 143

Estimates 3,326 310 9.3 117

Variation (%) (0.9) 7.6 80bp 22.2

Exhibit 3: Quarterly volume performance

(units) MHCV passenger MHCV goods LCV (ex. Dost) Total volume (ex. Dost) Dost Total volume (incl. Dost) Exports (inc. above )
Source: Company, Angel Research

2QFY13 5,348 15,625 201 21,174 8,666 29,840 2,083

2QFY12 6,123 17,258 278 23,659 23,659 3,230

% chg (yoy) (12.7) (9.5) (27.7) (10.5) 26.1 (35.5)

1QFY13 % chg (qoq) 6,604 13,295 431 20,330 7,248 27,578 3,003 (19.0) 17.5 (53.4) 4.2 19.6 8.2 (30.6)

1HFY13 11,952 28,920 632 41,504 15,914 57,418 5,086

1HFY12 11,451 31,013 472 42,936 42,936 5,769

% chg (yoy) 4.4 (6.7) 33.9 (3.3) 33.7 (11.8)

November 9, 2012

Ashok Leyland | 2QFY2013 Result Update

In-line growth in net sales; up 5.8% yoy: For 2QFY2013, net sales posted an in-line growth of 5.8% yoy (9.6% qoq) to `3,296cr driven by 26.1% yoy (8.2% qoq) increase in volumes. The volume growth was led by the small commercial vehicle, Dost which registered a sequential growth of 19.6%. However, total volumes ex Dost declined 10.5% yoy led by slowdown in industrial activity, increasing fuel and product prices and lower freight availability. The net average realization declined 16.1% yoy largely on account of higher contribution from the lower priced Dost vehicle. On a sequential basis though, net average realization improved 1.3% despite higher discounts on MHCV vehicles (higher by `20,000/vehicle to `80,000) led by better realization on the export front due to favorable currency movement (USD/INR rate of 55 vs 54.23 in 1QFY2013) and strong spare parts sales. The export product-mix during the quarter also benefited from sales of higher margin double-decker buses in Bangladesh and Falcon buses in Middle East. During 1HFY2013, AL has outperformed the MHCV industry leading to a 280bp improvement in the market share to 25.7%. The improvement was driven by new product launches in the intermediate commercial vehicle segment and network expansion outside the southern markets.

Exhibit 4: Volume growth led by Dost

(units) 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0
(9.9) 14.3 15.0 (3.8) 72.0 24,590 18,437 19,277 25.9 29,680 23,659 23,215 43.1 20.2 26.1

Exhibit 5: Net average realization down 16.1% yoy

(%) 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 (10.0) (20.0) (`) 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0
0.0 (6.8) (16.3) (16.1) 7.2 3.5 18.8 13.9 19.3

Total volumes

yoy chg (%)

35,688 27,578 29,840

Net average realisation

yoy chg (%)

(%) 25.0 20.0 15.0 10.0 5.0 0.0 (5.0) (10.0) (15.0) (20.0)

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

Source: Company, Angel Research

Source: Company, Angel Research

Exhibit 6: Net sales in-line with estimates

(`cr) 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0
72.0 3,848 3,115 2,714 2,227 22.5 14.8 7.0 12.0 30.9 2,513 30.4 19.7 5.8 2,903 3,007 3,296

Exhibit 7: Domestic market share trend

(%) 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 (%) 60.0 50.0 40.0 30.0 20.0 10.0 0.0 27.6 20.4 24.9 15.6 24.6 19.2 27.2 22.2 23.7 21.1 21.0 25.5 26.0 41.4 MHCV passenger 48.9 45.1 39.7 39.6 MHCV goods Total MHCV

Net sales

yoy chg (%)

4,311

43.8

43.5

39.1

2QFY13
35.2 25.4 23.5 22.7

17.7

22.3

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

Source: Company, Angel Research

Source: Company, SIAM, Angel Research

November 9, 2012

2QFY13

Ashok Leyland | 2QFY2013 Result Update

EBITDA margin ahead of estimates at 10.1%: On the operating front, EBITDA margins surged 213bp qoq to 10.1%, ahead of our estimates of 9.3%, mainly due to reduction in employee cost (down 1.5% qoq) and other expenditure (down 3.6% qoq). The other expenditure was lower on account of forex gain of `12cr, and on savings of `15cr and `10cr on ad spends and power costs respectively. As a result, operating profit grew 38.8% qoq to `334cr. On a yoy basis, the EBITDA margin witnessed a decline of 50bp as benefits of lower raw-material expenses as a percentage of sales were negated by a sharp 140bp increase in other expenditure as a percentage of sales. The other expenditure was higher largely due to higher advertising and brand building spends.

Exhibit 8: EBITDA margin surprises positively

(%) 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 11.3 7.5 13.2 9.7 10.6 7.2 10.9 8.0 10.1 73.6 73.2 72.8 72.9 74.7 75.9 75.8 74.4 74.5 EBITDA margin Raw material cost/sales

Exhibit 9: Net profit up 113% qoq

(` cr) 350 300 250 200 150 100 50 0
167

Net profit 7.7 6.2 5.0 3.5 1.9

43 298 86 154

Net profit margin

(%) 9.0 8.0

6.0 4.3 2.3 2.2

7.0 6.0 5.0 4.0 3.0 2.0

143

67

259

67

1.0 0.0

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

Source: Company, Angel Research

2QFY13

Source: Company, Angel Research

Net profit up 113% qoq: Led by a strong operating performance, significantly higher other income and lower tax-rate, the net profit surged 113% qoq (down 7.5% yoy) to `143cr. While other income was up 77.3% yoy and 85.5% qoq to `24cr, the tax-rate stood at 8.5% as against 20.1% in 2QFY2012 and 17.3% in 1QFY2013 due to MAT credit of `44.3cr. The interest expense for the quarter increased 57.4% yoy (24.3% qoq) on account of increase in debt levels and also due to higher working capital requirement.

November 9, 2012

2QFY13

Ashok Leyland | 2QFY2013 Result Update

Conference call Key highlights

The management expects the MHCV industry to post a decline of 5-10% (flat growth earlier) in FY2013; however it is hopeful of a revival in 4QFY2013. The company expects to post flat volumes ex Dost in FY2013. It is targeting a market share of 26% by the end of FY2013. The management sees Dost volumes of around ~36,000 units in FY2013. AL indicated that the operator profitability has improved post the diesel price hike as freight rates have gone up by over 10%. According to the management, the contribution of southern India in overall commercial vehicle industry has come down to 22-23% in 2QFY2013 compared to 25-26% earlier. The companys exports declined 12% in 1HFY2013 due to decline in demand in key markets of Bangladesh and Sri Lanka (accounting for 60-65% of total exports). Spare parts revenue during 2QFY2013 and 1HFY2013 stood at ~`260cr (37% yoy growth) and ~`500cr (27% yoy growth) respectively. Engine volumes jumped 26.0% yoy to 4,400 units and revenues came in at `71cr. The defense kit order book currently stands ~3,000 units. Production at the Pantnagar plant stood at 15,000 units in 1HFY2013. AL expects to produce 40,000 units in FY2013. The income tax benefit at the Pantnagar plant will expire in FY2015 and thereafter the company will get 30% tax benefit; however excise benefits expire by 2020. Post the recent excise duty hike and increase in localization at the plant, benefits have increased to `60,000/vehicle, up from `45,000/vehicle. The company has increased its capital expenditure guidance to `600cr for FY2013E from `450cr announced in 1QFY2013.

November 9, 2012

Ashok Leyland | 2QFY2013 Result Update

Investment arguments
Volume growth to benefit from easing of interest rates and recently launched Dost: MHCV demand has witnessed a slowdown in recent times due to high interest rates and slowdown in industrial activity; however, we believe MHCV demand is near its trough. With reversal in interest rates (25-50bp cut in FY2013), we expect a pick-up in industrial activity, leading to a rebound in MHCV sales in FY2014. Further, the recently introduced LCV - Dost (through JV with Nissan) has been received well by the markets and AL expects to ramp-up its production. EBITDA margin pressures to persist due to change in product-mix: While rawmaterial prices have stabilized and AL continues to benefit from the ramp-up in production at the Pantnagar facility (total profitability estimated to be higher due to cost savings of ~`60,000/vehicle), the product-mix is set to change due to increasing proportion of the lower margin LCV - Dost (contribution to total volumes to increase from ~7% in FY2012 to ~28% in FY2013E). AL has indicated that it earns marketing/distribution fees of `15,000-`18,000/vehicle on Dost sales.

Outlook and valuation

We revise our volume estimates marginally downwards to account for the continued weakness in the MHCV segment. However, we revise upwards our EBITDA margin estimates to factor in the strong performance during the quarter and also to account for management guidance of 10% EBITDA margin in 2HFY2013. We also lower our tax-rate to 15% in FY2013 from 18% earlier as guided by the management.

Exhibit 10: Change in estimates

Y/E March Net Sales (` cr) OPM (%) EPS (`) Earlier Estimates FY2013E 14,920 9.0 2.2 FY2014E 16,850 9.3 2.7 Revised Estimates FY2013E 14,490 9.5 2.2 FY2014E 16,606 9.6 2.9 % chg FY2013E (2.9) 50bp 2.1 FY2014E (1.5) 30bp 3.8

Source: Company, Angel Research

While the near term outlook for the MHCV industry remains challenging due to slowdown in overall industrial activity; we expect volumes to recover in FY2014 led by likely easing of interest rates by 25-50bp in FY2013. Further, the recently launched Dost continues to drive the overall volume growth of the company. We believe that the momentum in Dost volumes will continue going ahead and will account for ~30% (~7% in FY2012) of ALs overall volumes by FY2014E. At `26, AL is trading at an attractive level of 9x its FY2014E earnings. We maintain our Buy rating on the stock with a target price of `31, valuing the stock at 11x its FY2014E earnings.

November 9, 2012

Ashok Leyland | 2QFY2013 Result Update

Exhibit 11: Key assumptions

(units) MHCV passenger MHCV goods LCV (ex. Dost) Dost Total volume (units) % yoy chg Domestic Exports
Source: Company, Angel Research

FY2009 19,981 33,071 1,379 54,431 (34.7) 47,619 6,812

FY2010 18,481 44,345 1,100 63,926 17.4 57,947 5,979

FY2011 25,226 68,007 873 94,106 47.2 83,800 10,306

FY2012 25,845 67,408 1,172 7,593 102,018 8.4 89,109 12,909

FY2013E 28,430 64,038 1,465 36,000 129,932 27.4 116,939 12,993

FY2014E 31,272 69,161 1,612 45,000 147,045 13.2 130,134 16,910

Exhibit 12: Angel vs consensus forecast

Angel estimates FY13E Total op. income (` cr) EPS (`) 14,490 2.2 FY14E 16,606 2.9 Consensus FY13E 14,060 2.1 FY14E 16,062 2.7 Variation (%) FY13E 3.1 8.4 FY14E 3.4 5.7

Source: Bloomberg, Angel Research

Exhibit 13: One-year forward P/E band

(`) 45 40 35 30 25 20 15 10 5 0 Share Price (`) 6x 9x 12x 15x

Exhibit 14: One-year forward P/E chart

(x) 35 30 25 20 15 10 5 One-yr forward P/E Five-yr average P/E

Dec-08

Mar-04

Mar-05

Dec-09

Jan-07

Apr-03

Feb-06

Jan-08

Nov-10

Nov-11

Oct-12

Aug-05

Mar-06

Mar-08

Nov-06

Nov-08

Mar-10

Nov-10

Feb-12 Mar-12

Jul-07

Jul-09

Jul-11

Source: Company, Angel Research

Source: Company, Angel Research

Exhibit 15: One-year forward EV/EBITDA band

(` cr) 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 EV (` cr) 2x 4x 6x 8x

Exhibit 16: One-year forward EV/EBITDA chart

(x) 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 One-yr forward EV/EBITDA Five-yr average EV/EBITDA

Jun-06

Jan-04

Jan-08

Jun-10

Aug-05

Mar-07

Aug-09

Apr-03

Nov-04

Mar-11

Oct-08

Jan-12

Oct-12

Feb-06

Feb-11

Sep-06

Jul-10

May-08

Aug-05

Mar-07

Nov-08

Sep-11

Jun-09

Oct-07

Jan-10

Source: Company, Angel Research

Source: Company, Angel Research

November 9, 2012

Oct-12

Oct-12

Ashok Leyland | 2QFY2013 Result Update

Exhibit 17: Automobile - Recommendation summary

Company Ashok Leyland Bajaj Auto Hero MotoCorp Maruti Suzuki Mahindra & Mahindra Tata Motors TVS Motor Reco. Buy Neutral Neutral Neutral Accumulate Accumulate Buy CMP Tgt. price (`) (`) 26 1,852 1,908 1,465 910 281 38 31 986 319 45 Upside (%) 22.1 8.3 13.8 17.0 P/E (x) FY13E 11.6 17.0 16.1 22.2 16.6 7.6 8.0 FY14E 9.0 15.1 14.6 15.5 14.5 6.3 6.8 EV/EBITDA (x) FY13E 5.9 11.7 8.4 11.5 9.7 4.0 3.4 FY14E 4.9 10.0 7.0 7.7 8.0 3.3 2.7 RoE (%) FY13E 13.6 46.2 48.3 11.9 24.3 31.2 18.2 FY14E 16.1 41.6 41.9 15.1 23.4 28.9 18.7 FY12-14E EPS CAGR (%) 16.2 7.3 9.7 36.6 15.9 11.1 3.5

Source: Company, Angel Research

Company background
Ashok Leyland (AL) is the country's second largest CV manufacturer. The company has a strong presence in the MHCV segment, with a domestic market share of ~23% as of FY2012. AL enjoys a dominant position in southern India, with a ~48% market share, and is currently focusing on expanding its presence in northern India by increasing its touch points in the region. The company, through its JV with Nissan Motor and John Deere, intends to expand its product portfolio and has recently launched new vehicles Dost (to tap the growing LCV demand) and Backhoe Loader (construction equipment segment), respectively.

November 9, 2012

Ashok Leyland | 2QFY2013 Result Update

Profit and loss statement (Standalone)

Y/E March (` cr) Total operating income % chg Total expenditure Net raw material costs Other mfg costs Employee expenses Other EBITDA % chg (% of total op. income) Depreciation & amortization EBIT % chg (% of total op. income) Interest and other charges Other income (% of PBT) Recurring PBT % chg Extraordinary income/(exp.) PBT Tax (% of PBT) PAT (reported) ADJ. PAT % chg (% of total op. income) Basic EPS (`) Adj. EPS (`) % chg FY2009 FY2010 FY2011 FY2012 6,098 (23.1) 5,642 4,480 132 563 467 456 (43.5) 7.5 178 278 (56.0) 4.6 160 91 46.3 208 (67.3) 11 197 18 9.4 190 179 (60.3) 2.9 0.7 0.7 (60.3) 7,407 21.5 6,648 5,212 135 667 634 760 66.6 10.3 204 555 100.1 7.5 102 91 18.1 545 161.3 40 505 121 24.0 424 384 114.6 5.2 1.6 1.4 114.6 11,417 54.1 10,203 8,175 235 975 819 1,214 59.8 10.6 267 946 70.4 8.3 189 44 5.6 802 47.2 2 800 171 21.3 631 630 64.2 5.5 2.4 2.4 64.2 13,318 16.6 12,062 9,464 275 1,036 1,286 1,256 3.5 9.4 353 903 (4.5) 6.8 255 42 6.1 690 (13.9) 4 686 124 18.1 566 562 (10.8) 4.2 2.1 2.1 (10.8) FY2013E 14,490 8.8 13,113 10,288 326 1,145 1,355 1,377 9.6 9.5 382 995 10.1 6.9 347 49 7.0 696 0.9 696 104 15.0 592 592 5.3 4.1 2.2 2.2 5.3 FY2014E 16,606 14.6 15,005 11,790 365 1,312 1,538 1,601 16.3 9.6 409 1,192 19.8 7.2 318 53 5.7 926 33.0 926 167 18.0 759 759 28.3 4.6 2.9 2.9 28.3

November 9, 2012

Ashok Leyland | 2QFY2013 Result Update

Balance sheet statement (Standalone)

Y/E March (` cr) SOURCES OF FUNDS Equity share capital Reserves & surplus Shareholders Funds Total loans Deferred tax liability Other long term liabilities Long term provisions Total Liabilities APPLICATION OF FUNDS Gross block Less: Acc. depreciation Net Block Capital work-in-progress Goodwill Investments Long term loans and advances Other noncurrent assets Current assets Cash Loans & advances Other Current liabilities Net current assets Misc. exp. not written off Total Assets 4,939 1,540 3,399 998 264 3,166 88 790 2,288 2,141 1,025 10 5,695 6,019 1,769 4,250 561 326 4,152 519 973 2,660 2,961 1,191 5 6,334 6,692 2,058 4,634 358 1,230 385 3 3,984 180 431 3,373 3,760 224 6,833 7,256 2,343 4,914 548 1,534 608 7 4,304 33 810 3,461 4,742 (438) 7,174 7,854 2,725 5,130 550 1,591 608 7 4,762 68 869 3,825 4,693 70 7,956 8,415 3,134 5,281 589 1,597 608 7 5,643 276 996 4,371 5,320 324 8,406 133 3,341 3,474 1,958 263 5,695 133 3,536 3,669 2,280 385 6,334 133 3,830 3,963 2,348 444 78 6,833 266 3,942 4,208 2,395 490 4 77 7,174 266 4,224 4,491 2,895 490 4 77 7,956 266 4,674 4,940 2,895 490 4 77 8,406 FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E

November 9, 2012

10

Ashok Leyland | 2QFY2013 Result Update

Cash flow statement (Standalone)

Y/E March (` cr) Profit before tax Depreciation Change in working capital Others Other income Direct taxes paid Cash Flow from Operations (Inc.)/Dec. in fixed assets (Inc.)/Dec. in investments Other income Cash Flow from Investing Issue of equity Inc./(Dec.) in loans Dividend paid (Incl. Tax) Others Cash Flow from Financing Inc./(Dec.) in cash Opening Cash balances Closing Cash balances FY2009 FY2010 FY2011 208 178 (785) (18) (91) (18) (526) (2,466) 346 91 (2,028) 1,071 234 519 1,823 (731) 451 88 545 204 264 289 (91) (121) 1,090 (643) (63) 91 (614) 322 156 (523) (45) 430 88 519 802 267 628 (891) (44) (171) 591 (470) (904) 44 (1,329) 68 233 97 398 (340) 519 180 FY2012 FY2013E FY2014E 690 353 518 (275) (42) (124) 1,120 (755) (304) 42 (1,017) 47 309 (606) (250) (147) 180 33 696 382 (472) (49) (104) 453 (600) (57) 49 (608) 500 309 191 36 33 68 926 409 (46) (53) (167) 1,069 (600) (6) 53 (553) 309 (309) 207 68 276

November 9, 2012

11

Ashok Leyland | 2QFY2013 Result Update

Key ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Dupont Analysis EBIT margin Tax retention ratio Asset turnover (x) ROIC (Post-tax) Cost of Debt (Post Tax) Leverage (x) Operating ROE Returns (%) ROCE (Pre-tax) Angel ROIC (Pre-tax) ROE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) WC cycle (ex-cash) (days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Interest Coverage (EBIT / Int.) 0.5 3.5 1.7 0.4 1.9 5.5 0.2 0.8 5.0 0.2 0.7 3.5 0.3 0.9 2.9 0.2 0.6 3.7 1.5 76 40 114 33 1.4 73 49 110 40 1.8 61 35 95 11 1.9 61 33 105 (6) 1.9 62 35 107 (6) 2.0 61 35 107 1 6.2 6.5 6.4 9.2 12.4 10.7 14.4 17.7 16.5 12.9 15.5 13.8 13.1 15.1 13.6 14.6 17.5 16.1 4.6 0.9 1.7 7.1 10.2 0.3 6.3 7.5 0.8 1.7 9.7 3.7 0.4 12.2 8.3 0.8 2.3 15.2 6.4 0.3 17.9 6.8 0.8 2.4 13.2 8.8 0.2 14.2 6.9 0.9 2.3 13.6 11.2 0.2 14.2 7.2 0.8 2.5 14.6 9.0 0.2 15.9 0.7 0.7 1.4 0.5 7.9 1.4 1.4 2.2 0.8 8.8 2.4 2.4 3.4 1.0 10.0 2.1 2.1 3.4 1.0 10.9 2.2 2.2 3.7 1.0 11.9 2.9 2.9 4.4 1.0 13.6 38.2 18.6 3.2 1.9 1.2 18.5 1.5 17.8 11.6 2.9 2.9 1.0 10.9 1.3 10.9 7.6 2.6 3.9 0.6 6.4 1.1 12.2 7.5 2.4 3.9 0.5 6.1 1.1 11.6 7.0 2.2 3.9 0.5 5.9 1.0 9.0 5.9 1.9 3.9 0.4 4.9 0.9 FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E

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Ashok Leyland | 2QFY2013 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

DISCLAIMER
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. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. 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. 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 document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.

Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

Ashok Leyland No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%) Reduce (-5% to -15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

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