Result Update

February 13, 2017

Rating matrix
Rating : Buy
Bosch Ltd (BOSLIM) | 22335
Target : | 25250
Target Period : 12 months Multiple variables drag margins!
Potential Upside : 13%
• Bosch’s Q3FY17 revenues came in at | 2,672 crore (up 7.7% YoY),
What’s Changed? vs. estimate of | 2,735 crore. Gross revenues of automotive segment
Target Changed from | 24000 to | 25250 declined 4.8% YoY to | 2,366 crore while revenue from the non-
EPS FY17E Changed from | 599.5 to | 567 automotive segment posted growth of 22.4% YoY to | 530 crore
EPS FY18E Changed from | 600.2 to | 566.2 • Revenue from the domestic market grew 8.1% YoY (mobility
EPS FY19E Introduced at |657 segment grew 3.7% YoY) while revenue from export market declined
Rating Unchanged 1.2% YoY (as non-mobility revenue declined 14.3% YoY)
• EBITDA margins came in at 10% (down 427 bps YoY & 799 bps QoQ)
Quarterly Performance below our estimate of 13.7%. This is mainly due to 1) unfavourable
Q3FY17 Q3FY16 YoY (%) Q2FY17 QoQ (%) product mix 2) higher share of traded goods 3) higher provision of
Revenue 2,672.0 2,480.0 7.7 2,611.5 2.3
materials that are not used in BS IV and 4) one-offs that include CSR
EBITDA 266.7 353.5 -24.5 469.4 -43.2
EBITDA (%) 10.0 12.9 -289 bps 18.0 -799 bps
spend & professional expense towards BS VI project. Reported PAT
PAT 218.2 272.5 -19.9 703.7 -69.0 declined 20% YoY to | 218 crore vs. estimate of | 313 crore
• The management remains cautiously optimistic on the Indian market.
They believe tractor volumes would continue to recover while PV
Key Financials growth is expected to moderate. CV volumes are likely to remain
| Crore FY16 FY17E FY18E FY19E subdued, with LCV volumes remaining under pressure with M&HCV
Net Sales 10,416 10,457 12,602 14,296
to post modest growth of ~2%
EBITDA 1,869 1,770 2,507 2,866
Net Profit 1,252 1,731 1,728 1,975 Play on emission norms!
EPS (|) 410.2 567.0 566.2 647.2 Bosch India has consistent focus on newer product, segment & customer,
Change in accounting year, FY15 is a 15 month period; which is likely to drive its growth, going forward. The government has
announced its plans to skip BS V norms and asked the industry to comply
Valuation summary with BS VI emission norms by 2020. Though the management believes
FY16 FY17E FY18E FY19E the timeline is challenging, we believe Bosch being the leader and with
P/E (x) 54.4 39.4 39.4 34.5
technological (R&D) support from its parent is well prepared to cater to
EV / EBITDA (x) 35.5 36.9 25.7 22.0
the industry. The advancement of emission norms would, however,
Tgt EV/E (x) 40.3 41.9 29.2 25.1
P/BV (x) 8.2 7.1 6.2 5.4
require Bosch to have higher-than-expected investment & higher import
RoNW (%) 15.1 15.8 15.8 15.8 content from its parent, which could increase its cost thereby impacting
RoCE (%) 22.5 21.4 25.3 25.3 the margins. Bosch has phased out some products (like rotary pump) to
Change in accounting year, FY15 is a 15 month period comply with BS IV norms & largely replaced with newer products that
would be sourced from its parent & will be not be localised in nature.
Stock data However, we believe the same would gradually be passed on to OEMs.
Particular Amount Also, the upcoming BS VI norms in 2020 will bring revenue opportunity
Market Capitalization (| Crore) 68,168 from 2-W space (where traditional carburettor will be replaced by
Total Debt (FY16) (| Crore) 20.5 injection systems) that could further drive its growth. It currently caters to
Cash and Investments (FY16) (| Crore) 2,899 four 2-W OEMs and its systems are fitted in premium bikes.
EV (| Crore) 65,290
Well placed to capitalise on demand recovery!
52 week H/L (|) 25650 / 15753
Equity capital (| crore) 30.5 Bosch with its strong technology leadership & market share >70%, is one
Face value (|) 10.0 of the few ancillary companies with large bargaining power with OEMs.
Domestic automotive volumes (ex-2-Ws, inclusive of tractors), registered
Price performance (%) CAGR of ~1% (FY11-16) but are likely to pick up, going ahead. Good
1M 3M 6M 12M harvest season & higher MSP prices will continue to have strong traction
Bosch Ltd 7.3 8.7 -9.4 38.4 in the tractor volume going forward. The growth in CV (scrappage policy
Wabco India Ltd 5.1 4.4 -10.5 -1.9 & pre-buying due to emission norms) & PV (positive impact of pay
Motherson Sumi Systems Ltd 8.5 9.1 8.0 53.1 commission & new launches) will benefit Bosch. The recovery in infra
activity is likely to benefit its industrial segment, going forward.
Research Analyst
Unchallenged business, unlisted behemoth parent= “scarcity premium”
Nishit Zota
Bosch being an ancillary giant would remain at premium valuations to
nishit.zota@icicisecurities.com
both its peers and the market. On financials, we anticipate a CAGR of
~11%, ~16% in revenues, earnings, respectively, in FY16-19E (with sale
Vidrum Mehta
vidrum.mehta@icicisecurities.com
of its starter motor & generator division accounting for <10% of revenue)
with decent return ratios. Thus, we maintain our BUY recommendation on
the stock, valuing it at 39x its FY19E EPS with a target of | 25,250/share.
We remain positive on the long term prospects of the ancillary giant.

ICICI Securities Ltd | Retail Equity Research

Variance analysis
Q3FY17 Q3FY17E Q3FY16 YoY (%) Q2FY17 QoQ (%) Comments
Total Operating Income 2,672 2,735 2,480 7.7 2,612 2.3 Revenue came in below our estimates & was largely supported by the good
growth in the non automotive segment
Raw Material Expenses 1,461 1,409 1,304 12.1 1,318 10.8 Cost of raw material increased mainly due to 1) unfavourable product mix; 2)
higher share of traded goods; 3) higher provision of material which is not used
for BS IV and 4) lower ASPs
Employee Expenses 388 377 321 20.6 348 11.4 Higher staff cost due to restructuring
Other expenses 557 574 501 11.1 476 17.0 Other expense include one-off mainly due to 1) higher professional expense
towards BS VI project and 2) amount spent for CSR activity
EBITDA 267 375 353 -24.5 469 -43.2
EBITDA Margin (%) 10.0 13.7 12.9 -289 bps 18.0 -799 bps Higher raw material cost, employee & other expense dragged the operational
performance of the company
Other Income 163 172 142 15.4 211 -22.4 Other income up YoY mainly due to higher gain of fair market valuations of
mutual fund investment & higher rental income
Depreciation 129 90 106 2347 bps 89 4045 bps
Interest 2 1 4 -60.1 1 74.2
Total Tax 84 144 100 -16.1 167 -49.6
PAT 218 313 273 -19.9 704 -69.0 With revenue & margins came in below our estimate; profitability of the
company was impacted
Key Metrics
Automotive revneue 2,366 2,245 2,485 -4.8 2,531 -6.5
Non-autmotive revenue 530 490 433.2 22.4 365 45.1 Strong growth in the non automotive revenue is mainly supported by solar
division, packagaing segment & power tool operation
Source: Company, ICICIdirect.com Research,

Change in estimates
FY17E FY18E FY19E
(| Crore) Old New % Change Old New % Change Introduced Comments
Revenue 10,762 10,674 -0.8 13,202 12,859 -2.6 14569 Revenue estimates marginally lowered for FY17E & FY18E
EBITDA 1,881 1,770 -5.9 2,589 2,507 -3.2 2866
EBITDA Margin (%) 17.5 16.6 -90 bps 19.6 19.5 -11 bps 19.7 With miss in Q3FY17 margins; the overall margin estimates for
FY17E has been reduced
PAT 1,830 1,731 -5.4 1,832 1,728 -5.7 1975
EPS 600 567 -5.4 600 566 -5.6 647
Source: Company, ICICIdirect.com Research;

Assumptions
FY16 FY17E FY18E FY19E FY17E FY18E
Revenue (| crore)
Automotive 9,266 9,810 11,004 12,434 9,710 11,337 Revenue estimates revised lower; considering sale of starter motor & generator
division
Non- automotive 1,383 1,618 1,861 2,140 1,585 1,870
EBIT margins (%)
Lower margins in Q3FY17; has prompted us to revise the FY17E margin estimates
Automotive 16.7 18.7 18.1 18.1 20.8 18.3 lower
Non- automotive 5.8 4.3 6.9 6.9 6.7 8.2

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 2

 Key conference call takeaways
• The management continues to remain cautiously optimistic on the
demand outlook in India. They expect 1) Passenger car segment to
register moderate growth; 2) Pressure is likely to remain in LCV
space; 3) M&HCV volumes is expected to post modest growth of
~2% in the near term; 4) Normal monsoon & good harvest season is
likely to the demand recovery momentum for the tractor segment

• In order to comply with BS IV emission norms, the company has

phased out some of its existing products (rotary pump) & is bringing
newer technology/products from its parent

• Bosch continues to believe it has the right product, technology,

infrastructure and experience to cater to the industry need, which is
needed to comply with new emission norms. However, the timeline
(to comply with BS VI norms by 2020) looks challenging

• During Q3FY17, the overall automotive segment registered growth of

3.6% YoY while non-automotive grew 25% YoY. Geography wise -
the domestic business grew 8.1% YoY (of which mobility segment
grew ~3.7% YoY) while its exports declined 1.2% YoY (of which non
mobility declined by 14.3% YoY). At present, exports are at ~8.1% of
its overall sales

• EBITDA margins came in at 10% (down 427 bps YoY & 799 bps QoQ)
mainly due to A) higher raw material cost which was due to 1)
unfavourable product mix; 2) higher share of traded goods; 3) higher
provision of materials, which are not used in BS IV and 4) lower ASPs
and B) due to higher other expense which includes one-offs on
account of higher professional expense towards BS VI project and
amount spent on CSR activity

• The strong growth of 22% YoY in the non automotive segment was
driven by its solar division, packaging segment and power tool
operations

• According to the management, overall automobile vehicle production

in Q3FY17 (excluding 2-W & including tractors) grew ~1.4% YoY.
Passenger vehicles production grew ~2.2% YoY mainly on the back
of new product launches & discounts. M&HCV volumes grew 5.5%
partly due to pre-buying of trucks due to implementation of BS IV
norms. The demonetisation impact was seen in 3-W volumes, which
declined 21% YoY while fall in exports further pushed LCV volumes
down 3.6% YoY. Good harvest season & better financing option
supported the tractor volumes which registered 41% YoY growth
during Q3FY17

• The management expects the capex to be in the range of | 450-700

crore over the next two to three years

ICICI Securities Ltd | Retail Equity Research Page 3

 Company Analysis
Auto segment to continue to remain key driver of sales growth…
Bosch is an attractive ancillary company due to the huge size of the fuel
injection and engine parts business, which remains one of the most
critical linkages for an OEM. We forecast the CV & PV segment to register
CAGR of ~10% each owing to a weaker base and new product launches,
respectively, in FY16-19E. Even though the tractor segment faced serious
headwinds in the past, the segment started to recover. The low base
effect and pent up demand coupled with a good harvest season are likely
to keep up the strong tractor momentum. We expect a better demand
scenario in the automotive space in coming years. Further, Bosch being
the market leader and with technological (R&D) support from its parent is
well placed to cater to the industry requirement for complying with the
advancement of new emission norms. According to the management,
Bosch is well prepared to serve the industry with respect to the
upgraded/newer, product/system perspective to the industry.

The management, however, has executed the sale of lower margin starter
motor and generator (SMG) division, which accounted for <10% of
revenue. Hence, it is likely to impact overall revenues. Thus, we expect
revenue CAGR of ~11% to | 14,568 crore in FY16-19E (with sale of starter
motor & generator).

Exhibit 1: Revenue growth trend

37.0
16,000 40.0
14,000
30.0
12,000 20.5
13.3 20.0
10,000
| crore

6.0
8,000 10.0

%
1.9 0.8
6,000 -12.4
0.0
4,000
12,086

10,590

10,674

12,859

14,569
-10.0
8,659

8,820

2,000
- -20.0
CY12 CY13 FY15 FY16 FY17E FY18E FY19E
Total Operating Income % Increase

* Change in accounting year, FY15 is a 15 month period

Source: Company press release, ICICIdirect.com Research

EBITDA margins continue to expand!

Bosch has seen some EBITDA margin shave-offs from the CY11 peak but
has stabilised at ~15-16%. The same, however, has improved from FY16
onwards owing to a demand revival and new product launches in lieu of
changes in emission norm gradually. Also, the company’s consistent
focus on localisation efforts is likely to expand gross margins resulting in
higher profitability. The Q3FY17 EBITDA margins came in at 10% (down
427 bps YoY & 799 bps QoQ) and is mainly due to multiple variables such
as - 1) unfavourable product mix; 2) higher share of traded goods; 3)
higher provision of materials which are not used in BS IV and 4) one-offs
which include CSR spend & professional expense towards BS VI project.
Also, the December quarter is traditionally weak for Bosch. Hence, we
expect margins to normalise from Q4FY17 onwards. Further, we have
assumed that the sale of single digit margin business (SMG) would further
aid its overall margins (>100 bps) benefiting the company. Thus, for
FY18E and FY19E, we have expect EBITDA margins to be >19.5%.

ICICI Securities Ltd | Retail Equity Research Page 4

 Exhibit 2: EBITDA margin to improve

3,500 25.0
17.6
3,000 19.5 19.7
20.0
15.6 16.4 16.6
2,500
14.6
2,000 15.0

| crore

%
1,500 10.0
1,000
5.0
500

1,350

1,291

1,981

1,869

1,770

2,507

2,866
- -
CY12 CY13 FY15 FY16 FY17E FY18E FY19E
EBITDA EBITDA Margins %

* Change in accounting year, FY15 is a 15 month period

Source: Company press release, ICICIdirect.com Research

Strong operational cash flows; clean revenue accounting policies!

Bosch’s business generates strong cash flows from operations (CFO) that
were at | 1609 crore in FY16. Strong cash inflows from operations keep
the business cash rich and debt free, something that is better than other
ancillary peers. For FY17E, the management is planning an investment of
| 680 crore, mainly towards newer product/segment, technology &
infrastructure facility. Its investment in developing new technology and
infrastructure will cater to new emission norms. However, despite higher
investment, the CFO remains at a healthy level. We believe the
CFO/EBITDA ratio is likely to remain healthy, going forward.

Exhibit 3: CFO, EBITDA reflective of nature of accounting policies

2,500 140.0
121.7
106.9 86.1 120.0
2,000
89.8 92.0
100.0
78.6 81.6
1,500 80.0
| crore

60.0 %
1,000
40.0
500
20.0
1,213

1,380

1,822

1,608

2,154

1,972

2,340

- -
CY12 CY13 FY15 FY16 FY17E FY18E FY19E
CFO CFO/EBITDA

* Change in accounting year, FY15 is a 15 month period

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 5

 Maintains decent return ratios
Bosch has always had a history of being able to generate above normal
returns of employed capital (RoCE). Since CY08-12, it had RoCEs ranging
between 17% and 23%. The strong capital expenditure exercise started in
CY12-13 along with domestic automotive weakness led to a mild
reduction in these return ratios in CY13. However, we expect the same to
improve, going forward. We expect Bosch to maintain decent return
ratios, going forward.

Exhibit 4: Return ratio profile

30
27
22 25 25
25 23
21
20
20
%

18
17
16 16 16
15 15
14

10
CY12 CY13 FY15 FY16 FY17E FY18E FY19E
RoE RoCE

* Change in accounting year, FY15 is a 15 month period

Source: Company press release, ICICIdirect.com Research

Profitability to expand as depreciation to revert to normalcy

PAT margins would continue to move northwards primarily driven by
EBITDA margins expansion. Margins had came down in CY13 due to
higher depreciation charge (they depreciate assets faster than income tax
requirements causing the incremental ~1-1.5% decline in reported PAT
more than required). The change in asset base was mainly due to a
change in accounting year (from CY to FY) resulting in lower depreciation
lifting profitability. Also, in FY17E, it has one-off gains (~| 358 crore) from
the sale of starter motor & generator division, which perked up profits.
Hence, despite higher capex, the decline in non-cash would revert to
normalcy in the years ahead.

Exhibit 5: Higher depreciation charge owing to increased capex Exhibit 6: Strong profitability consistency

800 2,500 16.0

14.2
700 11.8 13.4 13.6
548 568 2,000 14.0
600 389 501
11.1 11.2
500 432 12.0
367 384 1,500 10.0
| crore

| crore

400 10.0
%

300 1,000
8.0
200
500 6.0
100
1,338

1,252

1,731

1,728

1,975
679

391

264

434

680

500

500

958

885

-
- 4.0
CY12 CY13 FY15 FY16 FY17E FY18E FY19E
CY12 CY13 FY15 FY16 FY17E FY18E FY19E
Capex Depreciation
PAT PAT Margins %
* Change in accounting year, FY15 is a 15 month period
* Change in accounting year, FY15 is a 15 month period
Source: Company, ICICIdirect.com Research
Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 6

 Key annual report takeaways
• The Bosch group (parent) is a leading global supplier of technology
and services. As of CY15, it employs ~375,000 associate’s worldwide
& generated sales of €70.6 billion. The Bosch Group comprises Robert
Bosch GmbH and its ~440 subsidiaries & regional companies in some
60 countries. Revenue mix for its parent for CY15 is at - Europe
accounting 53% of revenue, Asia Pacific 27% of revenue while North
& South America accounts 18% & 2% of its revenue, respectively.
Despite a subdued economic outlook & geopolitical uncertainty, the
supplier of technology and services expects its sales to grow in the
range of 3-5% in 2016

• The transition to BS VI from BS IV, skipping BS V is challenging and

has associated risks. The transition will drive the need for low
emission & fuel efficient sustainable technologies. Bosch supports the
introduction of BS VI emission norms by 2020 and has the right
technology, products, experience and testing infrastructure. It is well
prepared & committed to help India to make this transition
seamlessly. The ‘EMS’ is a cost-effective solution capable of
sustaining India’s environment. Further, we look towards 2020 i.e. BS
VI legislation will have higher weight to exhaust gas after treatment

• The emission legislation BS IV will be valid from April 2017. With this
the mechanical systems will be phased out especially the distributor
pump, which will be replaced by the common rail system (CRS)

• Bosch India, over the past three years, has invested ~| 1,750 crore in
India and set up around four new manufacturing facilities, apart from
ramping up existing plants. Major investments were made towards
development of facilities in Bidadi, development centre at Adugodi
and capacity expansion of products at other locations

• The diesel systems business grew 3.9% YoY led by higher sales of
new generation Common Rail Systems (CRS) and distributor pumps.
According to the management, conventional products such as in-line
pumps, distributor pumps and conventional injectors are likely to
continue growth with steady demand. However, eventually, they will
witness a slowdown with the countrywide implementation of BS VI.
The gasoline business grew 46.9% YoY, mainly because of increased
market share in the domestic passenger car segment

• On the industrial side of its business, power tools growth strategy

was two pronged 1) localisation of tools at Chennai facility and a small
share of exports to Saarc, Latin America, Asia, Middle East and Africa
and 2) to reach the maximum number of local customers, largely the
unorganised sector like carpenters, plumbers and contractors in tier II
and III cities by offering more affordable products

• Bosch Ltd has a presence in 29 sales offices with a network of more

than 1,100 distribution centres across the country. The company’s
service network is spread across India with around 3,400 outlets. In
2015, the automotive aftermarket division launched K4000, a
campaign that aimed at improving the division’s market connect with
the sales and service network team across India

• Bosch has undertaken a number of initiatives aligning with the

national policy of ‘zero defect zero effect’ to be efficient and
sustainable

ICICI Securities Ltd | Retail Equity Research Page 7

 Outlook and valuation
We believe a low base coupled with normal monsoons & good harvest
season have resulted in higher demand for tractor in FY17E and is likely
to continue, going forward. The growth momentum of CV (driven by
scrappage policy & pre-buying due to emission norms) & PV (positive
impact of Pay Commission & new launches) will continue benefiting
Bosch, going forward. Further, the expected pick-up in infrastructure
activity is likely to fuel growth of its non-automotive business, going
forward. With a strong balance sheet supported by robust FCFs, strong
return ratios and stable high margin profile, financials are impressive.

We believe that on the valuations front Bosch would tend to remain at a

premium to both its peers and the market. This stems from its dominant
business position as well as presence of a key behemoth foreign unlisted
promoter. On financials, we anticipate a CAGR of ~11%, ~16% in
revenues, earnings, respectively, in FY16-19E (considering sale of its
starter motor & generator division accounting <10% of revenue). The
return ratios are also expected to remain at decent level going forward.
Thus, we maintain our BUY recommendation on the stock, valuing it at
39x its FY19E EPS with a target of | 25,250/ share. We continue to remain
positive on the long term growth prospects of the ancillary giant.

Exhibit 7: Valuation
Revenues Growth EPS Growth PE EV/EBITDA RoNW RoCE
(| cr) (%) (|) (%) (x) (x) (%) (%)
FY16 10589.7 1.9 410.2 -7.5 54.4 35.5 15.1 22.5
FY17E 10673.9 0.8 567.0 38.2 39.4 36.9 15.8 21.4
FY18E 12858.9 20.5 566.2 -0.1 39.4 25.7 15.8 25.3
FY19E 14568.6 13.3 647.2 14.3 34.5 22.0 15.8 25.3
Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 8

Recommended history vs. consensus
30,000 70.0

25,000 60.0

50.0
20,000
40.0
(|)

15,000

(%)
30.0
10,000
20.0
5,000 10.0

0 0.0
Jan-15 Mar-15 Jun-15 Aug-15 Nov-15 Jan-16 Mar-16 Jun-16 Aug-16 Nov-16 Jan-17

Price Idirect target Consensus Target Mean % Consensus with HOLD

Source: Bloomberg, Company, ICICIdirect.com Research

Key events
Date Event
Mar-08 Bosch plans to turn India into a hub for its packaging business
Sep-08 Buyback of shares approved by board for a maximum price of | 4500 per share
Dec-08 Indefinite lockout imposed at Jaipur plant as a result of indefinite strike by workers
Apr-09 Buyback fails to enthuse investors as financials dip on demand slowdown
Jan-10 Bosch announces investment of | 2000 crore in India between 2010 and 2012
Jun-12 Bosch begins to rationalise production as inventory piles up on slow demand
Dec-12 Senior management rejigged as Dr Stepehn Berns takes over as MD from long standing MD VK Vishwanathan
Jun-13 Commercial vehicle industry witnesses unprecendented fall in volumes affecting Bosch's results significantly
Jun-14 Board approves change in accounting year from CY to FY; accordingly CY14 would be for 15 months commencing from January 2014 to March 2015
Aug-14 Workmen of the company's Jaipur plant go on illegal "tool down" strike and resume after 2 days
Sep-14 Worker of company's Banglore plan go on strike; demanding hike in pay and other benefits
Mar-15 Company's Naganathapura plant accidently catches fire. However, there is no major impact and the plant is adequately covered under insurance
Apr-15 Bosch declares a lockout at its Jaipur plant dueto ongoing worker unrest in the facility
Jun-15 Bosch looking for a partner (JV) or a buyer for its starter motor & generators division to further improve the division's growth prospects.
Feb-16 Board approves transfer by way of sale of the starter motor & generation business on a slump sale basis to a 100% subsidiary (to be incorporated) of Robert Bosch
(parent) for a lumpsum consideration of ~| 486 crore subject to shareholder approval
Source: Company, ICICIdirect.com Research
Top 10 Shareholders Shareholding Pattern
Name Latest Filing Date % O/S Position (m) Change (m) (in %) Dec-15 Mar-16 Jun-16 Sep-16 Dec-16
Robert Bosch GmbH 30-Sep-16 0.73 22.3 0.00 Promoter 71.2 71.2 71.2 71.2 70.5
General Insurance Corporation of India 30-Sep-16 0.0321 1.0 0.00 FII 7.7 7.7 7.7 7.8 7.5
The New India Assurance Co. Ltd. 30-Sep-16 0.0284 0.9 -0.01 DII 13.2 13.3 13.3 13.2 13.9
Life Insurance Corporation of India 30-Sep-16 0.0135 0.4 -0.03 Others 7.9 7.9 7.9 7.8 8.1
Aberdeen Asset Management (Asia) Ltd. 30-Sep-16 0.0133 0.4 -0.04
UTI Asset Management Co. Ltd. 31-Dec-16 0.00769 0.2 0.00
The Vanguard Group, Inc. 31-Dec-16 0.0075 0.2 0.00
Birla Sun Life Asset Management Company Ltd. 31-Dec-16 0.00652 0.2 0.00
BlackRock Institutional Trust Company, N.A. 31-Jan-17 0.00631 0.2 0.00
Axis Asset Management Company Limited 31-Dec-16 0.00508 0.2 0.04
Source: Reuters, ICICIdirect.com Research
Recent Activity
Buys Sells
Investor name Value Shares Investor name Value Shares
Axis Asset Management Company Limited 11.49 0.04 Aberdeen Asset Management (Asia) Ltd. -14.12 -0.04
JM Financial Asset Management Pvt. Ltd. 2.07 0.01 Life Insurance Corporation of India -11.54 -0.03
SBI Funds Management Pvt. Ltd. 1.84 0.01 Franklin Advisers, Inc. -4.46 -0.01
Motilal Oswal Asset Management Company Ltd. 1.48 0.00 The New India Assurance Co. Ltd. -2.27 -0.01
BlackRock Institutional Trust Company, N.A. 0.88 0.00 Canara Robeco Asset Management Company Ltd. -1.62 0.00
Source: Reuters, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 9

Financial summary
Profit and loss statement | crore Cash flow statement | crore
(Year-end March) FY16 FY17E FY18E FY19E (Year-end March) FY16 FY17E FY18E FY19E
Total operating Income 10,589.7 10,673.9 12,858.9 14,568.6 Profit after Tax 1,252.0 1,730.6 1,728.1 1,975.3
Growth (%) -12.4 0.8 20.5 13.3 Add: Depreciation 388.9 432.3 501.5 568.2
Raw Material Expenses 5,624.5 5,547.6 6,577.9 7,502.8 (Inc)/dec in Current Assets -263.7 -68.4 -835.7 -656.3
Employee Expenses 1,372.9 1,433.4 1,704.2 1,851.8 Inc/(dec) in CL and Provisions 226.6 59.5 577.9 452.9
Other Expenses 1,723.3 1,923.2 2,069.6 2,347.7 CF from operating activities 1,603.8 2,154.0 1,971.8 2,340.1
Total Operating Expenditure 8,720.7 8,904.2 10,351.7 11,702.3 (Inc)/dec in Investments -846.0 0.0 0.0 0.0
EBITDA 1,869.0 1,769.7 2,507.3 2,866.3 (Inc)/dec in Fixed Assets -433.8 -680.0 -500.0 -500.0
Growth (%) -5.7 -5.3 41.7 14.3 Others -33.3 -0.8 -116.9 -92.4
Depreciation 388.9 432.3 501.5 568.2 CF from investing activities -1,313.1 -680.8 -616.9 -592.4
Interest 4.6 0.2 0.0 0.0 Issue/(Buy back) of Equity 0.0 -0.9 0.0 0.0
Other Income 389.7 725.3 771.5 874.1 Inc/(dec) in loan funds -35.1 0.0 0.0 0.0
PBT 1,865.2 2,062.5 2,777.3 3,172.2 Dividend paid & dividend tax -312.2 -402.9 -402.9 -402.9
Less Exceptional items 0.0 -288.1 0.0 0.0 Others 6.5 -11.3 0.0 0.0
Total Tax 613.2 620.0 1,049.2 1,196.9 CF from financing activities -340.9 -415.1 -402.9 -402.9
PAT 1,252.0 1,730.6 1,728.1 1,975.3 Net Cash flow -55.5 1,058.4 952.0 1,344.8
Growth (%) -6.4 38.2 -0.1 14.3 Opening Cash 1,896.0 1,840.5 2,898.9 3,850.9
EPS (|) 410.2 567.0 566.2 647.2 Closing Cash 1,840.5 2,898.9 3,850.9 5,195.7
Source: Company, ICICIdirect.com Research Source: Company, ICICIdirect.com Research

Balance sheet | crore Key ratios

(Year-end March) FY16 FY17E FY18E FY19E (Year-end March) FY16 FY17E FY18E FY19E
Liabilities Per share data (|)
Equity Capital 31.4 30.5 30.5 30.5 EPS 410.2 567.0 566.2 647.2
Reserve and Surplus 8,266.5 9,583.2 10,908.4 12,480.8 Cash EPS 537.6 708.7 730.5 833.4
Total Shareholders funds 8,297.9 9,613.7 10,938.9 12,511.3 BV 2,718.8 3,149.9 3,584.1 4,099.3
Total Debt 20.5 20.5 20.5 20.5 DPS 85.0 110.0 110.0 110.0
Other non-current Liabilities 432.1 433.8 445.2 454.2 Cash Per Share 603.0 949.8 1,261.7 1,702.3
Total Liabilities 8,750.5 10,067.9 11,404.5 12,985.9 Operating Ratios (%)
Assets EBITDA Margin 17.6 16.6 19.5 19.7
Gross Block 5,396.3 6,076.3 6,576.3 7,076.3 PBT / Net sales 14.0 12.5 15.6 15.8
Less: Acc Depreciation 4,164.7 4,597.0 5,098.5 5,666.6 PAT Margin 11.8 14.2 13.4 13.6
Net Block 1,231.7 1,479.4 1,477.9 1,409.7 Inventory days 41.3 42.0 42.0 42.0
Capital WIP 56.8 56.8 56.8 56.8 Debtor days 45.4 46.1 46.1 46.1
Total Fixed Assets 1,288.5 1,536.2 1,534.7 1,466.5 Creditor days 45.3 46.0 46.0 46.0
Investments 3,739.7 3,739.7 3,739.7 3,739.7 Return Ratios (%)
Inventory 1,199.1 1,228.8 1,480.4 1,677.2 RoE 15.1 15.8 15.8 15.8
Debtors 1,316.1 1,348.7 1,624.8 1,840.8 RoCE 22.5 21.4 25.3 25.3
Loans and Advances 1,343.2 1,348.6 1,625.1 1,843.7 RoIC 23.8 20.7 29.8 33.5
Other current assets 153.3 153.9 185.5 210.4
Valuation Ratios (x)
Cash 1,840.5 2,898.9 3,850.9 5,195.7
P/E 54.4 39.4 39.4 34.5
Total Current Assets 5,852.2 6,978.9 8,766.7 10,767.8
EV / EBITDA 35.5 36.9 25.7 22.0
Creditors 1,312.9 1,345.5 1,620.9 1,836.4
EV / Net Sales 6.3 6.1 5.0 4.3
Provisions 1,016.5 1,041.7 1,254.9 1,421.7
Market Cap / Sales 6.4 6.4 5.3 4.7
Other Current Liabilities 433.6 435.3 524.6 595.1
Price to Book Value 8.2 7.1 6.2 5.4
Total Current Liabilities 2,763.0 2,822.5 3,400.4 3,853.3
Solvency Ratios
Net Current Assets 3,089.2 4,156.4 5,366.2 6,914.5
Debt/Equity 0.0 0.0 0.0 0.0
Deferred Tax Asset 452.8 454.6 547.8 621.5
Current Ratio 1.5 1.4 1.4 1.4
Other non-current Assets 170.30613 171.0 206.1 233.8
Quick Ratio 1.0 1.0 1.0 1.0
Application of Funds 8,750.5 10,067.9 11,404.5 12,985.9
Source: Company, ICICIdirect.com Research
Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 10

ICICIdirect.com coverage universe (Auto & Auto Ancillary)
CMP M Cap EPS (|) P/E (x) EV/EBITDA (x) RoCE (%) RoE (%)
Sector / Company (|) TP(|) Rating (| Cr) FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E
Amara Raja (AMARAJ) 869 930 Hold 14849 28.5 29.4 37.3 30.4 29.6 23.3 18.1 17.1 13.7 31.2 26.2 27.9 23.2 20.1 21.2
Apollo Tyre (APOTYR) 179 225 Buy 9036 21.7 22.1 22.9 8.3 8.1 7.8 5.0 5.9 5.8 19.9 15.1 13.5 17.1 15.6 14.2
Ashok Leyland (ASHLEY) 92 105 Buy 26018 2.5 5.9 6.7 36.3 15.6 13.8 10.8 8.3 6.9 23.0 27.4 28.2 13.1 24.8 23.2
Bajaj Auto (BAAUTO) 2807 3000 Hold 81212 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) 1170 1400 Buy 11308 58.7 77.7 93.2 20.3 15.3 12.8 11.6 9.8 7.8 19.5 20.5 23.5 20.3 20.5 23.5
Bharat Forge (BHAFOR) 1041 1150 Buy 24253 28.0 30.5 44.6 37.2 34.1 23.3 17.6 17.9 13.4 16.5 14.8 19.5 18.3 17.4 21.5
Bosch (MICO) 22346 25250 Buy 70167 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) 24859 28970 Buy 67144 633.4 772.3 927.4 39.2 32.2 26.8 21.8 16.8 13.5 40.2 40.5 38.6 36.4 33.5 30.6
Escorts (ESCORT) 382 405 Hold 4553 7.5 14.1 26.0 52.2 27.8 15.1 29.7 14.6 9.7 4.6 12.0 16.0 4.8 8.5 13.7
Exide Industries (EXIIND) 216 240 Buy 18318 7.3 8.4 9.3 29.4 25.8 23.2 16.0 14.3 12.4 19.4 19.9 20.2 14.0 14.6 14.8
Hero Mototcorp (HERHON) 3227 3675 Buy 64434 156.9 188.2 206.4 20.6 17.1 15.6 13.2 11.2 10.1 50.4 48.7 44.9 39.4 38.7 35.8
JK Tyre & Ind (JKIND) 117 145 Buy 2650 21.0 17.7 26.9 5.6 6.6 4.3 4.6 4.5 3.7 21.7 16.7 18.0 27.2 19.2 23.1
Mahindra CIE (MAHAUT) 197 225 Buy 6361 6.2 10.6 13.1 31.8 18.5 15.0 12.5 9.1 7.3 7.3 11.0 12.1 8.5 12.3 14.1
Maruti Suzuki (MARUTI) 6022 6765 Buy 181985 151.3 260.7 307.5 39.8 23.1 19.6 19.8 15.9 13.0 22.7 25.1 24.9 16.9 23.6 22.8
Motherson (MOTSUM) 351 335 Hold 49261 9.1 12.0 15.0 38.7 29.2 23.3 14.4 10.9 8.7 19.9 23.4 27.6 30.0 21.1 22.4
Tata Motors (TELCO) 505 595 Buy 153579 37.2 35.5 61.3 12.7 13.3 7.7 3.9 4.1 2.9 17.0 12.9 18.3 15.3 11.7 16.8
Wabco India (WABTVS) 5550 6350 Buy 10545 107.7 124.7 156.6 51.5 44.5 35.4 35.0 28.6 23.0 19.4 18.5 19.1 25.5 25.5 26.3
Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 11

RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns
ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.

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;

Pankaj Pandey Head – Research pankaj.pandey@icicisecurities.com

ICICIdirect.com Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
research@icicidirect.com

ICICI Securities Ltd | Retail Equity Research Page 12

ANALYST CERTIFICATION
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ICICI Securities Ltd | Retail Equity Research Page 13