Ashok Leyland

India Equity Research | Auto & Auto Ancillaries

Company Update
March 18, 2019
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Refer to important disclosures at the end of this report

CMP Target Price

MHCV industry channel checks: Still Rs 92

as of (3/18/2019)
Rs 72 (■)
12 months

in the reverse gear Rating Upside

SELL (■) (21.7) %

Change in Estimates
 The MHCV industry volumes are expected to remain weak in the near term due to high
EPS Chg FY19E/FY20E (%) 2.7/ 3.1
base, surplus capacity with fleet operators, deferred purchases during elections and
rising cost of ownership, according to our channel checks. North/West regions are Target Price change (%) 0.4

witnessing steep declines, while the South is seeing positive growth. Target Period (Months) 12
Previous Reco SELL
 Volume growth is expected to recover in FY20, led by pre-buying before the transition to
Emkay vs Consensus
BS6 emission norms. After the transition, volumes are likely to decline due to high base
EPS Estimates
and lower freight availability on account of commencement of phases of the dedicated
FY19E FY20E
freight corridor project.
Emkay 6.7 5.3
 The product mix has turned adverse after the implementation of new axle load norms,
Consensus 6.4 7.1
indicating a shift toward lower-tonnage trucks. The competitive intensity has also grown
Mean Consensus TP (12M) Rs 98
due to aggressive marketing efforts by Tata Motors. Ashok Leyland’s market share has
Stock Details
reduced from 34.2% in FY18 to 33.6% in FY19 YTD.
Bloomberg Code AL IN
 We expect Ashok Leyland’s revenue growth over FY19-21E to be muted at 4% CAGR Face Value (Rs) 1
due to a reversal in the MHCV sales cycle. EBITDA margin is likely to contract from
Shares outstanding (mn) 2,936
10.5% in FY19E to 7.6% in FY21E on lower scale, adverse mix, higher discounts and
52 Week H/L 168 / 78
partial absorption of BS6 costs. Overall, earnings to fall by 22% CAGR over FY19-21E.
M Cap (Rs bn/USD bn) 271 / 3.96
 We retain our Sell rating with a TP of Rs72 (unchanged) based on 7x FY20E EV/EBITDA Daily Avg Volume (nos.) 25,233,260
and the investment value in Hinduja Leyland Finance at Rs6/share. Daily Avg Turnover (US$ mn) 32.8

Key takeaways from channel checks: Shareholding Pattern Dec '18

Promoters 51.1%
 Subdued volume performance to persist in the near term: There has been a trend
reversal for the MHCV industry. Factors such as deferred purchases during the election FIIs 21.9%
period, surplus capacity with fleet operators, and a higher cost of ownership have DIIs 9.1%
adversely affected demand. Volume performance is expected to remain subdued over Public and Others 17.9%
the next few months until the 2019 general election is over.
Price Performance
 Pre-buying to support volume performance in FY20: Pre-buying before the transition
(%) 1M 3M 6M 12M
to BS6 emission norms is expected to support volumes. Cost increases are expected to
be in the range of Rs80,000-100,000 for ICVs/MCVs, while Rs100,000-150,000 for HCVs. Absolute 17 (12) (27) (37)
Volume growth is expected to be in double digits in FY20. After the transition to BS6, Rel. to Nifty 8 (16) (28) (44)
volumes are likely to decline due to high base and lower freight availability on the Relative price chart
commencement of phases of the dedicated freight corridor project. 175 Rs % 10

 The South is outpacing North/West regions due to relatively lower growth over the last 154 -2

two years. Ashok Leyland is the key beneficiary as it derives a higher portion of volumes 133 -14

from the South. However, Tata Motors is garnering market share across regions due
112 -26
to new launches, aggressive pricing/marketing efforts, and service/warranty initiatives.
91 -38

Please see our sector EAP (Page 9): Emkay Alpha Portfolio – Automobiles & Auto Ancillaries
70 -50
Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19
Financial Snapshot (Standalone) Ashok Leyland (LHS) Rel to Nifty (RHS)

(Rs mn) FY17 FY18 FY19E FY20E FY21E Source: Bloomberg

Revenue 201,401 262,479 287,815 314,370 309,113
This report is solely produced by Emkay Global. The
EBITDA 22,025 27,390 30,340 28,387 23,443 following person(s) are responsible for the
EBITDA Margin (%) 10.9 10.4 10.5 9.0 7.6 production of the recommendation:

APAT 15,585 15,748 19,549 15,517 11,757 Raghunandhan N L

EPS (Rs) 5.5 5.4 6.7 5.3 4.0 raghunandhan.nl@emkayglobal.com
EPS (% chg) 29.9 (1.8) 23.8 (20.6) (24.2) +91 22 6624 2428
ROE (%) 27.3 23.9 25.4 18.1 13.0 Mumuksh Mandlesha
P/E (x) 16.9 17.2 13.9 17.5 23.1 mumuksh.mandlesha@emkayglobal.com
EV/EBITDA (x) 12.1 8.8 8.0 8.5 10.3 +91 22 6612 1334
P/BV (x) 4.4 3.8 3.3 3.0 2.9
Source: Company, Emkay Research

Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer
to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore

ED: ANISH MATHEW SA: DHANANJAY SINHA

 Ashok Leyland (AL IN) India Equity Research | Company Update

 Discounts to customers have increased as the competitive intensity remains high.

Discounts have increased to up to 20% of vehicle prices. Ashok Leyland is also supporting
dealers by offering a credit period of 10-15 days.
 Down-trading: After the implementation of new axle load norms, there is a marked shift
toward lower tonnage vehicles. There is also a switch from tractor-trailers to rigid vehicles.
 Profitability of fleet operators has come under pressure due to higher vehicle prices (due
to increase in third-party insurance premiums and commodity inflation pass-through),
interest rates (a 100-150bps rise over the last few months), and fuel prices. In addition, fleet
operators have not profited from the increase in axle loads as most of the benefits have been
passed down to customers.
 Marginal impact of selective financing by NBFCs: Volume performance has not been
significantly impacted due to selective financing by NBFCs as banks and captive financing
arms of OEMs have become more aggressive. Interest rates have gone up by 100-150bps
over the past few months and are in the range of 9.5%-11%.
 Dealer inventory days for Ashok Leyland stand at ~21 days in the South, while at ~30 days
in North/West regions. Tata Motors’ dealer inventory days stand at ~30 days. Inventory days
have increased by 7-10 days in the last three months.

Exhibit 1: Reversal in sales cycle for domestic MHCVs… Exhibit 2: … and domestic LCVs

100 LCVs (TTM %)

60
80
50
60 40
40 30
20 20
0 10
0
(20)
(10)
(40) (20)
(60) (30)
Aug-18
Feb-19
Aug-09

Aug-10

Aug-11

Aug-12

Aug-13

Aug-14

Aug-15

Aug-16

Aug-17
Feb-09

Feb-10

Feb-11

Feb-12

Feb-13

Feb-14

Feb-15

Feb-16

Feb-17

Feb-18

Aug-09

Aug-10

Aug-11

Aug-12

Aug-13

Aug-14

Aug-15

Aug-16

Aug-17

Aug-18
Feb-09

Feb-10

Feb-11

Feb-12

Feb-13

Feb-14

Feb-15

Feb-16

Feb-17

Feb-18

Feb-19
Source: SIAM, Emkay Research Source: SIAM, Emkay Research

Exhibit 3: Domestic industry growth – Growth to taper ahead

(%) Total CV MHCV LCV
FY88-FY18 8.9 5.6 NA
FY98-FY18 9.4 7 11.9
FY08-FY18 5.7 2.2 9.1
FY13-FY18 1.5 4.8 -0.3
FY17 4.2 0 7.4
FY18 19.9 12.5 25.4
FY19E 17.4 14.4 19.5
FY20E 9.8 8.1 10.9
FY21E -7.0 -10.0 -5.1
Source: SIAM, Emkay Research

Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the
last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore

ED: ANISH MATHEW SA: DHANANJAY SINHA March 18, 2019 | 2

 Ashok Leyland (AL IN) India Equity Research | Company Update

Exhibit 4: Domestic MHCV market share – Ashok Leyland marginally losing share in FY19

100%
13 13 11 11 12 12 12 11 11
80%
26.4 25.8 28.5 32.7 33.8 34.2 33.9 33.8 33.8
60%

40%
53 55 55 52 49 49 50 50 50
20%

0%
FY13 FY14 FY15 FY16 FY17 FY18 FY19E FY20E FY21E

Tata AL VECV M&M Other

Source: SIAM, Emkay Research

Exhibit 5: MHCV tonnage mix: Reducing share of higher tonnage vehicles

100

80 40 47 40 43
52 49
60
25 24 22
40 18 21 21
18 11 13 12
20 12 10
17 19 19 21 22 23
0
FY17 FY18 1QFY19 2QFY19 3QFY19 4QFY19*

7.5-12T 12-16T 16-25T 25T+

*Note: Jan-Feb19. Source: SIAM, Emkay Research

Exhibit 6: Domestic MHCVs: Already in the fifth year of upcycle

500,000

400,000

300,000

200,000

100,000

0
FY90
FY91
FY92
FY93
FY94
FY95
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19E Domestic MHCV volumes
Source: SIAM, Emkay Research

Exhibit 7: MHCVs have inverse correlation with interest rates

12 50
11 40
10 30
9 20
10
8
0
7 (10)
6 (20)
5 (30)
4 (40)
FY01

FY14
FY00

FY02

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY15

FY16

FY17

FY18

FY19E

Govt bond 10 yr yield (%) MHCV (%; RHS)

Source: Bloomberg, SIAM, Emkay Research

Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the
last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore

ED: ANISH MATHEW SA: DHANANJAY SINHA March 18, 2019 | 3

 Ashok Leyland (AL IN) India Equity Research | Company Update

Exhibit 8: MHCVs have inverse correlation with input commodity prices such as steel

30 50
40
20
30
10 20
10
0
0
(10) (10)
(20)
(20)
(30)
(30) (40)

FY06
FY05

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19E
Steel prices (%) MHCV (%; RHS)
Source: Bloomberg, SIAM, Emkay Research

Exhibit 9: MHCVs have inverse correlation with fuel prices

30 50
40
20 30
20
10 10
0 0
(10)
(10) (20)
(30)
(20) (40)

FY13

FY18
FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY14

FY15

FY16

FY17

FY19E
Diesel prices (%) MHCV (%; RHS)
Source: Bloomberg, SIAM, Emkay Research

Exhibit 10: Freight rates/diesel prices(x) remain in a narrow range

2.5

2.0

1.5

1.0
Jul-17

Jul-18
Dec-16
Jan-17

Jun-17

Aug-17
Sep-17

Jun-18

Aug-18
Sep-18
Mar-17
Apr-17

Oct-17
Nov-17
Dec-17
Jan-18

Mar-18
Apr-18

Oct-18
Nov-18
Dec-18
Jan-19
Feb-17

May-17

Feb-18

May-18

Feb-19
Freight rate/Diesel Price (x)
Source: CMIE, Emkay Research; Note: Average freight rates from Delhi to Mumbai/Chennai/Kolkata, divided by Delhi
diesel prices.

Exhibit 11: Margins have witnessed steep contractions during the previous down cycles
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
Industry MHCV domestic volumes (units) 269,337 274,582 183,541 245,058 323,059 349,216 268,689 200,618 232,755
Growth (%) 29.8 1.9 -33.2 33.5 31.8 8.1 -23.1 -25.3 16.0
AL MHCV domestic volume (units) 70,524 75,409 47,118 57,139 83,098 81,263 70,916 51,818 66,442
Growth (%) 25.9 6.9 -37.5 21.3 45.4 -2.2 -12.7 -26.9 28.2
AL EBITDA margin (%) 11.9 12.8 9.6 9.0 10.9 9.7 7.0 1.2 7.6
AL Earnings (Rs mn) 5,962 6,766 3,209 3,034 6,313 5,644 1,441 (4,763) 2,339
Growth (%) 47.4 13.5 -52.6 -5.5 108.1 -10.6 -74.5 -430.4 -149.1
Source: SIAM, Company, Emkay Research

Exhibit 12: Status of the dedicated freight corridor – About 800kms section completed
Dec-18 Completed the 306-km section between Madar (Ajmer) in Rajasthan and Kishangarh (Rewari) in Haryana in the western segment
Nov-18 Completed the 194-km section from Bhadan to Khurja in Uttar Pradesh of the Eastern Dedicated Freight Corridor (EDFC)
Aug-18 Completed the 190-km Ateli (Haryana)-Phulera (Rajasthan) section of the Western DFC
Mar-20 Full commissioning expected. Freight carrying capacity would increase by 1,100 million tonnes
Source: Media reports, Emkay Research

Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the
last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore

ED: ANISH MATHEW SA: DHANANJAY SINHA March 18, 2019 | 4

 Ashok Leyland (AL IN) India Equity Research | Company Update

Exhibit 13: Key assumptions

FY15 FY16 FY17 FY18 FY19E FY20E FY21E
Volumes (units)
Domestic MHCVs 66,442 98,809 102,313 116,531 132,159 142,197 127,977
yoy % 28.2 48.7 3.5 13.9 13.4 7.6 -10.0
Domestic LCVs 25,562 28,512 30,951 42,078 53,018 58,320 55,404
yoy % -6.3 11.5 8.6 36.0 26.0 10.0 -5.0
Exports (MHCV + LCV) 12,546 13,037 11,802 16,239 12,760 13,398 14,068
yoy % 34.3 3.9 -9.5 37.6 -21.4 5.0 5.0
Total Volumes 104,550 140,358 145,066 174,848 197,938 213,915 197,449
yoy % 18.2 34.2 3.4 20.5 13.2 8.1 -7.7
Realization (Rs/unit) 1,291,870 1,348,282 1,388,343 1,501,184 1,454,068 1,469,602 1,565,528
yoy % 15.0 4.4 3.0 8.1 -3.1 1.1 6.5
Revenue (Rs mn) 135,622 189,373 201,401 262,479 287,815 314,370 309,113
yoy % 36.4 39.6 6.4 30.3 9.7 9.2 -1.7
Source: Company, Emkay Research

Exhibit 14: Changes in Estimates

Rs mn FY19E FY20E FY21E
Earlier Revised % Change % yoy Earlier Revised % Change % YoY Earlier Revised % Change % YoY
Volumes 193,819 197,938 2.1 13.2 209,490 213,915 2.1 8.1 193,467 197,449 2.1 (7.7)
Revenue 280,717 287,815 2.5 9.7 306,700 314,370 2.5 9.2 303,103 309,113 2.0 (1.7)
EBITDA 29,586 30,340 2.5 10.8 27,698 28,387 2.5 (6.4) 23,122 23,443 1.4 (17.4)
EBITDA % 10.5 10.5 0 bps 11 bps 9.0 9.0 (0) bps (151) bps 7.6 7.6 (4) bps (145) bps
Adj PAT 19,029 19,549 2.7 24.1 15,051 15,517 3.1 (20.6) 11,565 11,757 1.7 (24.2)
EPS 6.48 6.66 2.7 23.8 5.13 5.29 3.1 (20.6) 3.94 4.01 1.7 (24.2)
Source: Emkay Research

Exhibit 15: One-year forward EV/EBTDA

20
16
12
8
4
0
Sep-09

Sep-10

Sep-11

Sep-12

Sep-13

Sep-14

Sep-15

Sep-16

Sep-17

Sep-18
Mar-09

Mar-10

Mar-11

Mar-12

Mar-13

Mar-14

Mar-15

Mar-16

Mar-17

Mar-18

1yr fwd Ev/Ebitda Avg 5yr EV/Ebitda Mar-19

Source: Bloomberg, Emkay Research

Exhibit 16: One-year forward P/B

6
5
4
3
2
1
0
Sep-09

Sep-10

Sep-11

Sep-12

Sep-13

Sep-14

Sep-15

Sep-16

Sep-17

Sep-18
Mar-09

Mar-10

Mar-11

Mar-12

Mar-13

Mar-14

Mar-15

Mar-16

Mar-17

Mar-18

Mar-19

-1

1yr Fwd PB (x) Avg 10 yr PB +1 STD -1 STD

Source: Bloomberg, Emkay Research

Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the
last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore

ED: ANISH MATHEW SA: DHANANJAY SINHA March 18, 2019 | 5

 Ashok Leyland (AL IN) India Equity Research | Company Update

Key Financials (Standalone)

Income Statement
Y/E Mar (Rs mn) FY17 FY18 FY19E FY20E FY21E
Revenue 201,401 262,479 287,815 314,370 309,113
Expenditure 179,376 235,089 257,475 285,983 285,670
EBITDA 22,025 27,390 30,340 28,387 23,443
Depreciation 5,179 5,546 6,241 6,889 7,585
EBIT 16,846 21,844 24,099 21,499 15,858
Other Income 1,363 1,898 1,373 1,471 1,566
Interest expenses 1,554 1,312 764 480 384
PBT 16,655 22,429 24,708 22,489 17,039
Tax 1,070 6,681 5,160 6,972 5,282
Extraordinary Items 0 0 0 0 0
Minority Int./Income from Assoc. 0 0 0 0 0
Reported Net Income 15,585 15,748 19,549 15,517 11,757
Adjusted PAT 15,585 15,748 19,549 15,517 11,757

Balance Sheet
Y/E Mar (Rs mn) FY17 FY18 FY19E FY20E FY21E
Equity share capital 2,846 2,927 2,935 2,935 2,935
Reserves & surplus 58,415 68,721 79,202 86,039 89,116
Net worth 61,261 71,648 82,137 88,974 92,051
Minority Interest 0 0 0 0 0
Loan Funds 21,449 10,023 5,253 4,355 3,335
Net deferred tax liability 1,269 2,984 2,885 2,795 2,727
Total Liabilities 83,978 84,655 90,275 96,124 98,112
Net block 49,708 49,742 51,336 52,919 51,333
Investment 28,789 58,026 60,026 62,026 62,026
Current Assets 56,210 54,080 63,008 70,318 71,599
Cash & bank balance 9,120 10,044 1,641 1,567 1,334
Other Current Assets 7,602 12,134 13,306 14,533 15,260
Current liabilities & Provision 54,017 81,206 90,273 92,846 90,553
Net current assets 2,193 (27,126) (27,265) (22,527) (18,954)
Misc. exp 1,230 0 0 0 0
Total Assets 83,978 84,655 90,275 96,124 98,112

Cash Flow
Y/E Mar (Rs mn) FY17 FY18 FY19E FY20E FY21E
PBT (Ex-Other income) (NI+Dep) 11,938 20,531 23,335 21,018 15,473
Other Non-Cash items 0 0 0 0 0
Chg in working cap 1,769 29,299 (8,703) (5,159) (3,824)
Operating Cashflow 20,185 52,286 16,336 16,514 14,286
Capital expenditure (3,660) (6,496) (10,000) (6,000) (6,000)
Free Cash Flow 16,525 45,790 6,336 10,514 8,286
Investments (11,784) (29,238) (2,000) (2,000) 0
Other Investing Cash Flow 676 2,413 0 0 0
Investing Cashflow (13,406) (31,423) (10,627) (6,529) (4,434)
Equity Capital Raised 0 81 8 0 0
Loans Taken / (Repaid) (8,827) (11,425) (4,770) (899) (1,020)
Dividend paid (incl tax) (3,254) (8,586) (8,680) (8,680) (8,680)
Other Financing Cash Flow 127 1,304 94 0 0
Financing Cashflow (13,592) (19,939) (14,111) (10,059) (10,085)
Net chg in cash (6,812) 924 (8,403) (74) (233)
Opening cash position 15,931 9,120 10,044 1,641 1,567
Closing cash position 9,120 10,044 1,641 1,567 1,334
Source: Company, Emkay Research

Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the
last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore

ED: ANISH MATHEW SA: DHANANJAY SINHA March 18, 2019 | 6

 Ashok Leyland (AL IN) India Equity Research | Company Update

Key Ratios
Profitability (%) FY17 FY18 FY19E FY20E FY21E
EBITDA Margin 10.9 10.4 10.5 9.0 7.6
EBIT Margin 8.4 8.3 8.4 6.8 5.1
Effective Tax Rate 6.4 29.8 20.9 31.0 31.0
Net Margin 7.7 6.0 6.8 4.9 3.8
ROCE 22.2 28.4 29.1 24.6 17.9
ROE 27.3 23.9 25.4 18.1 13.0
RoIC 38.4 78.9 137.7 83.9 53.0

Per Share Data (Rs) FY17 FY18 FY19E FY20E FY21E

EPS 5.5 5.4 6.7 5.3 4.0
CEPS 7.3 7.3 8.8 7.6 6.6
BVPS 21.1 24.5 28.0 30.3 31.4
DPS 0.9 2.4 2.5 2.5 2.5

Valuations (x) FY17 FY18 FY19E FY20E FY21E

PER 16.9 17.2 13.9 17.5 23.1
P/CEPS 12.7 12.7 10.5 12.1 14.0
P/BV 4.4 3.8 3.3 3.0 2.9
EV / Sales 1.3 0.9 0.8 0.8 0.8
EV / EBITDA 12.1 8.8 8.0 8.5 10.3
Dividend Yield (%) 1.0 2.6 2.7 2.7 2.7

Gearing Ratio (x) FY17 FY18 FY19E FY20E FY21E

Net Debt/ Equity 0.1 (0.4) (0.3) (0.3) (0.3)
Net Debt/EBIDTA 0.2 (1.1) (0.9) (1.0) (1.3)
Working Cap Cycle (days) (12.6) (51.7) (36.7) (28.0) (24.0)

Growth (%) FY17 FY18 FY19E FY20E FY21E

Revenue 6.4 30.3 9.7 9.2 (1.7)
EBITDA (2.3) 24.4 10.8 (6.4) (17.4)
EBIT (4.6) 29.7 10.3 (10.8) (26.2)
PAT 29.9 1.0 24.1 (20.6) (24.2)

Quarterly (Rs mn) Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19

Revenue 71,907 87,725 62,627 76,211 63,252
EBITDA 8,393 10,327 6,716 8,290 6,496
EBITDA Margin (%) 11.7 11.8 10.7 10.9 10.3
PAT 4,904 6,615 4,431 5,450 3,879
EPS (Rs) 1.7 2.3 1.5 1.9 1.0
Source: Company, Emkay Research

Shareholding Pattern (%) Dec-17 Mar-18 Jun-18 Sep-18 Dec-18

Promoters 51.3 51.3 51.1 51.1 51.1
FIIs 22.6 23.3 23.5 22.9 21.9
DIIs 11.4 11.1 10.1 9.9 9.1
Public and Others 14.7 14.4 15.2 16.1 17.9
Source: Capitaline

Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the
last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore

ED: ANISH MATHEW SA: DHANANJAY SINHA March 18, 2019 | 7

 Ashok Leyland (AL IN) India Equity Research | Company Update

RECOMMENDATION HISTORY TABLE RECOMMENDATION HISTORY CHART

Closing Period
Date TP Rating Analyst BUY Hold Sell
Price (months) Accumulate Reduce Price
Target Price
15-Feb-19 80 72 12m Sell Raghunandhan NL 200
4-Feb-19 82 72 12m Sell Raghunandhan NL
174
31-Jan-19 81 72 12m Sell Raghunandhan NL
148
27-Dec-18 103 113 12m Hold Raghunandhan NL
122
14-Nov-18 107 152 12m Buy Raghunandhan NL
24-Aug-18 129 151 12m Buy Raghunandhan NL 96

18-Jul-18 111 122 12m Hold Raghunandhan NL 70

17-Sep-16

14-Sep-17

11-Sep-18
20-Mar-16

17-Mar-17

14-Mar-18

11-Mar-19
6-Jul-18 132 186 12m Buy Raghunandhan NL
22-May-18 141 186 12m Buy Raghunandhan NL
23-Apr-18 159 186 12m Buy Raghunandhan NL Source: Bloomberg, Company, Emkay Research
2-Feb-18 122 160 12m Buy Raghunandhan NL
9-Nov-17 115 156 12m Buy Raghunandhan NL
4-Oct-17 123 144 12m Buy Raghunandhan NL
4-Aug-17 109 117 12m Buy Raghunandhan NL
24-Jul-17 104 117 12m Buy Raghunandhan NL
13-Jul-17 106 90 12m Hold Bibhishan Jagtap
26-May-17 92 90 12m Hold Mihir Jhaveri
24-Apr-17 87 90 12m Hold Mihir Jhaveri
3-Feb-17 95 90 12m Hold Mihir Jhaveri
27-Jan-17 92 90 12m Hold Mihir Jhaveri
7-Dec-16 77 80 12m Hold Mihir Jhaveri
9-Nov-16 91 90 12m Hold Mihir Jhaveri
25-Jul-16 96 94 12m Hold Kaushal Maroo
27-May-16 107 97 12m Hold Kaushal Maroo
Source: Company, Emkay Research

Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the
last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore

ED: ANISH MATHEW SA: DHANANJAY SINHA March 18, 2019 | 8

 Ashok Leyland (AL IN) India Equity Research | Company Update

Emkay Alpha Portfolio – Automobiles & Auto Ancillaries

EAP sector portfolio
BSE200 EAP OW/UW OW/UW EAP Weight
Company Name
Weight Weight (%) (bps) (Normalized)
Auto & Auto Ancillaries 6.92 6.92 0% 0 100
Amara Raja Batteries 0.11 0.18 64% 7 3
Apollo Tyres 0.12 0.19 56% 7 3
Ashok Leyland 0.21 0.00 -100% -21 0
Atul Auto 0.00 0.07 NA 7 1
Bajaj Auto 0.70 0.42 -40% -28 6
Bosch* 0.31 0.31 0% 0 4
Eicher Motors 0.49 0.21 -56% -28 3
Analyst: Raghunandhan Nl Endurance Technologies* 0.06 0.06 0% 0 1
Contact Details Escorts 0.00 0.00 NA 0 0
raghunandhan.nl@emkayglobal.com Exide Industries 0.18 0.32 77% 14 5
+91 22 6624 2428 Hero Motocorp 0.63 0.29 -54% -34 4
Sector Mahindra & Mahindra 1.09 1.29 19% 21 19
Automobiles and Ancillaries Maruti Suzuki India 1.64 1.85 13% 21 27
Analyst bio Motherson Sumi 0.34 0.55 61% 21 8

Raghu holds an MBA and comes with MRF* 0.21 0.21 0% 0 3

total 11 years of research experience. His Tata Motors 0.60 0.60 0% 0 9
team currently covers 14 stocks in the Tata Motors DVR* 0.08 0.08 0% 0 1
Indian Automobiles and Ancillaries TVS Motor 0.16 0.30 85% 14 4
space. Source: Emkay Research

* Not under coverage: Equal Weight

Sector portfolio NAV (for future addition)

Returns by EAP on rolling basis
Performance NAV 3M 6M 12M
EAP - Automobiles & Auto Ancillaries 100
BSE 200 weighted portfolio 100
*Formal performance measurement of EAP starts on 1st April 2019
Source: Emkay Research

Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the
last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore

ED: ANISH MATHEW SA: DHANANJAY SINHA March 18, 2019 | 9

 Ashok Leyland (AL IN) India Equity Research | Company Update

Emkay Rating Distribution

BUY Expected total return (%) (Stock price appreciation and dividend yield) of over 25% within the next 12-18 months.
ACCUMULATE Expected total return (%) (Stock price appreciation and dividend yield) of over 10% within the next 12-18 months.
HOLD Expected total return (%) (Stock price appreciation and dividend yield) of upto 10% within the next 12-18 months.
REDUCE Expected total return (%) (Stock price depreciation) of upto (-) 10% within the next 12-18 months.
SELL The stock is believed to underperform the broad market indices or its related universe within the next 12-18 months.

Completed Date: 18 Mar 2019 23:35:41 (SGT)

Dissemination Date: 18 Mar 2019 23:36:41 (SGT)

Sources for all charts and tables are Emkay Research unless otherwise specified.

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ED: ANISH MATHEW SA: DHANANJAY SINHA March 18, 2019| 10

 Ashok Leyland (AL IN) India Equity Research | Company Update

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ED: ANISH MATHEW SA: DHANANJAY SINHA March 18, 2019| 11

 Ashok Leyland (AL IN) India Equity Research | Company Update

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ED: ANISH MATHEW SA: DHANANJAY SINHA March 18, 2019| 12

 Ashok Leyland (AL IN) India Equity Research | Company Update

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ED: ANISH MATHEW SA: DHANANJAY SINHA March 18, 2019| 13

 Ashok Leyland (AL IN) India Equity Research | Company Update

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Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the
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ED: ANISH MATHEW SA: DHANANJAY SINHA March 18, 2019| 14

 Ashok Leyland (AL IN) India Equity Research | Company Update

Raghunandhan N L, MBA
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ED: ANISH MATHEW SA: DHANANJAY SINHA March 18, 2019| 15