Auto Ancillary Fundamental Analysis.docx

Motherson Sumi About the Company Motherson Sumi Systems Limited (“Motherson Sumi Systems” or the “Company”) was established in 1986 and is the flagship company of the Samvardhana Motherson Group. Motherson Sumi Systems is a joint venture between Samvardhana Motherson Group and Sumitomo Wiring Systems (Japan). The Company primarily manufactures automotive wiring harnesses and mirrors for passenger cars in India and supplies plastic components and modules to the automotive industry. With a manufacturing and customer base across all six continents, Motherson Sumi Systems has evolved as one of the world’s leading manufacturers of automotive rear-view mirrors and a leading manufacturer of instrument panels, bumpers and door trims in Europe. The Company operates in two segments: Automotive and Non-Automotive. In the automotive segment its main products include wiring harness, high tension cords, plastic and rubber components and cockpit assembly, wire and mold for wiring harness components and brass terminals. In the non-automotive segment MSSL’s products include wiring harness, penstamp assembly, and plastic components for white goods, household wires, plates and aerobin.

Key Financial Figures Consolidated

(Rs. Cr)

Particulars

FY 2013

FY 2014

FY 2015

FY 2016

FY 2017

Total Income from Operations

25,616.96

30,721.01

35,031.89

38,676.92

43,256.71

Expenses

23,835.73

28,030.92

31,829.24

34,940.91

38,972.01

Earnings Before Other Income, Interest, Tax and Depreciation (Operating Profit)

1,781.23

2,690.09

3,202.65

3,736.01

4,284.70

Depreciation

714.51

817.19

920.63

1,135.67

1,059.04

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Finance Costs

249.46

294.39

317.76

270.62

374.92

Other income

16.95

17.62

17.65

39.21

146.31

Exceptional items

–

–

164.76

29.06

97.43

PBT

834.21

1,596.13

1,817.15

2,339.87

2,899.62

Tax

383.51

499.46

525.63

583.58

910.34

PAT (before Minority Interest and share of Associates)

450.70

1,096.67

1,291.52

1,756.29

1,989.28

Profit/ (loss) attributable to Minority Interest

7.03

331.55

429.42

482.31

–

Share of profit / (loss) of Associates

(0.87)

0.15

(0.37)

0.24

(183.11)

Other Related Items

–

–

–

–

–

Consolidated Profit / (Loss) for the year

444.54

764.97

862.47

1,273.74

2,172.39

Profitability Analysis Consolidated

(%)

Particulars

FY 2013

FY 2014

FY 2015

FY 2016

FY 2017

Operating Profit Margin Ratio

6.95

8.76

9.14

9.66

9.91

Net Profit Margin Ratio

1.76

3.57

3.69

4.54

4.60

Operating profit margin is a measurement of the proportion of a company’s revenue that is left over after paying for production costs such as raw materials, salaries and administrative costs. Net profit margin is arrived at by deducting non-operating expenses such as depreciation, finance costs and taxes out of operating profit and shows what is left for the shareholders as a percentage of net sales. Together these ratios help in understanding the cost and profit structure of the firm and analyzing business inefficiencies.

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Key Balance Sheet Figures Sources of Funds / Liabilities

(Rs. Cr)

Particulars

FY 2012

FY 2013

FY 2014

FY 2015

FY 2016

Share Capital

38.80

58.80

88.20

88.20

132.30

Share premium

0.40

–

–

–

–

Reserves & Surplus

1,832.50

2,230.20

2,871.10

3,235.60

4,113.30

Net worth (shareholders’ funds)

1,871.30

2,289.00

2,959.30

3,323.80

4,245.60

Minority Interest

502.70

402.50

789.60

1,014.20

1,441.10

Long term borrowings

2,961.10

2,715.90

2,983.40

4,085.90

5,002.30

Current liabilities

6,306.90

6,869.30

8,049.40

8,474.10

9,416.30

Other long term liabilities and provisions

263.2

406.70

412.60

527.10

425.20

Deferred Tax Liabilities

150.60

144.10

168.00

145.70

192.60

Total Liabilities

12,055.80

12,827.50

15,362.30

17,570.80

20,723.10

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Application of Funds / Assets

(Rs. Cr)

Particulars

FY 2012

FY 2013

FY 2014

FY 2015

FY 2016

Fixed Assets

5,138.00

5,662.90

6,566.00

7,084.70

8,732.90

Noncurrent Investments

93.80

71.60

74.90

64.90

100.90

Current assets

6,439.00

6,718.70

8,055.50

9,418.60

10,772.20

Long term advances and other noncurrent assets

295

286.10

547.50

811.70

752.20

Deferred Tax Assets

90.40

88.20

118.40

125.90

364.90

Total assets

12,056.20

12,827.50

15,362.30

17,570.80

20,723.10

Efficiency Analysis (%) Particulars

FY 2012

FY 2013

FY 2014

FY 2015

FY 2016

ROCE

19.19

32.94

39.96

38.02

34.95

ROE / RONW

13.87

19.42

25.85

25.95

41.37

Return on Capital Employed (ROCE) measures a company’s profitability from its overall operations by calculating the return generated on the total capital invested in the business (i.e. equity + debt). Return on Equity (ROE) or Return on Net worth (RONW) measures the amount of profit which the company generates on money invested by the equity shareholders. In short, ROE draws attention to the return generated by the shareholders on their investment in the business. Together these ratios can be used in comparing the profitability of the company with other companies in the same industry.

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Valuation Analysis Consolidated Particulars

FY 2013

FY 2014

FY 2015

FY 2016

FY 2017

Total Income from Operations (Rs. Cr.)

25,616.96

30,721.01

35,031.89

38,676.92

43,256.71

Growth (%)

71.84 %

19.92 %

14.03 %

10.40 %

11.84 %

PAT (Rs. Cr.)

450.70

1,096.67

1,291.52

1,756.29

1,989.28

Growth (%)

129.54 %

143.33 %

17.77 %

35.99 %

13.27 %

Earnings Per Share – Basic (Rs. )

7.56

8.67

9.78

9.63

11.37

Earnings Per Share – Diluted (Rs. )

7.56

8.67

9.78

9.63

11.37

Price to Earnings

25.55

33.81

49.86

27.72

39.35

Dividend History The Company has maintained an average dividend yield of 1.67 % over the last 5 financial years.

Liquidity and Credit Analysis Current Ratio Higher current ratio implies healthier short-term liquidity comfort level. A current ratio below 1 indicates that the company may not be able to meet its obligations in the short run. However, it is not always a matter of worry if this ratio temporarily falls below 1 as many times companies squeeze out short term cash sources to achieve a capital-intensive plan with a longer-term outlook. Motherson Sumi System’s average current ratio over the last 5 financial years has been 1.05 times which indicates that the Company has been maintaining sufficient cash to meet its short-term obligations.

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Long Term Debt to Equity Ratio Companies operating with high debt to equity on their balance sheets are vulnerable to economic cycles. In times of slowdown in economy, companies with high levels of debt find it increasingly difficult to service the interest on their borrowings as profit margins decline. We believe that long term debt to equity ratio higher than 0.6 – 0.8 could affect the business of a company and its results of operations. Motherson Sumi System’s average long-term debt to equity ratio over the last 5 financial years has been 0.87 which indicate that the Company is operating with considerable level of debt.

Interest Coverage ratio Interest coverage ratio indicates the comfort with which the company may be able to service the interest expense (i.e. finance charges) on its outstanding debt. Higher interest coverage ratio indicates that the company can easily meet the interest expense pertaining to its debt obligations. In our view, interest coverage ratio of below 1.5 should raise doubts about the company’s ability to meet the expenses on its borrowings. Interest coverage ratio below 1 indicates that the company is just not generating enough to service its debt obligations. Motherson Sumi System’s average interest coverage ratio over the last 5 financial years has been 9.71 times which indicates that the Company has been generating enough for the shareholders after servicing its debt obligations.

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Ownership pattern In its latest stock exchange filing dated 31 March 2017, Motherson Sumi Systems reported a promoter holding of 63.10 %. Large promoter holding indicates conviction and sincerity of the promoters. We believe that a greater than 35 % promoter holding offers safety to the retail investors. At the same time, institutional holding in the Company stood at 23.50 % (FII+DII). Large institutional holding indicates the confidence of seasoned investors. At the same time, it can also lead to high volatility in the stock price as institutions buy and sell larger stakes than retail participants.

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Bosch Ltd About the Company Founded in 1951, Bosch Limited (“Bosch” or the “Company”) is India’s leading supplier of technology and services in the areas of automotive and industrial technology, consumer goods and building technology. Additionally, the Company also has the largest development center, outside Germany, for end to end engineering and technology solutions. It is the flagship Company of the Bosch Group. The Bosch Group holds 71.18% stake in Bosch Limited. The Company is headquartered in Bangalore with manufacturing facilities at Bangalore, Naganathapura (near Bangalore), Nashik, Jaipur and Goa. Its Automotive Technology division includes Diesel and Gasoline Fuel Injection Systems, Car Multimedia Systems, Auto Electricals and Accessories, Starters and Generators, Energy and Body Systems. Its Industrial Technology division includes Packaging Machines, Special Purpose Machines, Solar Energy and its consumer goods and building Technology division includes power tools, security system. The Company has changed its financial year to commence from 1st April of every year and to end on 31st March of the following year. Consequently, the Company has reported its FY 2015 financial numbers for 15 months i.e., from January 01, 2014 to March 31, 2015. Hence current period’s figures are not comparable to those of the previous period.

Key Financial Figures Consolidated Particulars

(Rs. Cr) FY

FY

FY 2015

FY 2016

FY 2017

2012

2013

Total Income from Operations

8,659.07

8,820.06

12,085.48

10,612.77

11,242.56

Expenses

7,309.79

7,529.04

10,104.15

8,737.13

9,282.21

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Earnings Before Other Income,

1,349.28

1,291.02

1,981.33

1,875.64

1,960.35

Depreciation

366.92

384.20

548.42

395.01

456.23

Finance Costs

5.52

2.89

14.32

4.18

27.15

Other income

369.23

352.62

565.30

382.62

617.40

PBT

1,346.07

1,256.55

1,955.85

1,859.07

2,094.37

Tax

387.90

371.87

618.20

613.15

650.30

PAT (before Minority Interest and

958.17

884.68

1,337.65

1,245.92

1,741.12

–

–

–

–

–

–

–

–

(2.20)

0.89

–

–

–

1,248.12

1,740.23

Interest, Tax and Depreciation (Operating Profit)

share of Associates) Profit/ (loss) attributable to Minority Interest Share of profit / (loss) of Associates Consolidated Profit / (Loss) for the year

Profitability Analysis Consolidated

(%)

Particulars

FY 2012

FY 2013

FY 2015

FY 2016

FY 2017

Operating Profit Margin Ratio

15.58

14.64

16.39

17.67

17.44

Net Profit Margin Ratio

11.07

10.03

11.07

11.74

15.49

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Operating profit margin is a measurement of the proportion of a company’s revenue that is left over after paying for production costs such as raw materials, salaries and administrative costs. Net profit margin is arrived at by deducting non-operating expenses such as depreciation, finance costs and taxes out of operating profit and shows what is left for the shareholders as a percentage of net sales. Together these ratios help in understanding the cost and profit structure of the firm and analyzing business inefficiencies.

Key Balance Sheet Figures Sources of Funds / Liabilities

(Rs. Cr)

Particulars

FY 2011

FY 2012

FY 2013

FY 2015

FY 2016

Share Capital

31.40

31.40

31.40

31.40

31.40

Reserves & Surplus

4,697.04

5,541.86

6,262.90

7,315.60

8,249.30

Net worth (shareholders’ funds)

4,728.44

5,573.26

6,294.30

7,347.00

8,280.70

Long term borrowings

227.31

181.35

128.90

54.20

19.10

Current liabilities

1,966.46

1,897.43

2,207.20

2,551.10

2,763.00

Other long-term liabilities and

208.77

251.78

290.80

478.50

432.80

7,130.98

7,903.82

8,921.20

10,430.80

11,495.60

provisions Total Liabilities

21

(Rs. Cr)

Application of Funds / Assets Particulars

FY 2011

FY 2012

FY 2013

FY 2015

FY 2016

Fixed Assets

912.41

1,280.29

1,394.90

1,243.60

1,286.90

Noncurrent Investments

447.74

449.98

985.00

2,624.60

3,731.50

Current assets

5,210.47

5,692.72

5,979.80

5,926.50

5,843.60

Long term advances and other

332.76

225.63

262.60

218.90

180.80

Deferred Tax Assets

227.60

255.20

298.90

417.20

452.80

Total assets

7,130.98

7,903.82

8,921.20

10,430.80

11,495.60

noncurrent assets

Efficiency Analysis (%) Particulars

FY 2011

FY 2012

FY 2013

FY 2015

FY 2016

ROCE

26.32

27.23

20.10

26.77

22.60

ROE / RONW

20.14

20.26

14.06

18.21

15.05

Return on Capital Employed (ROCE) measures a company’s profitability from its overall operations by calculating the return generated on the total capital invested in the business (i.e. equity + debt). Return on Equity (ROE) or Return on Net Worth (RONW) measures the amount of profit which the company generates on money invested by the equity shareholders. In short, ROE draws attention to the return generated by the shareholders on their investment in the business. Together these ratios can be used in comparing the profitability of the company with other companies in the same industry.

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Valuation Analysis Consolidated Particulars

FY

FY

FY 2015

FY 2016

FY 2017

2012

2013

8,659.07

8,820.06

12,085.48

10,612.77

11,242.56

Growth (%)

6.09 %

1.86 %

37.02 %

(12.19 %)

5.93 %

PAT (Rs. Cr.)

958.17

884.68

1,337.65

1,245.92

1,741.12

Growth (%)

(14.64

(7.67 %)

51.20 %

(6.86 %)

39.75 %

Total Income from Operations (Rs. Cr.)

%) Earnings Per Share – Basic (Rs. )

305.20

281.80

426.00

397.50

560.60

Earnings Per Share – Diluted (Rs. )

305.20

281.80

426.00

397.50

560.60

Price to Earnings

31.05

38.15

55.53

52.29

43.11

Dividend History The Company has maintained an average dividend yield of 0.78 % over the last 5 financial years

Liquidity and Credit Analysis Current Ratio Higher current ratio implies healthier short-term liquidity comfort level. A current ratio below 1 indicates that the company may not be able to meet its obligations in the short run. However, it is not always a matter of worry if this ratio temporarily falls below 1 as many times companies 23

squeeze out short term cash sources to achieve a capital-intensive plan with a longer-term outlook. Bosch’s average current ratio over the last 5 financial years has been 2.54 times which indicates that the Company has been maintaining sufficient cash to meet its short-term obligations Long term Debt to Equity Ratio Companies operating with high debt to equity on their balance sheets are vulnerable to economic cycles. In times of slowdown in economy, companies with high levels of debt find it increasingly difficult to service the interest on their borrowings as profit margins decline. We believe that long term debt to equity ratio higher than 0.6 – 0.8 could affect the business of a company and its results of operations. Bosch’s average long-term debt to equity ratio over the last 5 financial years has been 0.04 which indicates that the Company is operating with a low level of debt Interest Coverage ratio Interest coverage ratio indicates the comfort with which the company may be able to service the interest expense (i.e. finance charges) on its outstanding debt. Higher interest coverage ratio indicates that the company can easily meet the interest expense pertaining to its debt obligations. In our view, interest coverage ratio of below 1.5 should raise doubts about the company’s ability to meet the expenses on its borrowings. Interest coverage ratio below 1 indicates that the company is just not generating enough to service its debt obligations. Bosch’s average interest coverage ratio over the last 5 financial years has been 162.08 times which indicates that the Company has been generating enough for the shareholders after servicing its debt obligations.

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Ownership pattern In its latest stock exchange filing dated 31 March 2017, Bosch reported a promoter holding of 70.49%. Large promoter holding indicates conviction and sincerity of the promoters. We believe that a greater than 35 % promoter holding offers safety to the retail investors. At the same time, institutional holding in the Company stood at 19.36 % (FII+DII). Large institutional holding indicates the confidence of seasoned investors. At the same time, it can also lead to high volatility in the stock price as institutions buy and sell larger stakes than retail participants.

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About the Company Exide Industries Limited (“Exide” or the “Company”) is leading Indian manufacturer of lead acid storage batteries. The Company was incorporated in 1947 and is engaged in the business of manufacturing storage batteries from 2.5 ampere-hour to 20,400 ampere-hour capacity. The products manufactured by the Company include automotive batteries, industrial batteries and submarine batteries. The Company sells its products under EXIDE, SF, SONIC and Standard Furukawa Brands. In the international market, Exide Industries’ products are sold under DYNEX, INDEX and SONIC brands. The Company’s industrial batteries are of three types: conventional lead acid batteries, valve regulated lead acid batteries and nickel-cadmium batteries. As of March 31, 2016, the Company had seven factories located all over India: two in Maharashtra, one in West Bengal, two in Tamil Nadu and one in Haryana. The Company has a market share of 72% of Automotive OEM and 70% of Organized Retail. The Company also manufactures submarine batteries.

Key Financial Figures Consolidated

(Rs. Cr)

Particulars

FY 2013

FY 2014

FY 2015

FY 2016

FY 2017

Total Income from Operations

6,372.26

8,331.47

9,568.48

9,528.64

12,228.79

Expenses

5,513.75

7,444.93

8,598.04

8,424.33

10,828.49

Earnings Before Other Income,

858.51

886.54

970.44

1,104.31

1,400.30

Depreciation

122.00

140.40

155.32

179.96

225.93

Finance Costs

9.06

7.61

3.21

1.65

146.29

Interest, Tax and Depreciation (Operating Profit)

26

Other income

49.68

48.18

61.62

85.89

69.06

PBT

777.13

786.71

873.53

1,008.59

1,097.14

Tax

237.13

240.55

257.20

292.17

293.12

PAT (before Minority Interest and

540.00

546.16

616.33

716.42

804.02

1.87

1.50

1.78

2.72

–

Share of profit / (loss) of Associates

(11.22)

–

–

–

–

Consolidated Profit / (Loss) for the

549.35

544.66

614.55

713.70

804.02

share of Associates) Profit/ (loss) attributable to Minority Interest

year

Profitability Analysis Consolidated

(%)

Particulars

FY 2013

FY 2014

FY 2015

FY 2016

FY 2017

Operating Profit Margin Ratio

13.47

10.64

10.14

11.59

11.45

Net Profit Margin Ratio

8.47

6.56

6.44

7.52

6.57

Operating profit margin is a measurement of the proportion of a company’s revenue that is left over after paying for production costs such as raw materials, salaries and administrative costs. Net profit margin is arrived at by deducting non-operating expenses such as depreciation, finance costs and taxes out of operating profit and shows what is left for the shareholders as a percentage of net sales. Together these ratios help in understanding the cost and profit structure of the firm and analyzing business inefficiencies.

27

Key Balance Sheet Figures Sources of Funds / Liabilities

(Rs. Cr)

Particulars

FY 2012

FY 2013

FY 2014

FY 2015

FY 2016

Share Capital

85.00

85.00

85.00

85.00

85.00

Reserves & Surplus

2,972.32

2,994.69

3,374.66

3,756.04

4,245.39

Net worth (shareholders funds)

3,057.32

3,079.69

3,459.66

3,841.04

4,330.39

Minority Interest

–

11.16

11.68

12.78

14.61

Long term borrowings

–

2.38

4.30

2.62

1.90

Current liabilities

896.17

1,820.28

2,194.16

2,235.17

2,390.27

Other long term liabilities and

58.38

6,291.54

6,712.30

7,664.27

8,458.28

Deferred Tax Liabilities

82.5

103.66

111.78

131.47

130.51

Total Liabilities

4,094.37

11,308.71

12,493.88

13,887.35

15,325.96

provisions

Application of Funds / Assets

(Rs. Cr)

Particulars

FY 2012

FY 2013

FY 2014

FY 2015

FY 2016

Fixed Assets

993.19

1,156.15

1,166.94

1,313.90

1,602.14

Noncurrent Investments

906.55

3,696.64

4,794.30

5,869.18

6,992.36

Current assets

2,176.23

3,390.17

3,529.44

3,720.39

4,177.26

Long term advances and other

18.40

2,483.85

2,421.30

2,401.98

1,972.30

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noncurrent assets Deferred Tax Assets

–

–

–

–

–

Goodwill on consolidation (net)

–

581.90

581.90

581.90

581.90

Total assets

4,094.37

11,308.71

12,493.88

13,887.35

15,325.96

Efficiency Analysis (%) Particulars

FY 2012

FY 2013

FY 2014

FY 2015

FY 2016

ROCE

24.59

27.75

25.51

25.16

25.40

ROE / RONW

15.20

17.84

15.74

16.00

16.54

Return on Capital Employed (ROCE) measures a company’s profitability from its overall operations by calculating the return generated on the total capital invested in the business (i.e. equity + debt). Return on Equity (ROE) or Return on Net Worth (RONW) measures the amount of profit which the company generates on money invested by the equity shareholders. In short, ROE draws attention to the return generated by the shareholders on their investment in the business. Together these ratios can be used in comparing the profitability of the company with other companies in the same industry.

Valuation Analysis Consolidated Particulars

FY 2013

FY 2014

FY 2015

FY 2016

FY 2017

Total Income from Operations

6,372.26

8,331.47

9,568.48

9,528.64

12,228.79

19.65 %

30.75 %

14.85 %

(0.42 %)

28.34 %

(Rs. Cr.) Growth (%)

29

PAT (Rs. Cr.)

540.00

546.16

616.33

716.42

804.02

Growth (%)

16.21 %

1.14 %

12.85 %

16.24 %

12.23 %

Earnings Per Share – Basic (Rs. )

6.46

6.41

7.23

8.40

9.46

Earnings Per Share – Diluted (Rs. )

6.46

6.41

7.23

8.40

9.46

Price to Earnings

20.00

20.57

21.45

16.46

24.08

Dividend History The Company has maintained an average dividend yield of 1.16 % over the last 5 financial years.

Liquidity and Credit Analysis Current Ratio Higher current ratio implies healthier short-term liquidity comfort level. A current ratio below 1 indicates that the company may not be able to meet its obligations in the short run. However, it is not always a matter of worry if this ratio temporarily falls below 1 as many times companies squeeze out short term cash sources to achieve a capital-intensive plan with a longer-term outlook. Exide Industries’ average current ratio over the last 5 financial years has been 2.00 times which indicates that the Company has been maintaining sufficient cash to meet its shortterm obligations. Long term Debt to Equity Ratio Companies operating with high long-term debt to equity on their balance sheets are vulnerable to economic cycles. In times of slowdown in economy, companies with high levels of debt find it increasingly difficult to service the interest on their borrowings as profit margins decline. We

30

believe that long term debt to equity ratio higher than 0.6 – 0.8 could affect the business of a company and its results of operations. Exide Industries’ average long-term debt to equity ratio over the last 5 financial years has been 0.00 times which indicates that the Company is operating with negligible level of debt and is well placed to meet its obligations. Interest Coverage ratio Interest coverage ratio indicates the comfort with which the company may be able to service the interest expense (i.e. finance charges) on its outstanding debt. Higher interest coverage ratio indicates that the company can easily meet the interest expense pertaining to its debt obligations. In our view, interest coverage ratio of below 1.5 should raise doubts about the company’s ability to meet the expenses on its borrowings. Interest coverage ratio below 1 indicates that the company is just not generating enough to service its debt obligations. Exide Industries’ average interest coverage ratio over the last 5 financial years has been 130.22 times which indicates that the Company has been generating enough for the shareholders after servicing its debt obligations.

Ownership pattern In its latest stock exchange filing dated 31 March 2017, Exide Industries reported a promoter holding of 45.99 %. Large promoter holding indicates conviction and sincerity of the promoters. We believe that a greater than 35 % promoter holding offers safety to the retail investors. At the same time, institutional holding in the Company stood at 32.85 % (FII+DII). Large institutional holding indicates the confidence of seasoned investors. At the same time, it can also lead to high volatility in the stock price as institutions buy and sell larger stakes than retail participants.

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