Q3FY18 Result Update Auto Ancillary BUY CMP (Rs) Target Price (Rs) Potential Upside Sensex Nifty Key Stock data BSE Code NSE Code Bloomberg Shares o/s, Cr (FV 10) Market Cap (Rs Cr) 3M Avg Volume 52 week H/L Shareholding Pattern (%) Jun-17 Promoter 70.7 FII DII 11.1 1 462 563 21.9% 35,640 10,914 540124 GNA GNA:IN 2.1 994 213,350 474/188 Sep-17 Dec-17 70.7 6 0.3 7.2 9.5 22.0 24.4 Higher volumes boost sales and profitability reported robust Q3FY18 result on account of strong sales in both domestic and export markets. Total income and Net profit increased by 40.9% and 55.9% respectively on yoy basis. In 9MFY18, the company derived ~45% of its revenue from export market, the outlook for which remains healthy considering significant pickup in truck demand in North American markets. Also, domestic outlook for tractors and MH&CVs continues to remain strong. Recommend Buy. Q3FY18 Result Update: Total income was up 40.9% at Rs. 167 cr compared to Rs. 118.5 cr in the same quarter last year. Domestic sales were up 32.8% yoy led by strong growth in tractor and MH&CV segments. Further, exports too remained robust, growing 34.6% yoy on account of strong demand for heavy trucks from North American markets. Going ahead, we expect overall volume growth to be around 12-15% supported by steady outlook for automobile industry globally and launch of axles for SUVs and LCVs in FY19-20E. On operational front, was up 38.4% at Rs. 2 cr against Rs. 19.4 cr yoy. Operational margins faded marginally by 30 bps due to higher material cost (up 4% yoy); however the same was aided by lower employee cost (up 16.5% yoy). We expect overall % to improve in the next 2-3 years led by cost reduction measures and launch of new products. Net profit surged by 55.9% on account of lower finance (down 70% yoy) and depreciation cost (up 2.8% yoy). With higher volumes and better working capital management, Net profit margin improved by 70 bps to % in Q3FY18 compared to % in Q3FY17. We expect the overall Net profit margins to remain healthy and improve marginally in the next 2-3 years led by higher capacity utilization and sales. 1 Year relative price performance 250 230 210 190 170 150 130 110 90 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Research Analyst Jun-17 Jul-17 Aug-17 Ajay Pasari, CFA ajay.pasari@religare.com Sep-17 Ni y Oct-17 Nov-17 Dec-17 Outlook & Valuation: is a niche player in the auto ancillary space with ~50% market share in the domestic rear axle shafts. The outlook for automobile industry (off-highway vehicles, MH&CVs, LCVs) is expected to remain robust on domestic front, given expected pick-up in GDP growth, higher infrastructure spending, focus on rural economy and normal monsoon. Also, with recovery in global economies, we expect demand for commercial automobile vehicles to remain strong in the next 2-3 years, mainly in the North American markets. GNA is also expanding its axle capacity to meet the rising demand and is likely to launch axles for LCVs and SUVs in FY19-20E, which would further add to its revenues. Thus, considering strong business outlook, capacity expansion, entry into new segments and improving margins, we recommend a Buy on the stock with a target of Rs. 563. Financial Summary - Consolidated Particulars, Rs cr Net revenue Adj PAT PATM (%) EPS, Rs RoE (%) P/E (x) FY17 FY18E FY19E FY20E 513 607 716 845 80 30 33.4 95 41 13.0 24.0 115 49 137 60 2 14.5 2 16.3 January 22, 2018
Q3FY18 Result Update Auto Ancillary P&L Account Quarterly - Consolidated Particulars, Rs cr Q3FY18 Q3FY17 Y-o-Y % Q2FY18 Q-o-Q % Net Revenue Material cost Employee cost Other expenses Total expenditure Other income Depreciation PBIT Interest expenses PBT Exceptional items Tax Tax/PBT % PAT APATM (%) EPS 167.0 103.7 28.9 140.1 2 0.4 6.2 21.1 1.3 19.7 3 12.7 5.9 118.5 72.6 6.5 20.1 9 19.4 16.4 1.4 6.0 14.8 2.3 12.4 4.3 34.5 3.8 40.9 4 16.5 43.7 41.4 38.4-29bps -69.6 2.8 42.8-4 58.8 64.6 125bps 55.9 73bps 55.9 153.5 96.7 25.4 129.8 23.7 15.5 0.9 6.5 18.2 1.8 16.4 5.7 34.7 10.7 5.0 8.8 7.2-0.9 13.5 8.0 13.1 62bps -52.3-4.0-26.0 20.7 24.3 102bps 18.9 64bps 18.9
Q3FY18 Result Update Auto Ancillary P&L Account - Consolidated Particulars, Rs cr FY17 FY18E FY19E Net revenue Expenditure Raw material consumed Employee cost Other expenses Total expenditure Other income Depreciation PBIT Interest expenses PBT Exceptional items Tax Tax rate % PAT PATM (%) EPS 513.4 318.5 2 87.3 433.0 80.4 23.9 59.4 4 17.3 3 29.6 60 376.3 30.9 104.3 511.5 95.3 3.1 28.0 70.4 62.3 21.2 41.1 716.0 442.2 36.5 122.1 600.8 115.3 3.1 34.2 84.2 9.3 74.9 25.5 49.4 FY20E 844.9 523.7 42.3 142.3 708.4 136.6 3.2 100.7 91.5 31.1 60.4 2 Balance sheet - Consolidated Particulars, Rs cr FY17 FY18E FY19E Share Capital Reserves & Surplus Total Shareholder's Fund Non-Current Liabilities Long term borrowing Deferred tax liability Current Liabilities Short term borrowing Trade payables Short term provisions Other current liabilities Total liabilities Fixed Assets Non Current investment Long Term loans & advances Other non-current assets 275.4 29 28.7 251.6 72.7 152.1 2.0 24.9 577.2 134.3 34.1 316.6 338.0 28.9 2.6 270.7 69.0 173.4 2.2 26.1 63 186.3 3 366.0 387.5 2 301.4 67.0 204.6 27.4 718.0 202.1 36.6 FY20E 426.4 447.9 29.4 3.2 337.9 65.0 241.4 2.8 28.8 815.2 213.0 37.3 Current Assets 396.3 403.0 46 552.4 Inventories 110.3 124.6 14 170.6 Trade receivables 182.3 20 246.2 285.6 Cash & Cash equivalents 7 6 Short term loans and advances 31.3 3 34.5 36.2 Total assets 577.2 63 718.0 815.2
Q3FY18 Result Update Auto Ancillary Cash Flow statement - Consolidated Key Financial ratios - Consolidated Particulars, Rs cr FY17 FY18E FY19E FY20E Particulars, Rs cr FY17 FY18E FY19E FY20E Profit Before Tax Add: Depreciation Add: Interest cost Op profit before working capital changes Changes In working Capital Direct taxes Cash Flow From Operating Cash Flow from Investing Purchase of Fixed assets Sale of Fixed assets Cash Flow from Investing Cash from Financing Proceeds from issuance of shares Net proceeds from borrowings Dividend (incl dividend tax) Interest cost Cash Flow from Financing Net Cash Inflow / Outflow Opening Cash & Cash Equivalents Closing Cash & Cash Equivalent 4 23.9 8.2 79.0-69.0 10.1-10.9 0.1-36.3 130.4-1 -11.1-2.3 98.0 71.8 0.7 7 62.3 28.0 98.4-19.3-21.2 57.9-8 -8-3.6 - -11.7-33.9 7 74.9 34.2 9.3 118.4-31.1-25.5 61.9-5 -5-2.1-9.3-11.4 0.5 91.5 139.7-26.6-31.1 82.0-5 -5-2.0 - -11.1 20.9 6 EPS Rs Book Value per share Rs Profitability Ratios / Total income (%) PBT/Total income (%) NPM / Total income (%) ROCE (%) ROE (%) Liquidity ratios Debt-Equity Ratio Current Ratio Interest Cover Ratio Turnover ratios Total Asset Ratio Fixed Assets Ratio Debtors Velocity Overall (Days) Inventory (Days) Creditors Velocity (Days) Cash Conversion cycle GROWTH YOY% Sales Growth % Operating Profit % Net Profit Growth % VALUATION 138.3 1 0.3 1.6 4.7 3.7 122.4 71.7 108.8 85.3-2.3 14.0 157.5 10.3 1 13.0 0.3 1.5 8.7 3.8 117.0 70.7 97.9 89.8 18.2 18.5 38.9 180.5 10.5 18.3 1.5 9.0 1.1 3.7 115.5 69.2 96.3 88.4 18.0 2 2 2 208.6 10.8 19.6 14.5 1.6 1 1.1 4.1 114.9 68.6 96.3 8 18.0 18.4 22.2 P / E Ratio P / BV Ratio EV / 33.4 3.3 12.6 24.0 1 2 16.3 2.2 7.5
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