Bajaj Auto (BAAUTO) 2815

Result Update Rating matrix Rating : Hold Target : 2780 Target Period : 12 months Potential Upside : 1% What s Changed? Target changed from 3000 to 2780 EPS FY18E Changed from 155.4 to 137.7 EPS FY19E Changed from 181 to 164.7 Rating Unchanged Quarterly Performance Q1FY18 Q1FY17 YoY (%) Q4FY17 QoQ (%) Revenue 5,442.4 5,748.0 5.3 4,897.3 11.1 EBITDA 938.4 1,176.3 20.2 906.0 3.6 EBITDA (%) 17.2 20.5 322 bps 18.5 126 bps PAT 923.0 978.4 5.7 801.8 15.1 Key Financials Crore FY16 FY17 FY18E FY19E Net Sales 22,587 21,767 23,961 27,749 EBITDA 4,782 4,422 4,409 5,333 Net Profit 3,930 3,828 3,951 4,767 EPS ( ) 135.8 132.3 136.6 164.7 Valuation summary FY16 FY17 FY18E FY19E Core P/E (x) 20.7 21.3 20.4 17.1 Tgt Core P/E (x) 20.5 21.0 20.4 16.9 EV/EBITDA(x) 16.6 17.0 16.5 13.3 P/BV (x) 6.1 4.8 4.3 3.8 RoNW (%) 29.6 22.5 21.1 22.2 RoCE (%) 40.7 30.3 29.0 30.9 Stock data Particular Amount Market Capitalization ( crore) 81,457.7 Total Debt (FY17) ( crore) 119.9crore Cash & Liquid Invests (FY17) ( crore) 6349.7Crore EV ( crore) 75227.8crore 52 week H/L ( ) 3120 / 2510 Equity capital ( ) 289.4 Face value ( ) 10 Price performance (%) 1M 3M 6M 12M Bajaj Auto Ltd 0.1 0.3 4.2 1.6 Hero MotoCorp Ltd 2.3 14.9 20.7 12.7 TVS Motor Company Ltd 4.8 18.7 50.9 90.5 Research Analyst Nishit Zota nishit.zota@icicisecurities.com Vidrum Mehta vidrum.mehta@icicisecurities.com Weak performance continues July 24, 2017 Bajaj Auto (BAAUTO) 2815 Bajaj Auto reported its Q1FY18 results, which were below our estimates on the operational front. Revenues were at 5442 crore (down 5.3% YoY, up 11.1%QoQ) vs. our estimate of 5378 crore. The beat is attributable to higher than estimated domestic & export realisations Total volumes for Q1FY18 were at 888434 units (down 10.7% YoY, up 12.8% QoQ). Domestic volumes declined 23.3% YoY, up 3.3% QoQ to 478909 units. Domestic realisations grew 8.2% YoY against our estimate of 7.1%. Export volumes increased 10.5% YoY, 26.4% QoQ to 324051 units. Export realisations grew 9.1% QoQ vs. our estimate of 4.6%. In export markets, the sales mix of high end motorcycles improved to 30% vs. 26% in Q1FY17 Reported EBITDA margins were at 17.2% (down 322 bps YoY, 126 bps QoQ) against our estimate of 19.5%. The miss is mainly attributable to lower than estimated gross margins. Of the ~210 bps decline in gross margins, renewal of contract with steelmakers has had ~110 bps impact. Margins in the domestic motorcycle segment declined as the company reduced prices of entry level bikes and increased marketing expense in the premium segment Reported PAT declined 5.7% YoY, up 15.1% QoQ to 923 crore vs. our estimate of 916.6 crore. The beat is attributable to higher than estimated other income, which increased 56% QoQ to 457 crore due to onetime dividend of 135 crore from KTM Struggling in domestic business BAL s domestic volumes grew 5.4% in FY17, outpacing industry growth of ~3.7%. This was mainly on account of new launches like the Dominar, V series & Avengers. However, volumes from these new models have come off sharply (Avenger: Q1FY1756391 units, Q1FY1823583 units; V12/V15: Q1FY1782387 units, Q1FY1840937 units). The market share has fallen across segments in the motorcycle segment, with CT 100 & Platina losing share in economy segment, single digit share in executive segment reducing further to sub 5% while in the premium segment the company has lost its dominance with the likes of Royal Enfield s market share now equal to BAL. With no new launches expected in the near term, we expect domestic volumes to grow at 5% CAGR in FY1719E. One positive that could emerge is the possible tieup with a global company in the motorcycle segment in the next few weeks. Export growth on low base and geography diversification BAL is cautiously optimistic on the export market. The company expects to offset the expected decline in Nigeria with growth in markets like Turkey, Iran and SouthEast Asia. In 3W, BAL has already reduced its dependence on SriLanka by increasing exports to Bangladesh, Peru etc. We expect export volumes to grow at 12.8% CAGR in FY1719E. Margins to be under pressure BAL continues to focus on profitability, with ~60% of the business operating at ~20%+ EBITDA margin. However, margins in domestic motorcycle segment will be under pressure, due to commodity cost pressure & customer acquisition costs. We value BAL on an SOTP basis, valuing the core business at 16x FY19E EPS and investment in KTM to arrive at a target price of 2780. We have a HOLD recommendation on the stock. ICICI Securities Ltd Retail Equity Research

Variance analysis Standalone Q1FY18 Q1FY18E Q1FY17 YoY (%) Q4FY17 QoQ (%) Comments Total Operating Income 5,442 5,378 5,748 5.3 4,897 11.1 Higher than estimates due to higherthanexpected domestic/export realisations Raw Material Expenses 3,809 3,679 3,863 1.4 3,320 14.7 Renewal of contracts with steelmakers led to rise in raw material prices Employee Expenses 273 236 268 1.6 227 19.9 Other Expenses 427 417 445 4.1 451 5.5 EBITDA 938.4 1,050.8 1,176.3 20.2 906.0 3.6 EBITDA Margin (%) 17.2 19.5 20.5 322 bps 18.5 126 bps EBITDA margins came in lower due to lower than estimated gross margins Other Income 457.3 342.0 267.1 71.2 293.6 55.7 Other income came in higher due to to onetime dividend of 135 crore from KTM Depreciation 75.3 82.1 77.5 2.9 75.7 0.6 Interest 0 0 0 9.1 0 NA Total Tax 364 393 387 6.0 322 13.2 Reported PAT 923.0 916.6 978.4 5.7 801.8 15.1 Beat on profit attributable to higher than estimated other income EPS ( ) 27.7 27.7 31.9 13.1 27.7 0.0 Key Metrics Revneue ( crore) Domestic 3,261 3,210 3,927 17.0 3,343 2.4 Higher than estimates on account of higher ASPs Exports 2,479 2,377 2,057 20.5 1,778 39.4 Higher than estimates on account of higher ASPs Blended ASP ( / unit) Domestic 68,099 67,036 62,931 8.2 72,103 5.6 Exports 60,534 58,035 55,497 9.1 54,868 10.3 ASPs higher due to higher share of premium motorcycles Change in estimates FY18E FY19E ( Crore) Old New % Change Old New % Change Comments Revenue 25,501 23,961 6.0 29,739 27,749 6.7 Downward revision as we have revised volume estimates downwards post Q1FY18 volume performance EBITDA 5,179 4,409 14.9 6,176 5,333 13.6 EBITDA Margin (%) 20.3 18.4 191 bps 20.8 19.2 155 bps Margin estimates reduced post management guidance PAT 4,497 3,951 12.1 5,237 4,767 9.0 PAT estimates reduced to reflect reduction in revenue & margin estimates EPS ( ) 155.4 136.6 12.1 181.0 164.7 9.0 Assumptions Current Earlier Comments Units (mn) FY16 FY17E FY18E FY19E FY18E FY19E Motorcycle volumes 3.4 3.2 3.4 3.7 3.5 3.9 Downward revision of estimates considering weak Q1FY18 performance ThreeWheeler volumes 0.5 0.4 0.4 0.5 0.5 0.5 Quadricycle volumes 0.01 0.02 0.02 0.02 0.02 Export volumes 1.7 1.4 1.6 1.8 1.6 1.8 Domestic revenues ( crore) 13,774 14,816 15,617 17,916 17,102 19,787 Export revenues ($ mn) 1,492 1,134 1,417 1,688 1,382 1,618 US$INR Realisation rate 66 67 67 67 67 67 Export ASP ($/unit) 856 830 903 941 870 906 Increased estimates due to better mix Blended ASP ( /unit) 60,475 61,907 65,287 68,438 65,705 69,171 RM/Vehicle ( /unit) 32,318 38,919 40,821 42,821 40,821 42,821 EBIDTA/Vehicle ( /unit) 12,320 11,260 12,445 10,415 12,028 10,043 ICICI Securities Ltd Retail Equity Research Page 2

Key conference call takeaways In Q1FY18, rise in commodity prices had a ~110 bps adverse impact on gross margins. In May 2017, the company raised prices by 500 on motorcycles & 1000 on 3W. Going ahead, the company expects raw material to sales to be in the range of 68.7%69% in FY18 (~70% in Q1FY18) Volume of V12 & Avenger family has come off sharply in the past few quarters (Avenger: Q1FY1756391 units, Q1FY1823583 units; V12/V15: Q1FY1782387 units, Q1FY1840937 units). Going ahead company has guided for a monthly run rate of 1200015000 units for Avenger & pickup in V series volumes from festive season onwards to ~25000 units a month The company is hopeful of achieving total export volumes of 1.6 million The exceptional item of 32 crore related to GST transition: a) compensation to dealers & b) adjustment to GST price from June 15 onwards Dealer inventory was reduced by ~50000 units (retail~155000 units, wholesale ~105000 units) in anticipation of GST The company attributes the 30% YoY fall in domestic 3W to high base of 75204 units in Q1FY17 (Maharashtra permit). Going ahead, the management expects a monthly run rate of ~20,000+ units in domestic 3W due to removal of restriction on new permits in Maharashtra, ~10,000 new permits in Delhi & proposed replacement of 2 stroke 3W with 4stroke 3W in Bangalore Domestic spare part revenues were at 460 crore with export at 190 crore. Total spare part revenue was at 650 crore vs. 637 crore YoY The company is in talks with a global motorcycle company for a possible tieup The Pulsar brand has witnessed market share erosion as the competitor brand Apache is doing well in states like Odisha, UP and Bihar In FY18, BAL expects total KTM sales from India at 1.1 lakh units, of which ~50,000 units will be sold in India The US$:INR realisation in the export market is expected to be 66.766.8 for the balance period in FY18 ICICI Securities Ltd Retail Equity Research Page 3

Company Analysis Export volumes to recover BAL s domestic volumes grew 5.4% in FY17, outpacing industry growth of ~3.7%. This was mainly on account of new launches like the Dominar, V series & Avengers. However, volumes from these new models have come off sharply (Avenger: Q1FY1756391 units, Q1FY1823583 units; V12/V15: Q1FY1782387 units, Q1FY1840937 units). The market share has fallen across segments in the motorcycle segment, with CT 100 & Platina losing share in economy segment, single digit share in executive segment reducing further to sub 5%. In the premium segment, the company has lost its dominance with the likes of Royal Enfield s market share now equal to BAL. With no new launches expected in the near term, we expect domestic volumes to grow at 5% CAGR in FY1719E. One positive that may emerge is the possible tieup with a global company in the motorcycle segment in the next few weeks. Overall, we expect revenues to grow at 12.9% CAGR in FY1719E to 27,749 crore. Exhibit 1: Revenue growth at 13.4% CAGR in FY1719E ( crore) 30,000 25,000 20,000 15,000 10,000 5,000 39 16,398 19,529 19 19,997 2 20,150 1 21,612 7 22,587 5 21,767 4 10 23,961 16 27,749 45 40 35 30 25 20 15 10 5 5 10 (%) FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E Revenue % increase The company is cautiously optimistic on the export market. BAL expects to offset the expected decline in Nigeria with growth in markets like Turkey, Iran and SouthEast Asia. In 3W, the company has already reduced its dependence on Sri Lanka by increasing exports to Bangladesh, Peru, etc. We expect export volumes to grow at 12.8% CAGR in FY1719E. ICICI Securities Ltd Retail Equity Research Page 4

Exhibit 2: Revenue mix trend 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 44.3 41.5 39.6 34.7 33.3 32.6 13,223 6,604 13,905 6,713 12,527 8,200 12,255 9,758 13,774 9,772 14,816 7,879 15,617 9,626 38.1 38.7 17,916 11,308 FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E 50 45 40 35 30 25 20 Domestic Exports % share of exports EBITDA margin to be under pressure in near term! Looking at BAL s financial performance, we can clearly see that the company is almost synonymous with strong consistency. However, BAL expects EBITDA margins to drop due to commodity price pressure and customer acquisition cost. We estimate EBITDA margin of 18.4% and 19.2% for FY18E and FY19E, respectively. Exhibit 3: EBITDA margins to decline! 6,000 22 ( crore) 5,000 4,000 3,000 2,000 1,000 19.3 3,171 19.0 3,720 3,635 18.2 4,106 20.4 4,117 21.2 20.3 19.0 4,782 4,422 18.4 4,409 19.2 5,333 21 20 19 18 17 (%) FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E 16 EBITDA EBITDA margin ICICI Securities Ltd Retail Equity Research Page 5

Exhibit 4: Per vehicle metrics and estimates 67,000 62,000 57,000 52,000 47,000 42,000 37,000 32,000 27,000 22,000 60,953 38,842 64,775 40,498 65,012 61,796 42,155 39,735 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 ( ) Q1FY18 Avg RM Cost Avg realisation Source: Company press release, ICICIdirect.com Research Return ratios to remain strong as company continues its profit growth! BAL remains a cash generating franchise, which has an annual CFO of ~ 4066 crore and CFO/EBITDA ratios of ~76% (five year average). The company has extremely tight control on working capital and has already worked towards reducing the system inventory. We believe the cash accumulated in BAL s balance sheet could be better utilised via higher dividend payout as capex requirements are just ~7% of CFO generated annually. Exhibit 5: CFO continues to remain strong 6,000 120.0 5,000 4,000 104.8 100.2 92.0 90.1 99.9 100.0 80.0 crore 3,000 60.7 61.4 65.6 60.0 % 2,000 40.0 1,000 3,899 2,207 4,116 2,527 3,136 4,070 3,970 5,330 FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E 20.0 CFO CFO/EBITDA ICICI Securities Ltd Retail Equity Research Page 6

Exhibit 6: Trend in profitability 6,000 25 ( crore) 5,000 4,000 3,000 2,000 1,000 20.4 3,340 15.4 3,004 15.2 3,044 16.1 3,243 13.0 2,814 17.4 3,930 17.6 3,828 16.5 3,952 17.2 4,767 20 15 10 5 (%) FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E PAT PAT margin Source: Company press release, ICICIdirect.com Research ICICI Securities Ltd Retail Equity Research Page 7

Key takeaways from annual report The domestic motorcycle market continued to remain sluggish, with domestic growth of 3.7% in FY17, after degrowth 0.4% in previous year. Compared to FY15, growth in FY17 was a mere 1.6% per annum from 10.7 million units two years earlier to 11.1 million in the current year. The muted performance is attributable to increasing share of scooter (~30% of total 2W sales) In the last two years, BAL s domestic motorcycle sales have outpaced industry growth. In FY17, BAL s domestic motorcycle volumes grew by 5.4% vs. market growth of 3.7%. The outperformance is attributable to launch of V series that sold 234000 units BAL has captured major market shares in sport segment but lost share in entry segment. In entry segment, where the company has presence through CT100 & Platina, its market share has reduced from 35% in FY16 to 32% in FY17. In the sports (Pulsar, Avenger) segment, market share has increased from 43% last year to 45%. In the super sports segment (KTM, Pulsar RS 200 & Dominar 400), sales were at 63,575 units. KTM sale of 34,970 units in India was higher 15% YoY The industry domestic 3W volumes declined 5% where BAL s corresponding volumes declined just 0.7%. In the domestic 3W (passenger + goods) market share increased from 47.4% in FY16 to 49.5% in FY17. In the domestic passenger segment, market share increased from 57.5% to 59.7% in FY17. BAL has recently entered the goods segment, where its volumes increased from 1325 units in FY16 to 13162 (12% market share) units in FY17. In export 3w, BAL saw a drop in volumes from 280,000 units last year to 191,236 units in FY17. The reason of decline was economic difficulty and currency constraint in several importing countries. Motorcycle exports degrew 16.5%. In export market, of the 18 markets that contribute 85% of the motorcycle exports, BAL gained market share in 16, reaching a healthy 40%+ in South Asia & Middle East & 25% in 25% in Latin America. In FY17, company has entered four new markets each for motorcycle & 3W, of which three were in the Asean region In FY17, Waluj the export hub of Bajaj Auto, produced 1.64 million motorcycles of which over 1.03 million were exported; and 445,563 threewheelers of which 191,000 were shipped abroad. The Chakan plant has used its core competencies in developing and manufacturing the high end sports bikes, and manufactured 608,974 units in FY17. The Pantnagar plant manufactured 960,686 motorbikes As of FY17, BAL s employee strength was at 9509 employees Bajaj Auto International Holdings BV is a 100% Netherlands based subsidiary of Bajaj Auto. Over the years, through this subsidiary, Bajaj Auto has invested a total of 198.1 million (H 1,219 crore), and holds approximately 48% stake in KTM AG of Austria (KTM). In CY16, KTM sold 203,423 motorcycles, growth of 11% and achieved a turnover of 1.14 billion, growth of 12%. Profit after tax was at 72.1 million ( 531 crore), growth of 13%. The proportionate profit to Bajaj Auto is 34.56 million ( 255 crore) ICICI Securities Ltd Retail Equity Research Page 8

Outlook and valuation On the financials front, ~60% of the business operates at ~20% EBITDA margin. However, margins will be under pressure due to commodity cost pressure and customer acquisition costs. We value BAL on an SOTP basis, valuing the core business at 16x FY19E EPS and investment in KTM to arrive at a target price of 2780. We have a HOLD recommendation on the stock. Exhibit 7: Valuation Revenues Growth EPS Growth PE EV/EBITDA RoNW RoCE ( cr) (%) ( ) (%) (x) (x) (%) (%) FY16 22,586.5 6.3 135.8 30.5 20.7 16.6 29.6 40.7 FY17 21,766.7 (3.6) 132.3 (2.6) 21.3 17.0 22.5 30.3 FY18E 23,960.8 10.1 136.6 3.2 20.6 16.5 21.1 29.0 FY19E 27,749.1 15.8 164.7 20.6 17.1 13.3 22.2 30.9 Exhibit 8: SOTP valuation SOTP Valuation Estimated value Per share ( ) Remark Core Business FY19E EPS ( ) 164.7 Multiple (x) 16 Longterm average valuation multiple Value per share ( ) 2,640 Stake in KTM (48%) Total valuation ( crore) 10657 Value towards BAL 5115 Value per share post 20% holdco disc Total Value per Share ( ) 2,780 47.99% stake via Bajaj Auto International Holdings 140 20% holding company discount ICICI Securities Ltd Retail Equity Research Page 9

(%) ( ) Recommended history vs. consensus 3,500 60.0 3,000 50.0 2,500 2,000 1,500 1,000 40.0 30.0 20.0 500 10.0 0 Aug15 Oct15 Dec15 Feb16 Apr16 Jun16 Aug16 Oct16 Dec16 Jan17 Mar17 May17 Jul17 0.0 Price Idirect target Consensus Target Mean % Consensus with BUY Source: Bloomberg, Company, ICICIdirect.com Research Key events Date Event Apr09 Unveils going global strategy aided by KTM (stake raised to 30% from 14.5% initially in 2007) May09 Unveils all new 150/180 cc Pulsar DTSI to enhance market leadership position in premium segment Nov09 Bajaj Auto's export strategy bears strong fruit as volumes rise 46% YoY to ~98,000 odd units (35% of overall share) Jan10 Takes historic decision to exit scooter business completely and become a pure play motorcycle manufacturer Jul10 Bajaj Auto shuns JV with Nissan for small car venture to continue alone with RE60 Dec10 Auto stocks slide as oil firms hike petrol prices steeply by ~ 3/ litre Feb11 Bajaj Auto crosses 1 million units in the exports markets May11 Rising input cost pressures cause automakers to raise prices; Bajaj hikes prices further as DEPB tax benefits reduced by government Oct11 US$INR skids touching 50 causing market preference towards exporters; Bajaj stands out in the same Mar12 Bajaj Auto raises stake in KTM to ~48%, first product launch KTM Duke 200 cc receives strong response Mar13 Bajaj Auto reports lowest March volumes since FY10 on account of weak domestic motorcycle sales as scooter sales shares rise Oct13 Exceptionally strong Q2FY14 margin performance makes it stand head and shoulders above any domestic & global OEM May14 Bajaj Auto reports lowest overall market share drop in the 2W space to below 15% Mar15 Bajaj Auto reports a market share of 18% in Q4FY15 Top 10 Shareholders Rank Name Latest Filing Date % O/S Position (m) Change (m) 1 Bajaj Group of Industries 31Mar17 0.47 135.7 44.42 2 Life Insurance Corporation of India 31Mar17 0.0539 15.6 1.05 3 Firodia Group of Industries 31Mar17 0.0348 10.1 0.17 4 Norges Bank Investment Management (NBIM) 31Mar17 0.0138 4.0 0.00 5 Lazard Asset Management, L.L.C. 30Jun17 0.0137 4.0 0.00 6 Bajaj (Niraj) 31Mar17 0.0126 3.7 0.00 7 Bajaj (Rahulkumar) 31Mar17 0.0103 3.0 0.00 8 BlackRock Institutional Trust Company, N.A. 30Jun17 0.0087 2.5 0.02 9 The Vanguard Group, Inc. 30Jun17 0.0079 2.3 0.02 10 J.P. Morgan Asset Management (Hong Kong) Ltd. 31May17 0.0079 2.3 0.01 Source: Reuters, ICICIdirect.com Research Shareholding Pattern (in %) Jun16 Sep16 Dec16 Mar17 Jun17 Promoter 49.3 49.3 49.3 49.3 49.3 FII 17.1 18.1 18.0 17.8 17.8 DII 8.8 8.2 8.4 7.9 7.3 Others 24.8 24.4 24.3 25.0 25.6 Recent Activity Buys Sells Investor name Value Shares Investor name Value Shares Bajaj Group of Industries +1,921.85M +44.42M PineBridge Investments Asia Limited 41.06M 1.06M Life Insurance Corporation of India +45.48M +1.05M Lyxor Asset Management 13.11M 0.30M Bajaj (Sanjivnayan) +26.17M +0.63M Firodia Group of Industries 7.18M 0.17M Caisse de Depot et Placement du Quebec +6.57M +0.17M Fidelity Management & Research Company 4.32M 0.10M City of London Investment Management Co. Ltd. +4.90M +0.13M Tata Asset Management Limited 2.72M 0.06M Source: Reuters, ICICIdirect.com Research ICICI Securities Ltd Retail Equity Research Page 10

Financial summary Profit and loss statement Crore (Yearend March) FY16 FY17 FY18E FY19E Total operating Income 22587 21767 23961 27749 Growth (%) 1.8 3.6 10.1 15.8 Raw Material Expenses 15,056.9 14,624.2 16,575.3 18,964.2 Employee Expenses 917.1 997.1 1,088.7 1,289.4 Other expenses 1,847.6 1,745.4 1,911.5 2,189.7 Total Operating Expenditure 17,804.6 17,344.3 19,551.9 22,415.9 EBITDA 4781.9 4422.4 4408.9 5333.2 Growth (%) 8.1 7.5 0.3 21.0 Depreciation 307.2 307.3 311.5 333.0 Interest 1.1 1.4 1.2 1.2 Other Income 1,073.6 1,222.0 1,551.4 1,811.2 PBT 5,547.3 5,335.6 5,647.6 6,810.2 Total Tax 1,617.7 1,508.1 1,663.2 2,043.1 PAT 3929.7 3827.6 3951.4 4767.1 Growth (%) 39.7 2.6 3.2 20.6 EPS ( ) 135.8 132.3 136.6 164.7 Cash flow statement Crore (Yearend March) FY16 FY17 FY18E FY19E Profit after Tax 3,929.7 3,827.6 3,951.4 4,767.1 Add: Depreciation 307.2 307.3 311.5 333.0 (Inc)/dec in Current Assets 593.8 339.9 290.9 214.4 Inc/(dec) in CL and Provisions 1,569.3 91.4 224.9 348.5 CF from operating activities 3135.9 4070.2 3970.2 5329.6 (Inc)/dec in Investments 4,480.6 4,730.1 2,000.0 2,000.0 (Inc)/dec in Fixed Assets 212.9 251.4 250.0 250.0 Others 5,719.6 492.0 616.3 804.9 CF from investing activities 1451.8 4489.5 1633.7 3054.9 Inc/(dec) in loan funds 6.1 2.0 0.0 0.0 Dividend paid & dividend tax 3,464.6 174.1 2,066.1 2,238.3 Inc/(dec) in Sec. premium 0.0 0.0 0.0 0.0 CF from financing activities 1410.7 140.6 2067.3 2239.5 Net Cash flow 273.4 559.9 269.2 35.2 Opening Cash 586.2 859.5 299.6 568.8 Closing Cash 859.5 299.6 568.8 604.0 Balance sheet Crore (Yearend March) FY16 FY17 FY18E FY19E Liabilities Equity Capital 289.4 289.4 289.4 289.4 Reserve and Surplus 12,977.2 16,744.8 18,630.1 21,158.9 Total Shareholders funds 13,266.6 17,034.1 18,919.5 21,448.3 Total Debt 117.9 119.9 119.9 119.9 Deferred Tax Liability 202.8 313.6 313.6 313.6 Other noncurrent liabilities 29.8 127.2 127.2 127.2 Total Liabilities 13705.5 17722.2 19558.3 22087.0 Assets Gross Block 4,361.4 4,457.8 4,707.8 4,957.8 Less: Acc Depreciation 2,364.6 2,500.7 2,812.2 3,145.1 Net Block 1,996.8 1,957.1 1,895.6 1,812.7 Capital WIP 26.9 10.6 10.6 10.6 Total Fixed Assets 2,023.7 1,967.8 1,906.3 1,823.3 Investments 10,260.6 14,731.5 16,731.5 19,531.5 Inventory 719.1 689.7 759.2 879.2 Debtors 717.9 902.6 993.6 1,140.4 Loans and Advances 7.1 6.2 6.8 7.9 Other current assets 216.3 295.6 212.3 417.1 Cash 859.5 299.6 568.8 604.0 Total Current Assets 3,399.9 3,185.4 3,745.5 3,995.0 Creditors 2,027.0 2,116.9 2,330.3 2,660.9 Provisions 113.0 114.5 126.0 143.9 Other current liabilities 0 477.1 604.3 546.2 Total Current Liabilities 2,781.0 3,054.9 3,051.9 3,494.5 Net Current Assets 751.1 618.9 130.5 693.6 Deferred Tax asset 0.0 0.0 0.0 0.0 Application of Funds 13705.5 17722.2 19558.3 22087.0 Key ratios (Yearend March) FY16 FY17 FY18E FY19E Per share data ( ) EPS 135.8 132.3 136.6 164.7 Cash EPS 146.4 142.9 147.3 176.2 BV 458.5 588.7 653.8 741.2 DPS 119.7 6.0 71.4 77.4 Cash Per Share 29.7 10.4 19.7 20.9 Operating Ratios (%) EBITDA Margin 21.2 20.3 18.4 19.2 PBT / Net sales 19.8 18.9 17.1 18.0 PAT Margin 14.4 15.2 15.7 16.0 Inventory days 11.6 11.6 11.6 11.6 Debtor days 11.6 15.1 15.1 15.0 Creditor days 32.8 35.5 35.5 35.0 Return Ratios (%) RoE 40.7 30.3 29.0 30.9 RoCE 29.6 22.5 21.1 22.2 RoIC 40.5 38.3 38.3 44.7 Valuation Ratios (x) Core P/E 20.7 21.3 20.4 17.1 EV / EBITDA 16.6 17.0 16.5 13.3 EV / Net Sales 3.5 3.5 3.0 2.6 Market Cap / Sales 3.6 3.7 3.4 2.9 Price to Book Value 6.1 4.8 4.3 3.8 Solvency Ratios Current Ratio 1.0 1.0 1.0 1.0 Quick Ratio 0.7 0.8 0.8 0.7. ICICI Securities Ltd Retail Equity Research Page 11

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) 845 930 Hold 14439 28.0 33.2 40.4 30.2 25.4 20.9 17.3 14.9 12.4 25.8 27.4 28.0 18.5 19.3 19.6 Apollo Tyre (APOTYR) 253 280 Buy 12776 21.7 21.8 19.7 11.7 11.6 12.9 6.5 7.9 8.6 19.9 13.6 11.0 17.1 15.0 12.2 Ashok Leyland (ASHLEY) 104 105 Buy 29239 2.5 4.3 4.7 40.8 24.1 21.9 12.3 11.6 10.8 22.8 21.2 21.6 17.4 21.2 16.5 Bajaj Auto (BAAUTO) 2825 2780 Hold 81748 132.3 136.6 164.7 21.3 20.6 17.1 17.0 16.5 13.3 30.3 29.0 30.9 22.5 21.1 22.2 Balkrishna Ind. (BALIND) 1620 1670 Buy 15657 58.7 74.0 81.4 25.1 19.9 18.1 13.9 12.8 10.6 20.4 23.0 24.0 20.3 23.0 24.0 Bharat Forge (BHAFOR) 1130 1300 Buy 26324 29.9 40.1 47.6 37.7 28.1 23.7 20.8 13.9 11.7 16.1 22.2 26.9 14.6 17.9 21.2 Bosch (MICO) 24031 26400 Buy 75458 410.2 570.5 564.0 57.7 41.5 42.0 37.7 35.8 30.1 15.1 16.9 16.4 22.5 24.8 24.1 Eicher Motors (EICMOT) 28866 30500 Buy 77966 655.9 833.2 1019.4 44.0 34.6 28.3 24.8 18.4 14.7 39.2 41.1 39.1 36.0 33.6 30.9 Exide Industries (EXIIND) 215 270 Buy 18258 7.3 8.2 9.4 29.3 26.3 22.8 19.0 17.7 14.4 19.4 18.7 20.4 14.0 14.1 14.8 Hero Mototcorp (HERHON) 3694 3975 Buy 73773 156.9 169.1 199.6 23.6 21.8 18.5 15.2 14.3 11.9 53.6 43.5 49.0 39.4 33.0 36.3 JK Tyre & Ind (JKIND) 161 215 Buy 3640 21.0 16.6 18.1 7.6 9.7 8.8 5.8 8.1 6.5 20.1 11.2 11.8 29.1 15.8 18.2 Mahindra CIE (MAHAUT) 248 280 Buy 8022 4.5 10.3 13.5 55.6 24.0 18.3 16.8 11.5 9.1 5.4 10.8 12.6 6.9 11.1 13.2 Maruti Suzuki (MARUTI) 7546 7200 Buy 228051 151.3 242.9 280.1 49.9 31.1 26.9 21.4 18.6 15.8 23.9 26.3 26.5 16.9 20.3 20.4 Motherson (MOTSUM) 326 450 Hold 45749 11.1 16.7 22.9 29.4 19.5 14.2 15.1 10.5 7.8 16.0 22.2 28.4 19.6 23.1 25.0 Tata Motors (TELCO) 467 560 Buy 141031 22.3 42.9 52.6 21.5 11.2 9.1 6.6 4.8 4.2 11.6 16.8 17.1 15.0 22.0 21.1 Wabco India (WABTVS) 5390 6610 Buy 10241 107.7 112.5 144.7 50.0 47.9 37.2 35.9 31.8 25.5 19.4 16.9 18.2 25.5 23.6 25.2 ICICI Securities Ltd Retail Equity Research Page 12

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, 1 st Floor, Akruti Trade Centre, Road No. 7, MIDC, Andheri (East) Mumbai 400 093 research@icicidirect.com ICICI Securities Ltd Retail Equity Research Page 13

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ICICI Securities Ltd Retail Equity Research Page 14