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38% Business
The product portfolio of the company is as follows:
15%
Closed die forging segment Opened die forging segment- caters to
Crankshafts Sugar Industry
27% Connecting rods Cement Industry
Promoters Institutional Investors Rocker arm Steel Plants
Other Investors General Public
Front axle beams Gear manufacturing and material handling
Steering knuckles Mining
Share Price Chart Transmission parts Ship building
Hubs Petroleum and Petrochemical
Oil and gas
Clientele
Domestic Global
Swaraj Mazda Meritor Automotive, USA
Mahindra & Mahindra Mercedes Benz, USA
Eicher Mitsubishi Motor Corporation, Japan
Greaves Ltd. Volvo Trucks, Sweeden
Maruti Renault
L&T Toyota
Daewoo Motors Daimler Chrysler
Escorts
Tata Engineering
Bajaj Auto
Ashok Leyland
Kirloskar Group
The Indian auto ancillary industry has witnessed marked changes over the years. The
domestic automobile industry, which now faces stiff competition from the global majors
such as Hyundai, Ford, General Motors, Toyota, etc, was the only revenue earner for
the domestic auto ancillary industry. These global companies have not only opened
their shops but have also started outsourcing from India. Consequently, the risk of
over dependence on the domestic industry is now mitigated to some extent.
The auto component industry in India in 2003-04 grew by 18% to Rs310bn. The
exports crossed the US$1bn mark. Going ahead, exports are expected to maintain
the growth rate but domestic market is likely to experience a lower growth rate as
compared to last year because of the larger base.
Highlights
Bulging exports fuels sales growth
The sales witnessed a CAGR of 16.7% over the last four years. This was mainly on
back of CAGR of 57.6% in exports over the same period. In FY04, BFL’s sales
grew by 30.9% to Rs8.3bn as against Rs6.4bn in FY03. For the same period, the
exports grew by 22.6% to Rs3.3bn from Rs2.7bn. The growth in exports was lower
in FY04 on account of increased domestic demand. Some of the capacity available
for export had to shift its focus to cater the increased domestic demand.
3500 160
3000 140
Exports (Rs mn)
Source: Company
There was not only significant rise in exports but they were further diversified. The
dependence on USA, which was around 63% in FY03, decreased to 44% in FY04.
Exhibit 2: Share of BFL’s exports by region
A sia
2002-03
P acific
26%
Europe USA
11% 63%
A sia 2003-04
P acific
24%
USA
44%
Europe
32%
The company is significantly enhancing its small forging capacity by setting up two
additional press lines, including one fully automated transfer press line. These additions
will more than double BFL’s passenger car crankshaft forging capacity to
approximately 3mn crankshafts per year. This is in addition to one 6,000ton and one
2,500ton press line presently under installation.
BFL has targeted the machined heavy-duty crankshaft market as an important element
for future growth. In order to meet this demand, the company is required to increase
both its forging and machining capacity. It is planning to set up a third, large forging
press line to increase forging capacity to meet demand. BFL has also planned to set
up 3 state-of-the-art machining lines having a total capacity of 200,000 machined
crankshafts per annum.
Similarly, BFL is setting up a testing and validation facility for testing the components
developed for its customers. This is a step in becoming full service supply provider,
which will enable the company to deepen its relationship with customers.
CDP BFL
16% 17% 9%
5%
Europe
Asia
US
79%
74%
• Forging capacities of both the companies are complementary in nature, thus will
help the company to cater to the demands of varied products.
• 50% of CDP’s revenue arise from the passenger car segment, while 60% of BFL’s
revenue comes from commercial vehicle segement. BFL can now cater to both the
segments globally.
CDP recorded a total income of Rs1,838mn and a PAT of Rs97mn in the quarter
ended March 2004.
Outlook
The initiatives taken by the new Government in the budget will fuel demand in the
commercial vehicle and the tractor segments. This augurs well for the company. Further,
the R&D benefit provided in the budget will help the company reduce its tax burden
and also to develop new products.
The acquisition of CDP will help the company spread its wings further into the
international market and consequently to increase its exports. However, cheaper
products from China pose a significant threat in the international arena. Capacity
additions, part of which will be in place in 2004-05, will help the company meet the
increasing demand in both domestic and international market.
Income Statement
Period to FY02 FY03 FY04
(Rs in mn) (12) (12) (12)
Net Sales 4,232 6,358 8,321
Operating expenses (3,148) (4,491) (5,918)
Operating profit 1,084 1,867 2,402
Other income 113 92 191
PBIDT 1,197 1,959 2,593
Interest (454) (408) (324)
Depreciation (397) (418) (458)
Profit before tax (PBT) 346 1,133 1,812
Tax (133) (322) (563)
Profit after tax (PAT) 213 811 1,249
Balance Sheet
Ratios
FY02 FY03 FY04
(12) (12) (12)
Per share ratios
EPS (Rs) 5.7 21.5 33.2
Div per share 30.0 40.0 65.0
Book value per share 46.8 45.5 66.7
Valuation ratios
P/E 115.0 30.2 19.6
P/BV 13.9 14.3 9.7
EV/sales 9.7 7.4 5.6
EV/ PBIT 51.6 30.5 21.9
EV/PBIDT 34.4 24.0 18.0
Profitability ratios
OPM (%) 25.6 29.4 28.9
PAT (%) 5.0 12.8 15.0
ROCE 21.4 39.6 48.3
RONW 12.1 47.3 49.7
Leverage ratios
Debt / Total equity 2.2 1.9 1.1
Payout ratios
Dividend Payout Ratio 67.9 35.2 36.7