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performance as compared to the OEM’s due to their diversified Ashok Leyland NEU Jamna Auto BUY
Bajaj Auto BUY Lumax Auto Tech BUY
revenue base across segments and geographies. We expect Subros
Eicher SELL NRB Bearings NEU
and Lumax to report growth in profits.
Hero Motocorp BUY RkForgings BUY
We have lowered our FY19-21 EPS estimates for Hero by 5% and are Maruti Suzuki BUY Subros BUY
lowering our target price to Rs.3,180 based on 16x FY21E EPS. Source: Company,HDFC Sec Inst Research
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4QFY19E RESULTS PREVIEW
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4QFY19E RESULTS PREVIEW
NET SALES (Rs mn) EBITDA Margin (%) APAT (Rs mn) Adj. EPS
COMPANIES 4Q QoQ YoY 4Q QoQ YoY 4Q QoQ YoY 4Q 3Q 4Q
FY19E (%) (%) FY19E (bps) (bps) FY19E (%) (%) FY19E FY19 FY18
AUTO ANCILLARIES
Jamna Auto 6,013 24 1 14.5 143 (49) 474 66 1 1.2 0.7 1.2
Lumax Auto 3,482 9 5 9.3 38 80 186 7 20 2.7 2.5 2.3
NRB Bearings 2,412 (1) 2 16.8 (49) (109) 259 (3) (3) 2.7 2.8 2.8
RKForgings 4,884 (1) 11 21.1 (43) 27 352 4 3 10.8 10.4 10.5
Subros 5,798 14 5 11.1 (3) (43) 231 34 24 3.9 2.9 3.1
Suprajit Engineering 3,983 (2) (2) 16.7 175 (137) 468 19 (17) 3.3 2.8 4.0
Swaraj Engines 1,837 (8) (1) 14.6 77 (82) 170 (1.7) (4.6) 14.1 14.3 14.7
Source: Company, HDFC Sec Inst Research
4
4QFY19E RESULTS PREVIEW
1M 3M 6M 1Y 10,000
Nifty 4 7 11 11
Nifty Auto (2) (3) (4) (24) 9,000
Feb-19
Sep-18
Jan-19
Mar-19
Dec-18
Jun-18
Aug-18
Jul-18
Oct-18
Apr-18
May-18
Apr-19
Nov-18
Eicher Motors (4) 2 (7) (30)
Exide Industries (2) (16) (14) (7)
Source: Bloomberg, HDFC Sec Inst Research
Hero Motocorp (5) (11) (11) (30)
Jamna Auto (0) (4) (16) (30)
30
Lumax Auto (14) (20) (14) (22)
15
M&M (2) (9) (13) (14)
-
Maruti 3 (3) 3 (23)
(15)
NRB Bearings (2) (3) 21 22
(30)
RK Forgings 0 1 (10) (38) (45)
Nifty
Bajaj Auto
M&M
Swaraj Engines
NRB Bearings
Suprajit Engineering
Jamna Auto
TVS
RK Forgings
Ashok Leyland
Nifty Auto
Lumax Auto
Maruti
Exide Industries
Subros
Tata Motors
Hero Motocorp
Eicher Motors
Subros 6 4 6 (19)
Suprajit Engineering 5 4 (3) (20)
Swaraj Engines (1) (7) 3 (30)
Tata Motors 19 16 14 (39)
TVS (5) (11) (10) (25)
Source: Bloomberg, HDFC Sec Inst Research Source: Bloomberg, HDFC Sec Inst Research
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4QFY19E RESULTS PREVIEW
80 400
60
300
40
20 200
Dec-14
Dec-15
Dec-17
Dec-18
Dec-13
Dec-16
Aug-13
Aug-15
Aug-16
Aug-18
Aug-14
Aug-17
Apr-05
Apr-06
Apr-07
Apr-08
Apr-12
Apr-13
Apr-14
Apr-15
Apr-16
Apr-17
Apr-13
Apr-14
Apr-16
Apr-17
Apr-19
Apr-09
Apr-10
Apr-11
Apr-18
Apr-19
Apr-15
Apr-18
Source: Bloomberg, HDFC Sec Inst Research Source: Bloomberg, HDFC Sec Inst Research
Apr-06
Apr-07
Apr-10
Apr-11
Apr-12
Apr-13
Apr-14
Apr-15
Apr-18
Apr-19
Apr-08
Apr-09
Apr-16
Apr-17
Apr-05
Apr-06
Apr-07
Apr-08
Apr-09
Apr-10
Apr-11
Apr-12
Apr-13
Apr-14
Apr-15
Apr-16
Apr-17
Apr-18
Apr-19
Source: Bloomberg, HDFC Sec Inst Research Source: Bloomberg, HDFC Sec Inst Research
6
4QFY19E RESULTS PREVIEW
USD/INR INR/JPY
1.7
74
1.7
72
70 1.6
68
1.6
66
64 1.5
Sep-18
Feb-19
Jan-19
Mar-19
Jun-18
Dec-18
Jul-18
Aug-18
Oct-18
Apr-18
May-18
Apr-19
Nov-18
Jul-18
Aug-18
Oct-18
Apr-18
May-18
Apr-19
Nov-18
Feb-19
Sep-18
Jan-19
Mar-19
Jun-18
Dec-18
Source: Bloomberg, HDFC Sec Inst Research Source: Bloomberg, HDFC Sec Inst Research
EUR/INR GBP/INR
86 100
84
95
82
80
90
78
76 85
Sep-18
Sep-18
Feb-19
Feb-19
Jan-19
Jan-19
Mar-19
Mar-19
Dec-18
Jun-18
Jun-18
Dec-18
Aug-18
Aug-18
Jul-18
Jul-18
Oct-18
Oct-18
Apr-18
May-18
Apr-19
Apr-18
May-18
Apr-19
Nov-18
Nov-18
Source: Bloomberg, HDFC Sec Inst Research Source: Bloomberg, HDFC Sec Inst Research
7
4QFY19E RESULTS PREVIEW
We expect revenues to grow by 4% YoY, led by 14% increase in Export demand outlook
volumes. Domestic market share targets in the two
We expect operating margins to contract by 320bps YoY (+60bp wheeler segment
Bajaj Auto AVG
QoQ) to 16.2%, due to a weaker product mix (higher share of New developments / launches in the EV
economy segment bikes) space – particularly for 3 wheelers
We expect PAT to decline -3% YoY (-5% QoQ)
We expect a decline in revenue of 9% YoY, due to 11% YoY drop Update on demand trend in rural and urban
in volumes. markets
Hero MotoCorp WEAK We expect the margin to contract by 220bps YoY (-25bps QoQ) New model launch pipeline
to 13.8%
PAT to decline by ~22% YoY (+1% QoQ)
We expect 3% YoY decline in revenues due to flat volume sales. CV demand outlook – pre buying trends
Realizations to fall due to adverse mix (lower share of M&HCVs) Update on LCVs, exports and defense
and higher discounts business.
Ashok Leyland WEAK
EBITDA margin to see a contraction of 130bps YoY to 10.5% Update on appointment of new CEO
(+20bps QoQ)
PAT decline of 10% (+57% QoQ)
We expect a revenue decline of 4% led by 13% decline in the Demand outlook – more clarity on
volumes. Realizations will be higher due to price hikes taken management’s production target of 950K
Eicher WEAK through the year (introduction of ABS) units (+13% YoY) for FY20E
EBITDA margin contraction by 200bps to 29.5% (+50bp QoQ).
8
PAT decline of 10% YoY (+9% QoQ)
4QFY19E RESULTS PREVIEW
Net sales to grow by 5% YoY (+14% QoQ) - a decline in Details about the acquisition of Zamil’s assets
passenger vehicle industry sales will be offset by Subros’s in India
expansion into new products / segments Growth outlook for the automobile segment
Subros Good
EBITDA margin contraction by 40bps to 11.1% in FY20E
PAT growth of 24% YoY would be supported by lower interest
costs
Top line to increase by 5% YoY (+9% QoQ) - Growth is expected Update on acquisition of new business from
to moderate due to the sale of SMT business in the last quarter OEMs
Lumax Autotech Good
EBIDTA margin to expand by 80bps YoY (+40bps QoQ) to 9.3% Margin and revenue guidance for FY20E
Profit to grow +20% YoY, +7% QoQ
We expect sales to remain flat due to weak CV industry sales Mix of conventional/parabolic springs for the
Jamna Auto AVG Margin to contract by 50bps YoY to 14.5% (+140bps QoQ). quarter
We expect the PAT to grow by 1% YoY . Update on aftermarket sales
We expect marginal revenue growth (+3%YoY, flat QoQ), due to Demand outlook – particularly for the two
lower 2W industry sales. wheeler segment
NRB Bearings AVG Margins to contract by 110bps YoY to 16.8% (+50bps QoQ), Aftermarket growth and outlook
owing to weaker product mix (lower revenue from CVs).
We expect PAT to decline by 3% YoY and QoQ.
Higher realizations / improved export revenues to result in 11% Update on export orders for its heavy press
Ramkrishna YoY growth (flat QoQ) in revenue. lines
AVG EBITDA margin to remain flat at 21%, (+30bps YoY, -40bps QoQ) Demand outlook for the M/HCV segment –
Forgings
PAT growth of 3% YoY (4% QoQ). both for India as well as US markets
9
4QFY19E RESULTS PREVIEW
Consolidated revenues to decline by 2% YoY and QoQ Outlook on margins in SEL and Phoenix
Suprajit EBIDTA margin to see 135bps YoY (+175bps QoQ) contraction to Performance of Wescon and the outlook
WEAK
Engineering 16.7% due by subdued margin of Phoenix and Wescon ahead
Expect revenues to remain flat YoY (-8% QoQ) due to weak Industry outlook for the tractor segment
tractor demand
Swaraj Engines WEAK EBITDA margin at 14.6% will decline 80bps YoY owing to the
above
10
4QFY19E RESULTS PREVIEW
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4QFY19E RESULTS PREVIEW
Rating Definitions
BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period
NEUTRAL : Where the stock is expected to deliver (-) 10% to 10% returns over the next 12 month period
SELL : Where the stock is expected to deliver less than (-) 10% returns over the next 12 month period
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4QFY19E RESULTS PREVIEW
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