Maruti Suzuki India (MARUTI) 4495

Result Update Rating matrix Rating : Buy Target : 5090 Target Period : 12 months Potential Upside : 13% What s Changed? Target Changed from 4857 to 5090 EPS FY16E Changed from 177.9 to 178.3 EPS FY17E Changed from 220.8 to 231.5 Rating Unchanged Quarterly Performance ( Crore) Q2FY16 Q2FY15 YoY (%) Q1FY16 QoQ (%) Revenue 13,933.7 12,303.8 13.2 13,424.9 3.8 EBITDA 2,269.4 1,520.8 49.2 2,189.1 3.7 EBITDA (%) 16.3 12.4 393 bps 16.3-2 bps Reported PAT 1,225.6 862.5 42.1 1,192.9 2.7 Key Financials Crore FY14 FY15 FY16E FY17E Net Sales 42,645 48,606 55,912 66,678 EBITDA 5,089.9 6,605.9 9,220.6 11,198.3 Net Profit 2,783.0 3,711.2 5,385.3 6,992.9 EPS ( ) 92.1 122.9 178.3 231.5 Valuation summary FY14 FY15 FY16E FY17E P/E (x) 48.8 36.6 25.2 19.4 Target P/E (x) 55.3 41.5 28.6 22.0 EV/EBITDA (x) 25.2 20.1 14.2 11.4 P/BV (x) 6.5 5.7 4.9 4.1 RoNW (%) 13.3 15.6 19.3 20.9 RoCE (%) 13.3 17.2 23.6 24.5 Stock data Particular Amount Market Capitalization ( Crore) 135785 Crore Total Debt (FY15) ( Crore) 180.2 Crore Cash and Investments (FY15) ( Crore) 3121.6 Crore EV ( Crore) 132843.5 Crore 52 week H/L ( ) 4763 / 3130 Equity capital ( crore) 151 Crore Face value ( ) 5 Price performance (%) 1M 3M 6M 12M Maruti Suzuki India Ltd -1.5 7.6 23.3 41.9 M&M Ltd 2.4-5.0 7.2-0.5 Tata Motors Ltd 26.4 1.6-25.8-23.1 Research Analyst Nishit Zota nishit.zota@icicisecurities.com Vidrum Mehta vidrum.mehta@icicisecurities.com Unabated growth to continue... October 29, 2015 Maruti Suzuki India (MARUTI) 4495 Maruti Suzuki Ltd (MSIL) reported its Q2FY16 numbers marginally below our estimates (in-line with Street estimates). Revenues came in at 13,934 crore, up 13.2% YoY, driven mainly by 9.8% YoY volume growth & 0.3% QoQ growth in ASP. Revenues came below our estimates of 14007 crore mainly on account of lower ASPs Reported EBITDA margins came in at 16.3%, up 393 bps YoY, marginally below our estimates of 16.5%. Reported margins are strong despite the fact that this quarter included higher other expenses in the form of one-time ad spends for the launch of S- Cross, Ciaz hybrid & Nexa showroom The PAT increased 42.1% YoY, 2.7% QoQ to 1,226 crore (vs. expectation of 1,325 crore). PAT came below our estimates on account of lower than estimated other income MSIL to benefit most from growth of PV industry Domestic sales of passenger vehicle grew 3.7% in FY15 led by slight improvement in consumer sentiment with expectation of faster economic growth. The industry has shown recovery in FY16E, with industry volumes growing 6.2% in H1FY16 and MSIL outpacing that growth, growing 12.7%. We believe there are a lot of favourable demand & supply side variables that will lead to faster volume growth in the near to medium term. While demand side variables include revival in economic growth, low inflation, steady growth in disposable income, declining cost of ownership (driven by lower fuel cost/interest rates), supply side variables are new model launches and capacity expansions. We believe MSIL s largely petrol denominated small car portfolio is likely to benefit the most as most small car buyers are first time buyers & sensitive to change in cost of ownership. MSIL s small car segment sales will also gain from the Seventh Pay Commission that is expected in late FY16. Strong portfolio, new launches & reach ensures dominance MSIL s strength lies in withstanding slowdown & competition through its wide distribution network. Maruti gained ~300 bps market share in FY14 and another ~200 bps in FY15. The gain in market share in FY14 was partly driven by increasing rural penetration, gain in market share in FY15 is driven by successful new products like Celerio, Ertiga & Ciaz. Maruti has entered a strong product cycle and is looking to plug the gaps in its product portfolio. MSIL has already addressed the upper segment sedan with its product Ciaz. Its recent launch S-cross & upcoming compact SUV will help MSIL create presence in the SUV segment. Introduction of premium hatchback Baleno (pitted against the likes of Hyundai i20/honda Jazz/ VW Polo) is a step in the right direction as it provide support to the nascent Nexa dealership. Secondly, the presence of Baleno in the fastest growing premium hatchback segment, will meaningfully contribute towards volume growth & margin expansion. Lastly, Baleno will help in export growth as MSIL is sole manufacturer of Baleno for parent Suzuki. Margin expansion & growth story intact We prefer the four-wheeler auto segment to the two-wheeler segment as low penetration levels still provide headroom for sustained growth. A strong operational performance in two consecutive quarters and operating leverage benefit have led us to raise our EBITDA margin estimates to 16.1%, 16.4% for FY16E, FY17E, respectively. We ascribe a multiple of 22x its FY17E EPS of 231 and recommend BUY with a target price of 5,090. ICICI Securities Ltd Retail Equity Research

Variance analysis Q2FY16 Q2FY16E Q2FY15 YoY (Chg %) Q1FY16 QoQ (Chg %) Comments Total Operating Income 13,934 14,007 12,304 13.2 13,425 3.8 Below estimates on account of lower ASPs due to higher discounting Raw Material Expenses 9,312 9,269 8,775 6.1 9,045 3.0 Employee Expenses 418 505 370 13.0 463-9.7 QoQ reduction in employee cost on account of write back of provision made in Q1 Other expenses 1,934 1,925 1,638 18.0 1,728 11.9 Other expenses to sales Increased 103 bps QoQ owing to higher ad spends on the launch of S-Cross, Ciaz hybrid & Nexa showroom EBITDA 2,269 2,308 1,521 49.2 2,189 3.7 EBITDA Margin (%) 16.3 16.5 12.4 393 bps 16.3-2 bps QoQ reduction in margins (16.3% vs 16.9%) on account of higher other expenses to sales Other Income 137 196 193-29.0 172-20.3 Other income came lower than estimates on account of FMP maturity mismatch Depreciation 669 642 599 11.8 672-0.3 Interest 18 5 35-48.9 19-6.6 Total Tax 493.7 530.8 217.9 126.6 478 3.4 PAT 1,226 1,325 863 42.1 1,193 2.7 PAT came below estimates on account of lower than estimated other income EPS 40.6 43.9 28.6 42.1 39 2.7 Key Metrics ASP ( ) 384,191 386,375 372,675 3.1 383,159 0.3 Lower ASPs due to higher discounting Provision for Royalty( cr) 801 765 679 17.9 728 10.0 Higher royalty payout owing to product mix & yen movement in Q2 Discounts ( ) 19,500 16,000 21,000-7.1 16,018 21.7 Higher discounts reflects the subdued demand sentiment Change in estimates FY16E FY17E ( Crore) Old New % Change Old New % Change Comments Revenue 57,350 57,378 0.0 67,649 68,412 1.1 FY16E estimates remain unchanged. FY17E estimates have been increased marginally to reflect higher ASP EBITDA 9,148 9,221 0.8 10,833 11,198 3.4 EBITDA Margin (%) 16.0 16.1 7 bps 16.0 16.4 37 bps Margins estimates raised to reflect benefit of operating leverage benefit PAT 5,433 5,385-0.9 6,670 6,993 4.8 EPS ( ) 180 178-1.0 221 231 4.7 Assumptions Current Earlier Comments FY14E FY15E FY16E FY17E FY16E FY17E Total Volumes (nos) 1155041 1292414 1436440 1662466 1457200 1670564 FY17 estimates also remain almost unchanged Average ASPs ( ) 369,205 376,083 389,238 401,079 383,545 394,683 ASPs increase assumed on change in product mix RMC/Unit ( ) 271,069 270,873 268,285 275,102 264,936 271,757 Royalty rates (%) 6.0 5.7 5.7 5.5 5.5 5.6 Discount ( ) 16,950 19,529 17,505 17,500 16,005 16,000 New launches & improvement in macro-environment will lead to reduction in discount Company, ICICIdirect.com Research ICICI Securities Ltd Retail Equity Research Page 2

Key conference call takeaways MSIL s domestic volumes grew 12.4% YoY against industry growth of 6.3% in Q2FY16. Although subnormal monsoon & uncertainty in rural demand was not conducive to growth, MSIL s double digit growth was led by multiple launches & facelifts. MSIL s rural growth was at 10% YoY vs. urban growth of 4% YoY For the overall industry, share of petrol segment stood at 54%. MSIL s petrol vehicles grew by 14.5% YoY (in-line with industry trend) while diesel vehicles grew 8% YoY (industry diesel vehicle volumes declined 2% YoY) Margin expansion was led by softening commodity prices & cost reduction initiatives taken by the company. Going ahead, the management does not expect significant benefits of commodity prices Export revenues for Q1FY16 were at 1128 crore. Export volumes declined 12% YoY to 30066 units. In the export market, MSIL is likely to benefit from a duty reduction in Sri Lanka For the quarter, average discounts were at ~ 19,500 vs. 16,000 in Q1FY16. The management has guided that these discount levels are likely to continue The dealer inventory is currently at about four weeks. The company has so far witnessed ~10% YoY growth in the festive season so far ( Dussehra/Navratri) There are currently 80 Nexa showrooms, which are expected to reach 100 by FY16 end. The management also alleviated concerns regarding this parallel dealership by stating that Nexa showrooms are exclusively offered to the existing Maruti dealers. Dealers who have taken up the Nexa dealership, currently have 785 non-nexa showrooms. Hence, the reach is not limited to the existing 80 Nexa showrooms. The company has a rewarding incentive system for non- Nexa dealer (50% revenue share with Nexa dealer, if the query is converted to vehicle sale). Product development expenses for the Baleno are at ~ 1100 crore The management has guided for a capex of 3500 crore for FY16E The management is optimistic about its recently launched premium hatchback Baleno. Before the launch date (declaration of price), dealers received ~12,500 customer enquiries and ~2,500 confirmed bookings. On the launch date, the company received 1000 enquiries & 600 confirmed bookings ICICI Securities Ltd Retail Equity Research Page 3

Company Analysis Unique position of dominance in spite of competition MSIL has maintained its market leadership despite the increase in competitive intensity. Despite ~18 players being in the fray fighting for the 2.5 million large market, MSIL has managed to hold ~45% market share. The financial performance has been strong over the past years with operating margins maintained at decent levels (over 10% in the last 11 quarters). On the business levers side, all factors range from cost of car ownership to demographics to new product launches led by S-Cross & Baleno. Allied to this, on the financial levers side, better operating leverage and FX benefits are also in place to benefit MSIL. We expect revenue growth at ~16.4% CAGR in FY15-17E reaching ~ 68412 crore in FY17E. Margins are likely to remain on an uptrend and clock 17% in both FY16E & FY17E, as industry demand improves, leading to better operating leverage and also reduction in discounting levels. Also, increased traction in newer products in premium categories would lead to better ASPs and, consequently, better margins and is likely to aid profitability. We expect the bottomline to grow at ~37% CAGR in FY15-17E and reach ~ 6993 crore in FY17E. Exhibit 1: Topline and bottomline trends 80000 70000 6993 8000 7000 60000 6000 ( crore) 50000 40000 30000 20000 10000 35587 1635 43588 2392 43701 2783 49874 3711 57378 5385 68412 5000 4000 3000 2000 1000 ( crore) 0 FY12 FY13 FY14 FY15 FY16E FY17E Topline Bottomline 0 Source: Company press release, ICICIdirect.com Research Exhibit 2: Margins to trend higher as volumes aid operating leverage 12,000 16.1 16.4 18 ( crore) 10,000 8,000 6,000 4,000 2,000 9.7 4,229.6 11.6 5,089.9 13.2 6,605.9 9,220.6 11,198.3 16 14 12 10 8 6 4 2 (%) - FY13 FY14 FY15 FY16E FY17E - EBITDA Margins (%) Source: Company press release, ICICIdirect.com Research ICICI Securities Ltd Retail Equity Research Page 4

Export performance steady; bigger growth post Suzuki s Gujarat plant! Suzuki is aiming to let MSIL grow as a low-cost brand to target markets such as Africa. MSIL already contributes ~45% to Suzuki s global profits. As such, Suzuki s strategy to make MSIL its global export hub for low priced products is logical. Currently, exports form ~9% of total sales for MSIL, with major export oriented product being the A-Star. Going ahead, we have taken ~11% CAGR in FY15-17E in export volumes. Exhibit 3: Export volumes 1800 1600 150 1400 122 131 ('000s) 1200 1000 800 600 400 138 1133 127 1006 120 1051 101 1054 1171 1306 1512 200 0 FY11 FY12 FY13 FY14E FY15E FY16E FY17E Domestic Exports Source: Company press release, ICICIdirect.com Research MSIL turns page as market share remains key focus With an increase in competitive intensity from FY10-11 onwards coupled with an increasing gap in petrol-diesel prices shifting customer preference for diesel cars in FY12-13, MSIL s market share had reduced from ~47% in FY09 to ~39% in FY13. The market share was further lost on account of persistent labour troubles at Manesar in both FY12 and FY13, which halted production. However, with the fuel price fall and domestic fuel price deregulation, there has been a recovery in petrol cars. MSIL has since then increased its presence in terms of products as well as capacity in both the petrol as well as diesel space. Launches of successful products like Ertiga and Celerio also aided growth of market share in a challenging environment. MSIL has regained a lot of lost ground in terms of market share (YTD ~47% domestic). We expect MSIL to maintain >40% market share despite the improvement in competition and growth in the utility vehicle space in the coming years. ICICI Securities Ltd Retail Equity Research Page 5

Exhibit 4: Domestic PV market share for MSIL 50 45 40 45 38 39 42 44 45 45 45 47 47 (%) 35 30 25 20 FY11 FY12 FY13 FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 YTD for Q3FY15 Domestic Market Share Exhibit 5: Passenger car market share (excluding UVs) 62 58 58.2 59.1 54 50 47.3 47.9 48.8 51.0 51.4 51.0 53.1 52.2 51.3 46 44.1 42 38 38.7 35.3 37.6 36.4 34 30 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 (%) Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Source: Company press release, ICICIdirect.com Research MSIL's domestic share Discounting levels declining with better macro environment, new launches In an intensely competitive industry struggling with demand slowdown, the increase in discounting levels to gain volumes is to be expected. As the market leader, MSIL had also been forced to give incentives to ward off competition and retain market share. However, we believe the new products launches (which do not offer any discounts) & facelifts will lead to improved product mix that will effectively reduce the discount levels. Discount on small cars (Alto, Wagon R) is broadly linked to the broad macro environment. These discounts will reduce with the improving macro economy conditions. From the higher discount levels of 21,000 in Q3FY15, the same has substantially reduced to ~ 15,000 in Q4FY15 & 16,000 in Q1FY16. We expect a reduction in average discounts from 19,625 in FY15 to 17,500 in both FY16E and FY17E. ICICI Securities Ltd Retail Equity Research Page 6

Exhibit 6: Discounting levels reducing 25000 20000 17466 19412 17500 21000 21000 21000 19,529 17,505 17,500 ( ) 15000 10000 10500 13427 5000 0 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 FY15E FY16E FY17E Source: Company press release, ICICIdirect.com Research Going ahead, as the industry recovers on the back of an improvement in overall economic scenario and interest rate cuts, discounting levels are likely to taper off from FY16E onwards, albeit not too sharply, thereby aiding profitability slowly. Exhibit 7: Annual discount trends and expectations 25000 20000 16951 19,529 17,505 17,500 ( ) 15000 12504 12266 10000 5000 0 FY12 FY13 FY14 FY15E FY16E FY17E ICICI Securities Ltd Retail Equity Research Page 7

Outlook and Valuation We prefer the four-wheeler auto segment to the two-wheeler segment as low penetration levels still provide headroom for sustained growth. We continue to remain bullish on the longer-term growth prospects of the car segment, especially MSIL, considering its dominant market share at ~45%. A strong operational performance in two consecutive quarters and operating leverage benefit have led us to raise our EBITDA margin estimates to 16.1%, 16.45 for FY16E, FY17E, respectively. We believe earnings growth trajectory would be strong (~37% CAGR in FY15-17E). We ascribe a multiple of 22x its FY17E EPS of 231 and recommend BUY with a target price of 5090. Exhibit 8: Valuation Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE ( cr) (%) ( ) (%) (x) (x) (%) (%) FY14 42644.7 0.1 92.1 16.3 46.6 24.0 13.3 13.3 FY15 48605.5 14.0 122.9 33.4 35.0 19.2 15.6 17.2 FY16E 55911.7 15.0 178.3 45.1 24.1 13.6 19.3 23.6 FY17E 66678.0 19.3 231.5 29.9 18.6 10.8 20.9 24.5 ICICI Securities Ltd Retail Equity Research Page 8

Company snapshot 6,000 5,000 Target Price: 5090 4,000 3,000 2,000 1,000 0 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 ( ) Mar-16 Source: Bloomberg, Company, ICICIdirect.com Research Key events Date Event Feb-10 Largest recall in Maruti's history for 1 lakh A-star's for faulty parts. Maruti plans to double petrol capacity and investments to ~ 2,500 crore Jul-10 Q1FY10 marks the change in royalty rates for Maruti from 3.3% to 5.9%, market disappointed Mar-11 Auto stocks rebound as Union Budget witnesses no change of excise duties. Manesar workers go on strike for first time in May for two weeks Aug-11 Labour trouble again brews up, production halted. Maruti Q2FY12 skids due to labour problems and high forex impacts as JPY unfavourable Jan-12 Maruti witnesses strong valuation based bargain hunting as management expects worst to be over Apr-12 Maruti launches the much awaited MPV product "Ertiga". Maruti announces merger with SPIL to consolidate business on the diesel side Jul-12 Maruti stock tumbles as workers in Manersar facility turn violent, causes tragic death of HR manager Awanish Kumar Dev Aug-12 Management lifts lockout post violence receding; production starts albeit slowly Apr-13 Yen moving beyond 100 vis-à-vis US$ aids Q4FY13 profits as EBIDTA margins rise to 10.4% Oct-13 Localisation and cost reduction initiatives Maruti surprise on Q2FY14 financials as margins surprise Jan-14 MSIL board approves Gujarat plant expansion by way of 100% subsidiary of Suzuki Motor Corporation; institutional investors perturbed; stock falls Mar-14 Management alleviates concerns of minority shareholders and removes uncertainty over the "mark-up" issue Oct-14 Maruti launches a new product in the sedan segment "Ciaz" Apr-15 MSIL reports bumper margins of 15.9% in Q4FY15. Announces dividend of 25 per share May-15 Maruti Suzuki 'Swift' completed 10 years of debut. The company has sold over 1.3 million car over the last 10 years Jun-15 Company launches Celerio's diesel variant at 4.65 lakh Jul-15 Maruti opens booking for premium crossover S-CROSS which is likely to to sold through its NEXA (premium) showrooms Top 10 Shareholders Shareholding Pattern Rank Name Latest Filing Date % O/S Position (m) Change (m) 1 Suzuki Motor Corp 30-Jun-15 56.21 169.8 0.00 2 Life Insurance Corporation of India 30-Jun-15 5.7 17.2-0.72 3 Capital World Investors 30-Sep-15 2.45 7.4 2.22 4 HDFC Asset Management Co., Ltd. 30-Sep-15 1.75 5.3-0.16 5 ICICI Prudential Life Insurance Company Ltd. 30-Jun-15 1.19 3.6-0.11 6 Schroder Investment Management Ltd. (SIM) 31-Jul-15 0.81 2.4 0.00 7 UTI Asset Management Co. Ltd. 30-Sep-15 0.79 2.4-0.24 8 Norges Bank Investment Management (NBIM) 31-Dec-14 0.78 2.4 2.35 9 Fidelity Management & Research Company 31-Aug-15 0.75 2.3 0.11 10 Birla Sun Life Asset Management Company Ltd. 30-Sep-15 0.71 2.2 0.44 Source: Reuters, ICICIdirect.com Research Recent Activity (in %) Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Promoter 56.2 56.2 56.2 56.2 56.2 FII 21.7 22.0 21.8 21.8 22.1 DII 14.5 14.9 14.7 14.6 14.4 Others 7.6 6.9 7.3 7.5 7.3 Buys Sells Investor name Value Shares Investor name Value Shares Capital World Investors 158.49m 2.22m Genesis Investment Management, LLP -45.71m -0.81m GMO LLC 50.45m 0.85m T. Rowe Price Hong Kong Limited -43.41m -0.74m TIAA-CREF 46.29m 0.65m Life Insurance Corporation of India -40.33m -0.72m DSP BlackRock Investment Managers Pvt. Ltd. 32.31m 0.45m Reliance Capital Asset Management Ltd. -39.06m -0.56m Birla Sun Life Asset Management Company Ltd. 31.17m 0.44m Columbia Threadneedle Investments (US) -28.91m -0.40m Source: Reuters, ICICIdirect.com Research ICICI Securities Ltd Retail Equity Research Page 9

Financial summary Profit and loss statement Crore (Year-end March) FY14 FY15 FY16E FY17E Total operating Income 43,701 49,874 57,378 68,412 Growth (%) 0 14 15 19 Raw Material Expenses 31,310 35,008 38,538 45,735 Employee Expenses 1,368 1,607 1,847 2,267 Marketing Expenses 0 0 0 0 Administrative Expenses 0 0 0 0 Other expenses 5,933 6,654 7,773 9,212 Total Operating Expenditure 38,611 43,268 48,157 57,213 EBITDA 5,090 6,606 9,221 11,198 Growth (%) 20 30 40 21 Depreciation 2,084 2,470 2,567 2,896 Interest 176 206 47 27 Other Income 829 939 848 1,303 PBT 3,659 4,868 7,454 9,579 Others 0 0 0 0 Total Tax 876 1,157 2,069 2,586 PAT 2,783 3,711 5,385 6,993 Growth (%) 16 33 45 30 EPS ( ) 92 123 178 231 Cash flow statement Crore (Year-end March) FY14 FY15 FY16E FY17E Profit after Tax 2,783 3,711 5,385 6,993 Add: Depreciation 2,084 2,470 2,567 2,896 (Inc)/dec in Current Assets 191-453 -137-2,405 Inc/(dec) in CL and Provisions 868 1,939 165 2,157 Others - - - - CF from operating activities 5,926 7,668 7,981 9,641 (Inc)/dec in Investments -3,583 5,817-1,000-1,000 (Inc)/dec in Fixed Assets -3,756-3,201-4,000-3,000 Others 1,355-8,403-1,291-1,068 CF from investing activities -5,985-5,787-6,291-5,068 Issue/(Buy back) of Equity 0 0 0 0 Inc/(dec) in loan funds 0 0 0 0 Dividend paid & dividend tax -424-881 -1,233-1,479 Inc/(dec) in Sec. premium 0 0 0 0 Others 336-1,505 100 100 CF from financing activities -88-2,385-1,133-1,379 Net Cash flow -147-505 557 3,194 Opening Cash 776 630 125 683 Closing Cash 630 125 683 3,876 Balance sheet Crore (Year-end March) FY14 FY15 FY16E FY17E Liabilities Equity Capital 151 151 151 151 Reserve and Surplus 20,827 23,658 27,810 33,324 Total Shareholders funds 20,978 23,809 27,961 33,475 Total Debt 1,685 180 280 380 Deferred Tax Liability 587 481 491 501 Others Liabilties 437 398 438 478 Total Liabilities 23,686 24,868 29,170 34,834 Assets Gross Block 22,702 25,636 29,936 32,936 Less: Acc Depreciation 11,912 14,115 16,682 19,578 Net Block 10,790 11,521 13,253 13,357 Capital WIP 2,621 2,621 2,321 2,321 Total Fixed Assets 13,412 14,142 15,575 15,679 Investments 10,118 12,814 14,814 16,814 Inventory 1,706 2,615 1,674 3,441 Debtors 1,414 1,069 1,915 2,283 Loans and Advances 1,251 1,172 1,168 1,489 Other Current Assets 358 326 562 510 Cash 630 125 683 3,876 Total Current Assets 5,359 5,307 6,001 11,600 Creditors 4,898 5,561 5,744 6,759 Provisions 678 1,361 1,463 1,789 Other current Liabilities 1,274 1,867 1,746 2,563 Total Current Liabilities 6,849 8,789 8,954 11,111 Net Current Assets -1,491-3,481-2,953 489 Other Assets 1,647 1,393 1,734 1,852 Application of Funds 23,686 24,868 29,170 34,834 Key ratios (Year-end March) FY14 FY15 FY16E FY17E Per share data ( ) EPS 92.1 122.9 178.3 231.5 Cash EPS 161.1 204.6 263.3 327.4 BV 694.4 788.2 925.6 1,108.1 DPS 12.0 25.0 35.0 42.0 Cash Per Share 20.8 4.1 22.6 128.3 Operating Ratios EBITDA Margin (%) 11.6 13.2 16.1 16.4 PBT / Net sales (%) 8.6 10.0 13.3 14.4 PAT Margin (%) 6.4 7.4 9.4 10.2 Inventory days 15.2 16.2 14.0 14.0 Debtor days 12.1 8.0 12.5 12.5 Creditor days 41.9 41.8 37.5 37.0 Return Ratios (%) RoE 13.3 15.6 19.3 20.9 RoCE 13.3 17.2 23.6 24.5 RoIC 25.9 21.6 30.0 35.1 Valuation Ratios (x) P/E 46.6 35.0 24.1 18.6 EV / EBITDA 24.0 19.2 13.6 10.8 EV / Net Sales 2.9 2.6 2.2 1.8 Market Cap / Sales 3.0 2.7 2.3 1.9 Price to Book Value 6.2 5.5 4.6 3.9 Solvency Ratios Debt/EBITDA 0.3 0.0 0.0 0.0 Debt / Equity 0.1 0.0 0.0 0.0 Current Ratio 0.8 0.6 0.7 1.0 Quick Ratio 0.7 0.6 0.6 0.7. ICICI Securities Ltd Retail Equity Research Page 10

ICICIdirect.com coverage universe (Auto & Auto Ancillary) CMP M Cap EPS ( ) P/E (x) EV/EBITDA (x) RoCE (%) RoE (%) Sector / Company ( ) TP( ) Rating ( Cr) FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E Amara Raja (AMARAJ) 915 1050 Hold 15631 24.1 31.5 41.8 38.0 29.1 21.9 24.7 19.9 15.3 34.3 33.2 34.2 25.6 25.2 26.2 Apollo Tyre (APOTYR) 190 228 Buy 9593 19.0 21.2 22.8 10.0 9.0 8.4 5.1 5.1 5.0 26.0 24.2 20.5 18.9 18.4 16.8 Ashok Leyland (ASHLEY) 91 90 Hold 25708 1.2 3.2 5.1 77.3 28.1 17.9 27.2 13.9 10.4 7.2 17.2 23.5 6.5 16.1 21.5 Bajaj Auto (BAAUTO) 2569 2910 Buy 74325 97.2 129.9 165.3 26.4 19.8 15.5 16.0 12.7 10.1 35.6 38.4 41.1 26.3 31.1 33.8 Balkrishna Ind. (BALIND) 664 720 Hold 6418 50.6 55.7 58.5 13.5 12.3 11.7 8.2 7.7 6.6 17.8 17.7 19.0 21.3 17.8 17.7 Bharat Forge (BHAFOR) 868 1294 Buy 20223 32.8 46.5 54.2 26.5 18.7 16.0 19.7 14.5 12.6 18.6 26.4 29.3 22.2 27.0 25.6 Bosch (MICO) 21282 25000 Hold 66825 426.0 478.2 610.3 58.5 52.2 40.9 38.5 35.4 27.9 18.2 17.6 19.1 19.4 19.4 21.3 Eicher Motors (EICMOT) 17438 20545 Hold 47100 227.1 562.1 708.1 76.8 31.0 24.6 49.1 21.9 17.1 24.5 43.7 41.2 24.5 41.7 37.7 Escorts (ESCORT) 181 150 Hold 2159 6.7 17.5 25.6 23.2 8.9 6.0 12.5 6.1 3.5 4.5 10.1 13.6 4.4 10.0 13.0 Exide Industries (EXIIND) 161 175 Buy 13681 6.4 7.6 8.9 25.1 21.1 18.1 13.8 11.5 9.7 18.9 20.6 21.8 13.5 14.5 15.4 Hero Mototcorp (HERHON) 2626 2625 Hold 52442 119.5 155.9 175.0 22.0 16.8 15.0 0.0 0.0 0.0 45.9 48.5 45.3 36.5 39.1 36.9 JK Tyre & Ind (JKIND) 105 150 Buy 2390 14.5 21.9 22.1 7.3 4.8 4.8 5.5 4.2 3.8 18.7 22.0 20.3 23.3 26.9 21.8 M&M (MAHMAH) 1227 1525 Buy 72426 50.7 61.6 78.8 24.2 19.9 15.6 18.0 11.5 9.0 14.5 17.0 19.9 17.1 16.5 18.2 Mahindra CIE (MAHAUT) 236 300 Buy 7631-2.4 8.8 13.1 NA 26.7 18.0 22.7 13.5 10.8-4.1 12.3 16.9 5.9 11.5 15.9 Maruti Suzuki (MARUTI) 4495 5090 Buy 135845 122.9 178.3 231.5 36.6 25.2 19.4 20.1 14.2 11.4 17.2 23.6 24.5 15.6 19.3 20.9 Motherson (MOTSUM) 242 347 Hold 32070 6.5 10.7 18.8 37.2 22.6 12.9 15.1 12.4 8.2 24.7 27.9 38.7 25.9 34.5 46.0 Tata Motors (TELCO) 386 480 Buy 118685 41.2 40.5 52.5 8.5 8.7 6.7 3.4 3.3 2.6 22.8 14.8 16.3 24.9 13.8 15.2 Wabco India (WABTVS) 6904 6080 Hold 13118 63.6 114.8 168.9 108.5 60.1 40.9 57.2 37.2 26.4 14.0 20.5 23.5 18.2 24.4 27.8 ICICI Securities Ltd Retail Equity Research Page 11

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, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai 400 093 research@icicidirect.com ICICI Securities Ltd Retail Equity Research Page 12

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ICICI Securities Ltd Retail Equity Research Page 13