Auto Sector

India Research
Automobiles
April 2012
Auto Sector
Here comes the Sun!
Ashish Nigam Kunal Jhaveri

+91 22 4031 3443 +91 22 4031 3411
ashish.nigam@antiquelimited.com kunal.jhaveri@antiquelimited.com
Strictly confidential
India Auto Sector April 2012
Industry overview...
 On every count, FY12 was an extremely difficult year for the Auto sector; thankfully it’s behind us! The breather in volumes does not perturb us too much
when you consider the previous two years of supernormal growth (little under 30%) coupled with the multiple macro headwinds (interest rates up
~325bps, gasoline prices up ~40%, high inflation, commodity costs pressures, you name it...). Going into FY13-14, while there are still challenges
aplenty (as always), we have reason to believe that they will not overwhelm the triggers this time around.
 Our contrarian positive view on two-wheelers stays (hard to ignore the much superior business model which is a boon in any environment), but good
businesses seem to get their due credit only in tough times. Going ahead, based on what seems to be the fag-end of the rate tightening cycle, we expect
the auto companies with a higher sensitivity to an improving macro (cars/CVs) to outperform the safer havens (2Ws). Based on past cycles, any relief on
the macro side or an indication of rates having peaked-out, re-rates valuations for cars/CVs much before an actual uptick in volumes (which could be
even 2-3 quarters away).
 With too many moving parts in our coverage universe, we are compelled to keep our stock approach a little more bottom-up. Among the large caps, our
pecking order is Tata Motors, Maruti Suzuki and Hero MotoCorp. While Hero’s presence in our pecking order contradicts our underlying theme, we
continue to believe that this over-pessimism in the stock is a good thing (trying to differentiate earnings risk from stock risk). Outside the front-liners, we
have two very high conviction BUYs – Eicher Motors and Bosch.
Summary of Recommendations:
FY13e
Company Mcap (INRbn) Reco CMP (INR) Target Price (INR) Return (%) EPS (INR) P/E (x) ROCE (%)
Tata Motors 821 BUY 275 330 20 45.1 6.1 38
Maruti Suzuki 387 BUY 1315 1552 18 93.2 14.1 24
Hero MotoCorp 411 BUY 2010 2363 18 140.9 14.3 98
Eicher Motors 57 BUY 2150 2410 12 139.7 15.4^ 35
Bosch 256 BUY 8180 9002 10 427.6 19.1^ 29
Mahindra & Mahindra 436 BUY 700 780 11 46.2 12.2* 25
Bajaj Auto 479 BUY 1640 1858 13 121.5 13.5 66
Ashok Leyland 82 HOLD 31 33 7 2.6 11.8 15
Exide Industries 124 HOLD 146 157 8 8.2 16.8* 19
Escorts 8 HOLD 75 78 4 9.1 8.2 5
Source: Antique; * for M&M & Bosch - Core Auto P/E; ^ for Bosch & Eicher - December 2012; # for Escorts - September 2012
Antique Stock Broking Limited 2

Stocks we like…
 Tata Motors: While the first leg of the stock’s rally (stock up >9x in 2 years - 2009/10) was driven by the delta in JLR margins (from -3% to +17%),
the second leg should be driven by the delta in JLR volumes (from ~240k in FY11 to ~310k in FY12e and ~385k in FY13e). While there have been
significant upgrades recently, we feel that the street is still under-estimating the Evoque’s full potential (which has apparently started eating into the share
of luxury sedans as well). Also, the fortunes of the domestic business (HCVs/cars) are very sensitive to any relief on the macro side. All of the above
would trickle down to clean the company’s balance sheet (once and for all).
 Maruti Suzuki: The company’s long-drawn downgrade cycle finally seems to have ended and normally, the subsequent upgrade cycle is equally
long. Past analysis indicates a higher likelihood of a “V” shaped recovery (rather than a “U” shaped one), and hence the company now seems to be
nearing the first stage of all its positive cycles - volumes, margins and consequently, multiples. Directionally, the stock seems to be one of the best FY13-
14 plays in the sector. The only argument for the bear (competition & currency) is also fading - Maruti has thus far withheld peak of the competitive
pressures extremely well and currency too has finally moved in the company’s favor.
 Hero MotoCorp: Our call on Hero has always been less about the volume growth (longer term volume growth forecast is <10%) and more about the
margin uptick (atleast 300bps from here). Also, in our view, multiples are driven less by the quantum of growth and more by its consistency, coupled with
strong free-cash generation and high return on capital. For Hero, with steady state RoCEs of >75%, an FCF/PAT of >1x (negative working capital) and
dividend yield of ~5%, the stock (adjusting for non-recurring royalty), trading at <12x FY13e P/E, looks extremely attractive. Also, the street seems to be
expecting the moon from Honda and factored the company’s own guidance as the fortunes of the industry. In our view, the mere event of “capacity
expansion” affects the market dynamics of commodities, not brands. Extrapolating the lone success of the Activa brand as Honda’s ability to develop
strong sub-brands in motorcycles (where they have had a very poor track record thus far) seems quite presumptuous.
 Eicher Motors: Royal Enfield (one of the few “cult” brands in India) is the best proxy of this emerging leisure biking trend in the country. Based on
current demand/supply, Enfield should sell as many as they can make for at least the next 2 years. What the street seems to have missed is that this
division has high economic interest for an Eicher Motors (>60% of its consol FCF). For VECV (Volvo-Eicher JV), we are particularly optimistic about the
engine division which makes Eicher a part of Volvo's global supply chain. More importantly, of the ~INR17bn cash hoard (~35% of market cap),
INR4.5bn gets deployed into a high RoCE business like engines (reckon ~40% on full operations).
 Bosch: The best proxy for rising dieselization of cars (which we believe is a structural phenomenon, irrespective of this petrol-diesel disparity). With high
entry barriers in a segment where high growth looks sustainable, Bosch’s enviable business model justifies the premium valuation. A monopoly like
position in critical engine equipment also gives it strong pricing power (stark contrast to most other ancillaries). Dependence on CVs is gradually
reducing making the business less cyclical and also more profitable.

FY12 – A year we’d like to forget!
 FY12 has been an extremely challenging for the Auto sector. Multiple Fuel price trend
macro headwinds in the form of higher interest rates (up 325bps), high
INR/litre
75
gasoline prices (up ~40%) and high inflation (WPI inflation staying in the 70
9% vicinity for most of FY12) led to quite a hard landing of the economy
65
(FY12 GDP growth forecast hacked down to <7% from ~9% at the start
of the year). 60
55
 All these factors combined have taken its toll on most segments of the Auto 50
sector. However, taking a more holistic view, the long-term structural drivers
45
of the sector (conducive demographics, benign penetration, rising aspirations
40
of the middle-class consumer, under-developed public transport, etc.) rarely
stay on the side-lines for too long. We believe that with an indication of 35
Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12
some relief on the macro side, the fortunes of the sector (especially those of
Petrol Prices Diesel Prices
the beaten-down segments) would improve sooner than later.
Source: Bloomberg, Antique
Segment-wise volume growth Cost pressures impacting freight operator profitability

120% 130 360
100%
300
80% 120
60% 240
110
40%
180
20%
100
0% 120
-20%
90 60
-40% Feb-06 Oct-06 Jun-07 Feb-08 Oct-08 Jun-09 Feb-10 Oct-10 Jun-11 Feb-12
Mar-10 Jul-10 Nov-10 Mar-11 Jul-11 Nov-11 Mar-12 TCI Freight Index (Indexed to 100) (LHS) Diesel Price (Indexed to 100) (LHS)
MHCVs LCVs Cars 2W Rubber Price (Indexed to 100) (RHS)
Source: SIAM, Antique Source: TCI, Bloomberg, Antique

Seemingly fag-end of deteriorating macro…
 Interest rates have increased by 375 bps in the last two years (325 bps in Car sales growth: High negative co-relation with rate hikes
the last year). With ~70% of cars in India sold on finance, domestic car 80% 18%
sales growth (much more than domestic 2W sales growth) shows a very
60%
strong negative co-relation with interest rates.
16%
40%
 Analyzing the last decade, it’s safe to infer that the negative co-relation
between car sales growth and interest rates is much more than that of 20% 14%
two-wheeler sales growth and interest rates. This is attributable to several
0%
factors like financing penetration, ticket size, urban~rural mix, etc. Very
12%
simplistically, this also makes us believe that as we reach the fag-end of -20%
the rate tightening cycle, and barring any extremely unfavourable movement
-40% 10%
in fuel prices (the second devil, which is dependent of multiple global
Feb-04 Feb-06 Feb-08 Feb-10 Feb-12
factors), car sales growth should outpace that of two-wheelers over the
SBI PLR (%) (RHS) YoY Car Growth (LHS)
next two years.
Repo rate (%) Two-wheelers: Almost oblivious to interest rates...

9.0 80% 18%
8.5
60%
8.0 16%
40%
7.5
7.0 20% 14%
6.5
0%
6.0 12%
-20%
5.5
5.0 -40% 10%

Feb-04 Feb-06 Feb-08 Feb-10 Feb-12
4.5
Mar-10 Jul-10 Nov-10 Mar-11 Jul-11 Nov-11 Mar-12 SBI PLR (%) (RHS) YoY 2W Growth (LHS)
Source: Bloomberg, Antique Source: Bloomberg, Antique

Time to play the bad boys?
 We compare SBI PLR and P/E multiples of Maruti Suzuki (for cars) and Maruti Suzuki P/E: Strong negative co-relation with SBI PLR
Ashok Leyland (for CVs) over past interest rate cycles. Based on analysis 25 16%
of data spanning over a couple of cycles, we infer that any indication of
rates easing-off, re-rates multiples for cars/CVs, much before an actual 20
15%
uptick in volumes (which can even be 2-3 quarters away). 14%

15
 While there are always anomalies to these strong co-relations and quite 13%
often, multiples could be affected by several other factors besides rates 10
(Maruti, for example, has been through many other de-rating catalysts -
12%
hyper competitive pressures, royalty increase by Suzuki, etc.) the 5

11%
expectation of rates peaking or bottoming-out has been the most accurate
macro variable on chart. While the timing could be off by a couple of
0 10%
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 FY13e
quarters, we believe that these inferences cannot be ignored when taking
SBI PLR (RHS) Maruti Suzuki P/E (LHS)
a directional call which pans out over a two-year horizon.
Cars~2Ws: Volume co-relation with previous rate hikes Ashok Leyland P/E: Negative co-relation with SBI PLR is even stronger...
10 Year 7 Year 5 Year 2 Year 1 Year 6 months 25 16%
0.0
15%
20
-0.2
14%
15
-0.4
13%
10
-0.6
12%
-0.8 5
11%
-1.0 0 10%
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 FY13e
Car Sales 2W Sales SBI PLR (RHS) Ashokleyland P/E (LHS)
Source: Antique Source: Bloomberg, Antique
Indian Demographics (Quantity & Quality) - The perpetual saviour...
 The demographic argument never gets old. Armed with one of the world’s Indian Demographics - Extremely conducive for long-term Auto growth...
youngest population with a median age of 25 years which coupled with 50
Median Age
the population size above 1.2 billion and, more importantly, whose
45 45
dependency ratio is on the downtrend, India’s demographics remain
40
extremely conducive for long-term growth of all automotive segments. 38
37
35 34
33
 70% of the population is still below the age of 35 years (target audience) 30 31
2928
which is expected to have brought over 150 million people to the working
25 25
population in the last 6 years (between 2006 and 2012).
20
 India stands out in the BRIC nations when compared with China (median 15
age 34 years), Russia (median age 38 years) and Brazil (median age 29 0 200 400 600 800 1000 1200 1400 1600
years). Population (million)
Brazil Russia India China Japan USA Indonesia Sri Lanka Thailand
Dependency Ratio - A data point that is hard to ignore... Source: United Nations, Antique
75 71
69 69
70 Decreasing dependency over next
 India currently has a higher total dependency ratio compared to other
2 decades
65 61 61 economies. This is on account of child dependency the benefits of which
60 56 55 55 56 will accrue over the next 2 decades.
55 53
51 51 50 51
50 47
49 49 48  A data point that is extremely difficult to ignore is the downward trend in
45
45 41
44 44
India’s dependency ratio. India along with Indonesia and Brazil are the
40
39 39
only 3 major economies whose dependency ratio will decline over the
35 next 2 decades (India’s from 56% in 2010 to 45% in 2030).
Germany
UK
Japan
France
Sri Lanka
Russia
Thailand
China
India
Indonesia
Brazil
USA
 All the developed economies along with China and Russia from the BRIC
nations will see significant increase in dependency ratio owing to old
2010 Dependency Ratio 2030 Dependency Ratio
age dependency.
Source: United Nations, Antique

The headroom for growth!
 Vehicular penetration levels in India are still extremely low, at ~13 vehicles Per capita GDP (USD)
per 1,000 people as against ~36 per 1,000 in China (~800 per 1,000 45,989
in the United States). Rural vehicular penetration in India is even lower at 41,050 40,670 39,738
3 per 1,000 people. While one can argue about the variances in per 35,162 35,083
31,774
capita income and multi macro variables, we’d just like to highlight the
headroom for automobile companies to grow over the long-term, which
has caught the attention of Auto OEMs across the globe.
 Low penetration levels, rapidly growing middle class, increasing purchase 8,684 8,121
power, local availability of almost all the raw materials (at a competitive 3,744
cost), well-developed credit/financing facilities, and availability of trained 1,134
manpower at a low cost are combined the best catalysts for the long-term
Germany
UK
France
Japan
Russia
China
India
Italy
USA
Spain
Brazil
growth of the automobile sector.
Source: IMF, Antique
Vehicular penetration (per 1,000 people) Car penetration v/s Per capita GDP
800 1000
Cars per 1000 people

800
607
505 497 487 600

463 453
400
BRIC Nations
200 Developed Nations
120
36 13 0
0 5 10 15 20 25 30 35 40 45 50
Per capita GDP (USD '000)
Germany
UK
France
Japan
China
India
Italy
USA
Spain
Brazil
Germany Spain France Italy UK USA China India Brazil
Source: IMF, Antique Source: IMF, Antique

Can India go the China way?
 China’s passenger vehicle sales saw a strong growth over the last decade China: Car sales v/s per capita GDP
which we assume was aided by increased consumption spending, 15000 15000
favorable demographics and rising middle class. This also coincides Cars sales zoom as per capita
perfectly with its per capita GDP crossing the $1,000 mark. 12000
GDP crosses the inflection point of
$1000
12000
 While attributing this high growth only to the per capita GDP crossing the 9000 9000
$1,000 mark would be presumptuous, most OEMs strongly believe that
this was the inflection point for China which spurred automobile demand 6000 Per capita GDP = 6000
$1000
in the years ahead. What is more important is that India seems to be
exactly where China was 8 years back in terms of per capita income. 3000 3000
Even in terms of passenger vehicle sales, India currently lags China by 8

0 0
years. If this does turn out to be India’s inflection point as well, with all
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
other macro variables remaining conducive, the Indian car industry could
be entering a phase of high growth in the years to come.
Per Capita GDP USD (LHS) Car Sales (000's) (RHS)
Source: China Bureau of Statistics, Antique
Car Sales: India lags China by 8 years India: Car sales v/s per capita GDP
15000 7500 10000
12000 6000 8000
9000 4500 6000

Is this India's inflectio n po int?
P er capita GDP =
6000 3000 $ 1000 4000
8 year lag
3000 1500 2000
0 0 0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
China PV Sales (000's) India PV Sales (000's) Per Capita GDP USD (LHS) Car Sales (000's) (RHS)
Source: China Bureau of Statistics, Bloomberg, Antique Source: Bloomberg, Antique
India~China - Similar past... Could the future be similar too?
 More analysis of China’s past reveals a strong co-relation of per capita China: Car sales v/s per capita GDP
GDP and the corresponding growth in car sales. This also bears an 15000 15000
uncanny resemblance to how India’s car sales growth has trended at the
same stage of per capita income (especially when it was below the 12000 12000
coveted $1,000 mark).

9000 9000
 In 1994, China’s per capita GDP crossed $500 and doubled in 7 years 10 x
to cross $1000 in 2001. During the same period, its passenger vehicle 6000 6000
sales doubled. Comparing this to India, its per capita GDP reached
$500 in 2002 which doubled to $1,000 in 2007. During the same 3000 2 .2 x 2 .2 x 3000
4x
period, auto sales in India also doubled.
0 0
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
 For China, since then, its per capita GDP has grown 4x, touching $4,100
in 2010. During the same period Chinese automobile sales have grown Per Capita GDP USD (LHS) Car Sales (000's) (RHS)
by a staggering 10x to cross the 14 million mark in 2010 (~17 million Source: China Bureau of Statistics, Antique
currently). India: Car sales v/s per capita GDP
 Increasing urbanization, growth in rural China, a government with a pro- 7500 10000
consumption mandate, etc. might have been some other factors that led
6000 8000
to this “J curve” in Chinese auto sales, but one cannot rule out the $1,000
per capita GDP mark being the inflection point. 4500 6000
 Passenger vehicle sales in India and China were similar during the period 3000 4000
when their per capita GDP doubled from $500 to $1000. China has
2.3x 2.3x
witnessed a consumption boom since its per capita GDP crossed $1,000 1500 2000
with passenger vehicle sales growing 10x in the last decade.

0 0
India seems to be at the exact same stage (with probably a much better
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015

demographic dividend) as China was 8 years back (at the early stages
Per Capita GDP USD (LHS) Car Sales (000's) (RHS)
of its auto boom).
Cars – War of the hatchbacks!
 The fringe players in A2 segment have gained 680bps and 480bps New entrants nibble market share from all the top 3 players...
market share in FY11 and FY12 from the top 3 players (Maruti Suzuki,
Hyundai, Tata Motors).
(540)
bps 19.5%
 Maruti has done a commendable job of withstanding this onslaught in (250)

(80) 100 (10)
bps bps
FY11 losing only 80bps market share to the fringe players. In FY12
15% bps
bps
(350)
however, it has lost 540bps. This has had more to do lack of diesel bps
capacity coupled with the strike at its Manesar plant (impact of ~100,000
units) and less to do with incremental competitive pressures. 8%
 Tata Motors have gained (or re-gained) 100bps market share in FY12, 680bps 450bps
primarily on account of being the only player with sufficient diesel capacity FY11 FY12
(with its Fiat JV).
New Entrants Tata Motors Hyundai Maruti Suzuki
Source: CRISIL, Antique
A2 segment - Market dynamics A2 segment - Maruti has regained market share lost in 2Q & 3Q (strike)
800
17.5% 21.2% 21.3% 18.0%
700 Fabia
5.5% 7.7%
600 Polo Sw ift 7.6% 9.7%
Ritz
Price (000's)
500 i10 24.4% 21.9%

21.2% 21.8%
Micra Alto
400
Santro WaganR
300
200 Indica
Omni
52.5% 49.9% 47.3% 52.5%
100
0
0 50 100 150 200 250 300
Volumes (000's) Q1FY12 Q2FY12 Q3FY12 Q4FY12
Alto WaganR i10 Sw ift Indica Omni Santro Ritz Polo Micra Fabia Maruti Suzuki Hyundai Tata Motors New Entrants
Source: CRISIL, Antique Source: CRISIL, Antique
Cars - Those without diesel variants have suffered...
Hatchback (A2 segment) market share

(%) 1Q 2Q 3Q 4Q FY10 1Q 2Q 3Q 4Q FY11 1Q 2Q 3Q 4Q FY12
A-Star 3.5 2.5 2.7 2.9 2.9 2.8 2.4 2.4 2.6 2.6 1.3 1.1 0.7 1.1 1.0
Estilo 2.9 2.5 4.5 4.7 3.7 4.8 3.3 3.5 3.1 3.6 1.9 1.5 0.8 1.1 1.3 Maruti Suzuki lost market share
Ritz 6.0 6.5 4.8 5.4 5.7 4.6 5.0 5.0 4.4 4.8 5.1 6.9 3.0 3.8 4.7 due to insufficient diesel
Alto 23.4 22.1 21.9 17.8 21.1 20.3 24.5 24.9 25.6 24.0 22.7 22.7 19.9 23.0 22.0 capacity. A-star and Estillo
combined resulted in ~390bps
Swift 9.5 10.5 10.5 11.0 10.4 10.8 10.0 10.0 8.4 9.7 10.1 6.3 12.9 13.8 10.7
of market share loss for Maruti
Wagon R 14.1 13.1 14.0 11.2 13.0 10.3 11.4 12.7 10.6 11.3 11.4 11.4 10.0 9.7 10.6
Maruti Suzuki 59.4 57.2 58.5 53.0 56.8 53.7 56.6 58.6 54.7 55.9 52.5 49.9 47.3 52.5 50.5
i10 13.7 12.7 13.9 13.2 13.4 12.0 10.6 11.0 11.3 11.2 10.7 9.1 9.3 7.4 9.2 The much feared Hyundai Eon
i20 2.8 4.0 4.0 4.1 3.8 5.1 6.1 5.6 5.0 5.4 6.9 5.9 6.1 3.8 5.8 has failed to impact Alto sales.
Santro 7.2 7.9 8.0 7.8 7.7 6.1 5.7 6.1 5.1 5.7 6.7 6.1 4.1 3.8 5.2 In fact, it has cannibalized the
Eon 2.2 7.0 2.2 Hyundai Santro and i10
Hyundai 23.8 24.6 25.9 25.1 24.9 23.3 22.4 22.7 21.4 22.4 24.4 21.2 21.8 21.9 22.3
Indica 11.7 10.5 8.4 10.6 10.3 8.3 6.4 5.8 6.8 6.8 5.5 7.6 9.7 7.7 7.6 Tata Motors gained ~80bps
Tata Motors 11.7 10.5 8.4 10.6 10.3 8.3 6.4 5.8 6.8 6.8 5.5 7.6 9.7 7.7 7.6 market share primarily due to
Jazz 0.8 1.0 0.6 0.4 0.7 0.3 0.5 0.3 0.3 0.3 0.2 0.5 0.4 0.1 0.3 being the only player with
Punto 0.6 1.9 1.1 1.1 1.2 1.0 0.9 0.6 0.8 0.8 1.1 0.8 0.5 1.0 0.9 sufficient diesel capacity
Spark 3.4 4.2 4.6 3.1 3.8 2.9 2.0 2.4 2.3 2.4 3.1 1.4 1.3 0.9 1.7
Fabia 0.7 0.6 0.7 0.6 0.5 0.3 1.0 1.1 0.8 1.4 1.2 1.3 0.7 1.1 Among the new entrants,
Beat 3.6 1.1 3.0 2.0 2.2 2.3 2.4 1.9 5.0 4.6 3.2 3.6 Toyota and Chevrolet have
Figo 2.2 0.7 5.8 5.6 3.9 6.2 5.4 5.3 5.1 5.0 4.9 5.1 gained market share, primarily
on their diesel models. Toyota
Polo 1.2 2.4 1.8 2.5 2.0 3.0 3.0 2.9 2.5 2.9
Liva (~70% dieselized) gained
Micra 0.9 0.9 1.4 0.9 1.3 1.4 1.3 1.4 1.4
220bps and Chevrolet Beat
Liva 2.7 3.5 2.6 2.2
(~50% dieselized) gained
Brio 0.6 0.7 0.3 120bps market share
Others 4.8 7.8 6.9 11.1 8.0 14.7 14.7 12.9 17.1 14.9 17.5 21.2 21.3 18.0 19.6

India Inc is hiring!
 With the economy still holding up (we see even ~7% growth as the glass Findings from hiring outlook survey
being 3/4th full) and most companies expanding their operations, the 10% 5%
job market too is picking up. A survey conducted by Naukri.com (India’s 14%
13%
24% 23% 21%
No. 1 job site, servicing over 34,000 corporate clients) among recruiters
across India reveals a positive hiring outlook. 38%
38%
 Overall, 76% of recruiters expect new jobs to be added in 2012 as
against the downturn of 2009, where only 45% of the recruiters predicted 72% 74% 76%
the creation of new jobs.
45%
38%
 Increments have also improved over last year - 63% of companies gave
increments in range of 10-20% vis-à-vis 41% last year while increments
above 20% were given by 15% of companies vis-à-vis 9% last year. Dec 2008 Jan 2009 Jan 2010 Aug 2011 Feb 2012
New jobs w ill be created Replacement hiring w ill take place No hiring Layoffs w ill continue
Source: Naukri, Antique
Hiring index at highest level since introduction Higher range of increments over last year
1300
1200 9% 15%
1100
41%
1000
63%
900
800 43%
700 19%
7% 2%
600
2010 2011
Aug-08 Mar-09 Oct-09 May-10 Dec-10 Jul-11 Feb-12
Hiring Index Hiring Trend <5% 5 - 10% 10 - 20% >20%
Source: Naukri, Antique Source: Naukri, Antique

Consumer sentiment – Biggest driver of high discretionary purchases...
 Over a longer term, we reckon that the favorable macro-economic factors, Reducing dependency ratio
rising aspirations of the Indian consumer and their burgeoning need to
commute will keep growth rates in the auto sector very healthy. 65.1%
62.0%
 Commodity prices too seem to have stabilized, which coupled with the 56.0%
possibility of interest rates easing and the customer having had enough
49%
time to have made his peace with high fuel prices, we believe that the
good news would outweigh the bad news going ahead.
 However, the mother of all drivers for high discretionary spending (especially
for aspirational products like automobiles) remains sentiment and
affordability, both of which are showing signs of improvement.
 One factor that has boosted income levels (and also sentiment) is the 1997 2000 2010 2020e
alteration in personal income tax levels. This has made the average urban Source: United Nations, Antique
middle-class tax payer (with an annual income of over USD8,500) 4-8%  Alteration in income tax slabs, coupled with a buoyant job market and
richer. reducing dependency ratio will continue to increase income and
Annual Income (INR) Post-tax income Inc in post-tax income affordability levels.
Budget ‘09 Budget ‘12 Annual Monthly
100,000 100,000 100,000 0 0
 We believe that this is more than enough to absorb the marginal increase
200,000 196,000 200,000 4,000 333 in EMIs on account of higher vehicle prices (post budget) and increase in
300,000 286,000 290,000 4,000 333 monthly running bill due to high fuel prices.
400,000 366,000 380,000 14,000 1,167
500,000 446,000 470,000 24,000 2,000 Favourable Alteration in Individual Income Tax Slabs
600,000 516,000 550,000 34,000 2,833 Budget 2010 Budget 2011 Budget 2012
700,000 586,000 630,000 44,000 3,667 Upto 1.6 lacs 0% Upto 1.8 lacs 0% Upto 2 lacs 0%
800,000 656,000 710,000 54,000 4,500 1.6 lacs - 5 lacs 10% 1.8 lacs - 5 lacs 10% 2 lacs - 5 lacs 10%
900,000 726,000 790,000 64,000 5,333 5 lacs - 8 lacs 20% 5 lacs - 8 lacs 20% 5 lacs - 10 lacs 20%
1,000,000 796,000 870,000 74,000 6,167 8 lacs + 30% 8 lacs + 30% 10 lacs + 30%
Source: GOI, Antique

Waiting for GST...
 Moving towards GST, while the road-map is still a little sketchy, there are Manufacturer to Dealer VAT GST
indications that when implemented, it could be positive for the Auto sector, Price of vehicle (ex-factory) 100.0 100.0
simply from a tax structure point of view. + central excise (12%) 12.0 0.0
+ central sales tax (2%) 2.0 0.0
 Given the current complex tax structure {from the time the vehicle leaves + VAT (12.5%) 12.5 0.0
a factory (situated in one region of the country) and reaches multiple + Central GST (9%) 0.0 9.0
showrooms (spread across the country)}, as per our calculation, the + State GST (9%) 0.0 9.0
uniformity of the tax structure itself could make an average vehicle ~7% Price of vehicle (ex-showroom) 126.5 118.0
cheaper. This could be the precursor to the much anticipated auto boom, -6.72%
which would support the inherent drivers of auto consumption in India. Source: Antique
Auto OEM revenues (as a % of GDP)

 We see a higher likelihood of this tax saving as the government too is
12%
betting big on the automobile sector for driving growth and expects the
10% 9.0%
9.9%
industry to account for ~10% of the GDP by 2016 (from ~6.5% currently)
8.3% and 30-35% of the manufacturing sector (from 18% currently).
7.6%
8% 6.9%
6.5%
 Should this play out, it would imply that the auto industry is expected to
6%
4.8% 4.7%
5.3%
grow at a 14% CAGR from FY11-16e (assuming a GDP growth of 7.0%
4.1% 4.2% 4.2%
4% 3.6% for FY12e and 7.5% for FY13e and 8% thereafter). This is also expected
3.0%
to provide additional employment to 25 million people.
2%
 From a global perspective, this also makes India a favourable investment
0% destination for most global auto makers. The government expects the
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12e
FY13e
FY14e
FY15e
FY16e
industry as a whole (including component makers) to attract investments

Source: Antique
worth USD30bn over the next 5 years.

High multiplier effect!
 Driven by extremely deep forward and backward linkages with several GDP Growth (%)
key segments of the economy, the automobile industry provides direct
9.5%9.7%
and indirect employment to approximately ~15 million people and 9.0%
contributes ~18% to the country’s indirect tax kitty. 8.0%
8.5% 8.4%
7.3% 7.5% 7.4% 7.4%

 More importantly, an uptick in the automobile sector has a very strong 6.4%
6.7%
6.4%
6.7% 6.9%
multiplier effect. It is estimated, that every car, CV, 2-wheeler and 3- 5.4%
5.7% 5.8%
5.3%
wheeler produced, generates direct and indirect employment of 5.3, 4.4%
4.3%
13.3, 0.5 and 3.9 units respectively, which translates into an additional 3.8%
employment of ~25 million people by 2016.
 This makes the automobile sector one of the key drivers for economic 1.4%
growth and leads us to believe that no government will deter the industry
growth rate by way of an unfavorable tax regime as it has a direct FY91 FY93 FY95 FY97 FY99 FY01 FY03 FY05 FY07 FY09 FY11 FY13e
bearing on the economy. Source: CMIE, Antique
Current excise duty structure

(after budget '08) (specific duty) (1st Stimulus) (after budget '09) (after budget '10) (after budget '11) (after budget '12)
Current excise duty structure Feb, 2008 June, 2008 Dec, 2008 July, 2009 Feb, 2010 Feb, 2011 Mar, 2012
2 Wheelers 12% 12% 8% 8% 10% 10% 12%
3 Wheelers 12% 12% 8% 8% 10% 10% 12%
Passenger Vehicles (Cars & UVs)
<4m length + petrol engine <1,200cc; diesel <1,500cc 12% 12% 8% 8% 10% 10% 12%
>4m length + petrol engine <1,200cc; diesel <1,500cc 24% 24% 20% 20% 22% 22% 24%
>4m length + petrol engine >1,200cc; diesel >1,500cc 24% 24% + INR15k 20% + INR15k 20% + INR15k 22% + INR15k 22% + INR15k 27%
Commercial Vehicles - Goods (FBV) 14% 14% 10% 8% 10% 10% 12%
Commercial Vehicles - Passenger 12% 12% 8% 8% 10% 10% 12%

Existing players enjoy first-mover advantage!
 While it’s clear that the high competitive intensity for the domestic players FY13e RoCE vs. P/E
can only increase going ahead, they have so far held their ground by 25
their higher localization levels, widespread distribution networks and first-
mover advantage. However, these factors alone would not help sustain 20
competitiveness over a longer period.

15
FY13e P/E
 Therefore, the need of the hour is greater emphasis on the development of 10
factors which would ensure competitiveness on a long-term basis, which P/E of ~12x excluding
is why ramp-up in investments in R&D and new product design has become 5 non-recurring royalty
critical and can help the domestic players retain their competitiveness in
0
the industry. Another key area is the development of strong linkages with 0 20 40 60 80 100
material/component suppliers, dealers, financers, etc. For many foreign
5-year average ROCE (%)
players, the biggest challenge to being cost competitive in India is
Ashley Bajaj Auto Bosch Exide Escorts Tata Motors M&M Maruti Hero MotoCorp
developing a strong local vendor base.
Source: Company, Antique
Company-wise Gross Leverage Population by Income Class

7.0 2% 4% 3% 6%
6% 7% 4% 12%
6%
6.0 JLR acquisition debt coupled w ith 9% 9%
8%
netw orth erosion (loss at 17% 15%
Annual Income (in 1000s)

5.0 consolidated level)
4.0
Further
47% 33%
issuances &
Divestment + bond JLR becoming
3.0 55%
conversion + GDS FCF+ 83%
2.0 72%
39%
1.0 37%
0.0 18%
8%
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12
1985 1995 2005 2015e 2025e
Maruti Suzuki Hero Honda Tata Motors (consol)
Mahindra & Mahindra Bajaj Auto Ashok Leyland Deprived (<90) Aspirers (90-200) Seekers (200-500) Strivers (500-1000) Global (>1000)
Source: Company, Antique Source: McKinsey

Indian dieselization – It’s just the beginning!
 Diesel car sales are clearly defying the general car industry trends at the moment. The share of diesel passenger vehicles has risen from ~20% in FY08
to ~36% currently (global average >60%). This implies that over the last 4 years, diesel passenger vehicles have grown at a ~37% CAGR as against
~9% CAGR for petrol passenger vehicles.
 Demand for diesel cars and UVs is expected to increase by a CAGR of 20% over the next 5 years to reach about 2.2 million vehicles in 2015-16, from
about 0.9 million vehicles in 2010-11. This would take the share of diesel models to 46% of total passenger vehicles sales over the next 5 years from the
current 36%.
 Rate of dieselization will be higher in the car segment with diesel expected to account for 38-40% of domestic car sales by 2015-16 from 27% at
present. In the UV segment, the share of diesel vehicles is expected to remain constant at around 95-97%, while in the MPV segment, it is expected to
increase marginally to 26% from 24% in 2010-11.
 The recent increase in the petrol~diesel disparity has accentuated demand for diesel vehicles recently. Fearing an additional excise hike, most OEMs
were tentative expanding diesel capacity, but post the budget, with an absence of a specific diesel excise hike, OEMs have fast-tracked their diesel
capacity expansion plans.
Passenger vehicles - fuel mix Dieselization - Small cars expected to outpace sedans
100% 70%
6% 8%
60%
33% 60%
80% 51%
36%
46% 50%
60% 40% 35%

31%
40% 30%
21%
67%
58% 20% 16%
46%
20%
10%
0% 0%
2005-06 2010-11 2015-16e 2005-06 2010-11 2015-16e
Petrol Diesel CNG Small Cars Sedans
Source: CRISIL, Antique Source: CRISIL, Antique

Expect dieselization to continue increasing (irrespective of the petrol~diesel disparity)
 Diesel car sales have been extremely buoyant post the fuel price de- 26th June 2010 Apr 2012
regulation (June 2010).Post that, petrol prices have risen by 32% (and Average Running Cost Diesel Petrol Diesel Petrol
were de-controlled) whereas diesel prices have risen by only 15% (and Daily running (km) 40 40 40 40
were not de-controlled). Mileage (km/litre) 15 11 15 11
Cost/litre (INR, Mumbai) 39.88 52.20 45.99 71.47
 This has been the primary driver for the surge in diesel car sales and No. of Days 25 25 25 25
sluggishness in petrol car sales in the last couple of years. We believe Monthly running (km) 1,000 1,000 1,000 1,000
that diesel car sales will continue to outpace petrol car sales going ahead. Monthly fuel consumption (ltrs) 67 91 67 91
While it’s irrational to extrapolate this huge petrol ~ diesel disparity over Monthly fuel cost (INR) 2,659 4,745 3,066 6,497
a longer period, the inherent economics of a diesel vehicle (~25% more Saving in monthly fuel cost due to diesel (%) 44.0% 52.8%
fuel efficient than its petrol counterpart) makes us structurally positive on Saving in monthly fuel cost due to diesel (INR) 2,087 3,431
dieselization of the Indian car industry going ahead. Source: Antique
Fuel price trend Petrol ~ Diesel disparity at its peak

80 60%
INR/Litre
70
50%
60
50
40%
40
30 30%
20
Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12
20%
Petrol Prices Diesel Prices Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12

Higher fuel efficiency - Key driver of long-term growth of diesel cars...
Diesel vehicles – Almost 25% more fuel efficient than its petrol counterpart Private diesel vehicles account for only 5% of total diesel consumption
Vehicle Model/Variant Kerb weight Engine cc Emission Fuel type Mileage Vehicle type Distance Fuel Diesel Diesel %
(Km/l) covered efficiency vehicles consumed Consumption
Small Gasoline 1,035 1,197 BSIV Gasoline 17.9 per year (Km/l) sales in FY10 (liters)
Small Diesel 1,105 1,248 BSIV Diesel 21.7 Trucks and Buses 75,000 3.7 531,395 10,771,520,270 92.2%
Entry Level Gasoline 1,095 1,193 BSIV Gasoline 15.6 Cars (Taxi) 75,000 16 21,388 100,256,250 0.9%
Entry Level Diesel 1,101 1,396 BSIV Diesel 23.0 UV (Taxi) 7500 13 40,455 233,394,231 2.0%
Utility Vehicle Gasoline 1,565 1,998 BSIV Gasoline 10.4 Cars (Private) 15,000 16 335,095 314,151,563 2.7%
Utility Vehicle Diesel 1,655 2,494 BSIII Diesel 13.7 UV (Private) 15,000 13 229,245 264,513,462 2.3%
Luxury Vehicle Gasoline 2,195 3,498 BSIV Gasoline 8.2 11,683,835,775 100%
Source: SIAM, Antique
Luxury Vehicle Diesel 2,285 2,987 BSIV Diesel 10.2
Diesel capacity (as % of total volumes) Diesel vehicles (as a % of total)

120%
100% 98% 79% 77%

72%
75% 69%
80%
60% 56% 51%

40% 44%
49% 33%
20% 19%
0%
0 50 100 150 200 250 300 350 400 450 500
FY13 Diesel Capacity (000's)
Maruti Hyundai TTMT Toyota GM Volksw agen Belgium France Norw ay Spain Italy Germany
Source: Antique Source: SIAM, Antique

CVs have held up surprisingly well...

CVs - Strong co-relation with IIP growth
 The CV industry implicitly reflects the industrial growth in the economy
280% 30%
and has a very strong co-relation with the IIP (more for MHCVs, less for
240%
LCVs). 200%
25%
20%
 LCVs (especially SCVs) continue to buck the trend at the moment, on the 160%
15%
120%
back of the growing popularity of the hub-and-spoke distribution model
80% 10%
coupled with the rising importance of the small transporters' role in the
40%
road freight process. 5%
0%
0%
 Growth in FY12 was driven by LCVs, but over the last decade or so, both -40%
-5%
LCVs and MHCVs segments have grown at similar rates (with the growth -80%
-120% -10%
in MHCVs being much more volatile). This is primarily due to lumpy Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11
capacity addition by freight operators when times are good and sharp IIP Grow th (05-06 base) (RHS) YoY LCV Grow th (LHS) YoY MHCV Grow th (LHS)
cutback in capacity additions when times are tough. Source: Bloomberg, Antique
 Apart from how buoyant industrial activity is, the long-term demand drivers Cost structure of a freight operator (excl EMI)
for the industry are also linked to freight operator profitability, which has
been under pressure over last year.
Others
 Freight rates have been firm, but not moved up commensurately with the 5%
recent cost pressures (diesel, driver, maintenance, tyres, etc.), suggesting Maintenance
13%
that transporter profitability has been under pressure.
Diesel
 Hence, capacity additions have been tentative this year. That said, MHCVs 60%
Driver C harges
have held up surprisingly well in the current year (10% growth) despite 12%
the weaker macro and sluggish IIP.
Toll C harges
 Now, as we reach the fag-end of the rate tightening cycle and directionally 10%
a better economic/capex cycle, we reckon that the fortunes of the MHCV

segment can only improve from here on.
Source: Industry, Antique

CVs – Long-term drivers intact…

Investment in roadways (INRbn)
 The long term demand drivers of the CV segment remain intact - roads are
1,750
the most preferred mode of transport (approximately 85% of passenger
movement and 65% of goods movement in the country happens via road). 1,500
CAGR 16%
1,250 387
 There are also other multiple volume triggers like a more stringent 341
implementation of the overloading ban (which will result in the need for 1,000 301
422
addition of capacities). along with the gradual uptick in replacement 750
260 373
225
demand (currently around 50% of the trucks population is over 10 years
355
152 338
500 106
old and 30% is over 15 years old). 292
290
648
251 645
250 492
344
 The development of newer highways will be another trigger which will 187 183
288
0
boost the demand for higher horsepower trucks as it will enable higher FY08 FY09 FY10 FY11e FY12e FY13e FY14e
turnaround time. Highw ay State Rural
 Government is strongly focusing on infrastructure development, with roads
being an area of great focus. It is estimated that investments in the Road Freight movement - Road vs. Rail (billion tonnes per kilometer)
sector will grow at 16% CAGR from FY11 to FY14. Investments would
906
be made across the spectrum with highways, rural and state roads all 799
853
registering growth in investments. 765

693
621
 This investment in roadways, besides boding well for the turnaround time 562 538
572 591
521
of CVs, would also result in an uptick in demand for CVs used in the
508
456 481
422 440
407
building of these roads. It is estimated that to build one kilometer of road 379
333 353 381
312
itself would require 15-20 trucks.
 Road connectivity clearly plays a key role in India’s economic growth. In

the past decade, a clear trend has emerged where share of roads in
freight traffic has increased at the cost of railways. With better last mile FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11
connectivity, the share of roads in freight movement is expected to Road Railw ay
increasing, which bodes well for CV segment in the long term. Source: CRISIL, Antique

Two-wheelers – Boon in any environment…
 Post a ~40% increase in gasoline prices and 300bps increase in interest Running Cost Car 2W
rates, two-wheelers sales have bucked the trend in this high inflationary Running per month (Kms) 600 600
scenario as running costs are approximately 74% lower (compared to a Fuel effiency (Kms) 15 60
petrol 4W). Fuel consumed (per month) 40 10
Fuel cost/litre (Rs) 71 71
 Additionally, two-wheelers are less competitive a segment. The top 4 Monthly fuel cost (INR) 2,859 715
players command a 97% market share and the balance 3% comprises of Monthly miscelleneous cost 1,000 300
only 4 players. Monthly running cost 3,859 1,015
Annual running cost 46,306 12,176
 Cars on the other hand a much more competitive (more so in the last 4 2W Advantage (INR) 34,129
years). Top 3 players comprise for 73% of the market at the moment 2W Advantage (%) 74%
(from 85% in FY09). The balance 27% comprises of a staggering 12 Source: Antique
players.
Cars - Market share trend Motorcycles - Market share trend
4% 4% 4% 4% 5%
17% 15% 16% 4% 6% 6% 7% 8%
20% 25% 9% 8% 7% 7% 6%
14% 13% 13%
13% 22% 24%
13% 29% 27% 26%
18% 20% 21% 18%
20%
55% 60% 58% 55% 56%

51% 52% 50% 49%
42%
FY08 FY09 FY10 FY11 YTDFY12 FY08 FY09 FY10 FY11 YTDFY12
Maruti Hyundai Tata Motors Others Hero Motocorp Bajaj Auto TVS Honda Others
Source:SIAM, Antique Source: SIAM, Antique

2W penetration – Still some headroom for growth!
 Our positive view on 2Ws is more due to the consistency of growth and Two-wheeler penetration (per 100 people)
less due to the quantum. Also, the asset light/profitable business model is
62
a boon in any environment.
 Recent penetration fears seem overdone. Despite being the second largest
two-wheeler market (China being the leader), penetration levels are still
comfortable (6%) when compared to other developing markets like Taiwan
30
(62%), Vietnam (30%) and Indonesia (21%). 25
21
 While we do expect 2W volume growth to underperform cars/CV volume
growth ahead, we see no threat to the recent industry 12-15% CAGR. 6
8 7
India Brazil C hina Indonesia Vietnam Thailand Taiwan

2W addressable household (In millions)
Source: Yamaha, Antique
140 133
120
 Financing penetration is getting deeper. Two-wheeler financing companies
100 91 have come out with schemes like DCC (direct cash collection) where
81 cash is collected every month going door-to-door and loans are given to
80
67 people who do not have formal mode of payment options like a bank
60 account.
40 37
40
20  Hence the addressable households in the rural regions is also on the rise.
Rising rural incomes, supported by higher minimum support prices (MSPs)
0
FY05 FY10 FY15e and stable crop output is expected to drive rural demand.
Urban Rural

2W Exports – Small contribution, big potential!
 In the last 8 years exports have grown at a 30% CAGR. Bajaj and TVS Global 2W demand distribution (2010)
derive 29% and 11% of their volumes from exports and will be primary
beneficiaries in the medium term.
2% 1%
4%
 4 major markets comprising China (16m), India (11m), ASEAN (13m) 8%
4% 27%
and Latin America (4m) form 89% of global 2W sales. Africa (Nigeria 22%
~1.2m) is also emerging as an important 2W market.
32%
 Over the last few years, Hero has missed out on export opportunities,
which Bajaj was able to capitalize on. Post the split, we expect Hero to
focus on big export markets like Africa, South America and Indonesia.
Over a much longer period (5-7 years), we see no reason why Hero
can’t replicate the success that Bajaj Auto enjoys in exports.
C hina India LatAM Rest of Asia Europe Nigeria America ASEAN
Source: Yamaha
2W market share - ASEAN markets 2W Global market share (2010)
Others, 2%
Suzuki, 8%
2% 1% 1%
5%
7% 36%
11%
14%
Honda, 53% 23%

Yamaha, 37%
2010 2W Global Market Share
Honda Yamaha HeroMoto C orp Bajaj Auto Suzuki

TVS Kawasaki Piaggio Others
Source: Yamaha Source: Yamaha

2Ws ~ consumer staples – Similar return ratios…
Fixed Asset Turnover (x) ROCE (%)

9 100%
88%
8 90%
7 80%
7
6
6 70% 62%
60% 52%
5
4 50%
4
40% 35%
3 3
30%
2
20%
1
10%
-
0%
HUL ITC HMCL Bajaj Auto
HUL ITC HMCL Bajaj Auto
5 Yr - Average Fixed asset turnover
5 Yr - Average ROCE
Source: Company, Antique Source: Company, Antique
Free Cash Flow / PAT (%) FY13e P/E

140% 30 28
116%
120% 25
25
100%
86%
80% 73% 75% 20
15
60% 14
15
40%
10
20%
0% 5
HUL ITC HMCL Bajaj Auto HUL ITC HMCL Bajaj Auto
4 Yr - Average FCF/PAT 1 year forw ard PE
Source: Company, Antique Source: Antique
Market data Tata Motors Reco : BUY

Sector : Automobiles
CMP : INR275
Market Cap (INRbn)
Market Cap (USDbn)
:
:
826
16
This time it’s volumes! Target Price : INR330
O/S Shares : 2,692
Free Float (m) : 1,545 JLR - Less about the geography, more about the product!
52-wk HI/LO (INR) : 298/138
Avg Daily Vol ('000) : 8,901  The success of the Evoque has taken everyone by surprise! While this has led to significant volume upgrades, we
Bloomberg : TTMT IN
believe that the street is still under-estimating the Evoque’s full potential (which we understand is also eating into
Source: Bloomberg
the share of luxury sedans). Currently at around ~8k per month, we expect this traction in Evoque volumes to
Shareholding pattern continue as it expands its presence in other geographies, with minimal cannibalization of existing Land Rovers.
Promoters : 35%
FII : 25%
Post an incredible initial response (order backlog of ~3 months even after the ramp-up in volumes), the company is
DII : 14% gearing up for total production of ~34k per month (~410k per year). We estimate JLR volumes at 385k units in
Others : 26%
FY13e (up 25% YoY), assuming Evoque volumes of 120k (implying only a 1% growth for the existing models).
Source: BSE
Price performance vs Nifty Currency tailwinds!

150  Besides the INR depreciation against the GBP (which results in strong translation gains when translating JLR's GBP
120 profits back to INR), even operationally, currency has been extremely favourable for JLR over the last couple of
90 quarters (the benefits of which are yet to fully accrue) - the USD has appreciated against the GBP {all JLR sales
60 outside Europe (~50% of volumes) are USD denominated} and the EUR has depreciated against the GBP (~45%
30 of components/materials purchased are EUR denominated, which would off-set the negative impact of the ~25%
Apr-11 Aug-11 Dec-11 Apr-12 of revenues that are EUR denominated). Excluding the currency aspect, the fact that the fastest growing market
Tata Motor NIFTY (China) is also the most profitable bodes well for future margins.
Source: Bloomberg
Key financials (consolidated) Domestic business can’t do much worse!

YE 31 Mar (INRm) FY11 FY12e FY13e
Revenues 1,231,333 1,615,869 1,998,976
 MHCV/cars are very sensitive to any improvement on the macro front. While the mini-truck segment (Ace)
EBITDA 168,175 220,550 283,902 continues to perform extremely well, as we reach the fag-end of the rate-tightening cycle, we expect the laggards
EBITDA Margin (%) 13.7 13.6 14.2
in the domestic business (MHCV/cars) to improve going ahead.
Adjusted PAT 89,413 114,012 143,913
Adjusted EPS (INR) 28.0 35.8 45.1
P/E (x) 9.8 7.7 6.1 BUY!
EV/EBITDA (x) 6.1 4.7 3.6
RoE (%) 9.8 7.1 10.1  We reiterate BUY with a target price of INR330 - valuing the domestic business at INR82 per share (8x FY13e
RoCE (%) 10.9 8.2 10.7 EV/EBIDTA), JLR at INR226 per share (4x FY13e Adj. EV/EBIDTA) and other subs at INR22 per share.
Div Yield (%) 1.5 1.5 1.5

Favourable currency tailwinds!
Weak INR (to GBP) results in translational gains for Tata Motors Weak EUR (to GBP): Positive for JLR as ~45% of purchases are in EUR
95.00 0.94
Average Average 0.92

90.00 GBP/INR GBP/INR 0.90
80.1 79
0.88
85.00
0.86
Average
80.00 GBP/INR 0.84
72.5 0.82
75.00 Average Average
0.80 Average
EUR/GBP EUR/GBP
EUR/GBP
0.78 0.854 0.857
70.00 0.835
0.76
4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12
65.00 0.74
01-Jan-11 01-A pr-11 01-Jul-11 01-Oct-11 01-Jan-12 01-A pr-12 01-Jan-11 01-A pr-11 01-Jul-11 01-Oct-11 01-Jan-12 01-A pr-12

Strong USD (to GBP): Positive for JLR as >50% of sales are in USD China and other emerging markets to lead JLR’s volume growth
0.72
0.70 Average Average 15% 13% 15% 16% 18% 21%

USD/GBP USD/GBP 4% 5%
0.68 6% 9% 10% 11%
0.636 0.636 4% 17%
5% 20%
0.66
30% 27% 23% 5%
22% 5%
0.64
22%
20%
0.62
24% 24% 28% 24%
0.60 Average 19% 17%
USD/GBP
0.58 0.624 23% 22% 19% 22% 18% 17%
0.56
4QFY11 1QFY12 2QFY12 3QFY12 4QFY12
0.54 FY08 FY09 FY10 FY11 FY12e FY13e
01-Jan-11 01-A pr-11 01-Jul-11 01-Oct-11 01-Jan-12 01-A pr-12 North America United Kingdom Europe (excluding UK and Russia) Russia China Rest of the World
Source: Bloomberg, Antique Source: Company, Antique

Peer Comparison
Region MCap EV/EBIDTA P/E P/B ROE Return
Company (USDbn) CY11 CY12 CY11 CY12 CY11 CY12 CY11 CY12 1 month 3 month 6 month 12 month
USA
FORD MOTOR CO 48 9.7 8.5 8.2 7.2 6.0 2.4 86.8 33.1 (2) 11 24 (20)
GENERAL MOTORS C 39 2.4 2.2 6.7 5.5 1.0 1.0 21.5 20.9 (5) 19 17
Average 6.0 5.3 7.5 6.3 3.5 1.7 54.1 27.0
EUROPE
BAYER MOTOREN WK 56 7.8 7.6 8.5 8.2 1.6 1.4 20.0 17.3 (5) 19 48 10
VOLKSWAGEN AG 74 6.4 5.8 6.1 5.5 0.9 0.8 21.4 13.8 (10) 8 37 6
DAIMLER AG 63 8.8 7.8 8.6 7.5 1.2 1.1 13.8 13.4 (3) 23 44 (13)
FIAT SPA 7 NA NA 6.0 4.0 0.5 0.4 6.1 8.6 (11) 10 13 (36)
PEUGEOT SA 4 NA NA 7.7 3.6 0.2 0.2 5.3 3.3 (15) (5) (16) (56)
PORSCHE AUTO-PRF 17 NA NA 4.7 4.0 0.6 0.6 7.2 12.3 (10) 5 33 (6)
VOLVO AB-B 30 7.6 6.7 11.5 9.4 2.3 2.0 22.3 18.5 (3) 17 44 (16)
Average 7.7 7.0 7.6 6.0 1.0 0.9 13.7 12.5
KOREA
HYUNDAI MOTOR 49 4.3 4.0 7.6 7.0 1.9 1.6 23.1 19.9 15 13 29 24
KIA MOTORS CORP 28 7.7 7.2 9.6 9.0 2.4 1.9 31.0 26.6 9 14 17 12
Average 6.0 5.6 8.6 8.0 2.2 1.7 27.1 23.3
CHINA
SAIC MOTOR-A 26 3.5 3.1 6.9 6.1 1.8 1.4 23.3 21.3 (7) 3 (7) (20)
CHONGQING CHAN-A 3 NA NA 17.0 13.0 NA NA 8.4 10.7 (13) 14 2 (17)
FAW CAR CO LTD-A 3 8.6 7.1 35.0 29.2 2.1 1.9 6.2 10.0 (6) 19 (8) (38)
BEIJING SIFANG-A 1 NA NA 29.3 21.1 NA NA NA NA (11) 4
DONGFENG AUTO-A 1 11.7 9.2 11.7 7.7 1.1 1.0 5.7 9.0 (14) 8 (9) (36)
GUANGZHOU AUTO-H 8 6.7 5.5 9.1 7.6 1.4 1.3 14.5 14.7 (8) 19 15
Average 8.5 13.4 17.3 13.2 1.5 1.3 10.6 12.5
JAPAN
SUZUKI MOTOR 13 4.2 3.7 18.2 13.9 1.1 1.0 5 6 3 23 19 10
NISSAN MOTOR CO 48 5.1 4.2 10.1 8.3 1.1 1.0 10 11 8 27 33 23
HONDA MOTOR CO 68 8.7 5.0 21.2 10.7 1.1 1.1 12 5 2 26 41 6
TOYOTA MOTOR 146 10.0 6.2 36.0 14.9 0.9 1.0 4 3 5 32 38 7
MAZDA MOTOR 5 24.0 7.8 NA NA 0.5 0.7 1 (16) 9 2 (1) (21)
MITSUBISHI HEAVY 16 9.7 8.7 35.8 18.9 0.9 0.9 2 3 1 15 27 4
Average 10.3 5.9 24.2 13.3 0.9 1.0 5.8 1.9

BUY!
DVR - Always the better way to play Tata Motors... Standalone (INRm) FY09 FY10 FY11 FY12e FY13e
60% Revenues 256,297 355,930 480,405 544,096 628,547
EBITDA 17,013 40,342 46,651 38,004 47,373
50% EBITDA Margin (%) 6.6 11.3 9.7 7.0 7.5
PAT 10,013 22,401 18,118 10,186 20,269
40%
EPS 19.5 39.3 28.4 3.2 6.4
Adjusted EPS 2.1 4.8 6.1 4.4 6.4
30%
20%
JLR Financials (INRm) 10MFY09 FY10 FY11 FY12e FY13e
10% Jaguar volumes 47,000 47,424 51,818 54,411 56,911
LandRover volumes 120,300 146,506 189,087 252,598 328,929
0%
Total volumes 167,300 193,930 240,905 307,009 385,839
Nov-09 Mar-10 Jul-10 Nov-10 Mar-11 Jul-11 Nov-11 Mar-12
Revenues 397,840 491,442 710,712 1,008,633 1,300,975
EBITDA (3,360) 31,285 116,539 174,493 227,671
Discount
EBITDA Margin (%) (0.8) 6.4 16.4 17.3 17.5
PAT (24,480) (1,899) 72,216 99,667 123,070
SOTP Methodology Value per share

Tata Motors Standalone A 8x FY13e EV/EBIDTA 82
Jaguar Land Rover B 4x FY13e EV/Adj EBIDTA 226
Value of Key Subsidiaries & Investments: (pro-rated) Stake
Telco Construction & Equipment 40% Based on latest stake sale 7
Tata Daewoo 100% 10x FY13e EPS 2
TML Drivelines 85% 10x FY13e EPS 7
Tata Motors Finance 100% 1x Book 5
Tata Technologies 82% 10x FY13e EPS 5
Listed Investments (Tata Steel, Auto Corp of Goa) Market Value 1
Total value of Key Subsidiaries & Investments 28
Holding company discount 20% 6
Net Value of Key Subsidiaries & Investments C 22
SOTP Value of Tata Motors A+B+C 330
Source: Antique

Profit and loss account (INRm) Cash flow statement (INRm)

Year ended 31st Mar 2009 2010 2011 2012e 2013e Year ended 31st Mar 2009 2010 2011 2012e 2013e
Revenues 709,389 925,193 1,231,333 1,615,869 1,998,976 EBIT (6,580) 42,288 121,620 160,175 208,710
Expenses 690,901 844,033 1,063,158 1,395,319 1,715,074 Depreciation & amortisation 25,068 38,871 46,555 60,376 75,192
EBITDA 18,488 81,160 168,175 220,550 283,902 Interest expense 19,309 22,397 20,454 20,703 21,569
Depreciation & amortisation 25,068 38,871 46,555 60,376 75,192 (Inc)/Dec in working capital (47,087) (50,154) 46,225 (52,297) (44,605)
EBIT (6,580) 42,288 121,620 160,175 208,710 Tax paid 3,358 10,058 12,164 27,139 45,121
Interest expense (net) 19,309 22,397 20,454 20,703 21,569 CF from operating activities 42,908 98,859 89,332 225,005 261,817
Other Income 841 464 896 2,262 2,534 Capital expenditure 532,309 36,217 68,491 147,000 154,800
Exceptional Items 3,239 15,717 3,324 (6,350) 253 Inc/(Dec) in investments (14,084) 9,617 3,251 - 4,525
Profit before tax (21,810) 36,071 105,385 135,384 189,928 Income from investments 841 464 896 2,262 2,534
Tax (incl deferred) 3,358 10,058 12,164 27,139 45,121 CF from investing activities (517,385) (45,371) (70,846) (144,738) (156,791)
Profit after tax (25,053) 25,711 92,736 107,663 144,167 Inc/(Dec) in share capital 1,285 566 671 - -
Adjusted profit after tax (28,291) 9,994 89,413 114,012 143,913 Inc/(Dec) in debt 233,890 4,097 (25,921) (22,511) (9,167)
Adjusted EPS (INR) (11.0) 3.5 28.0 35.8 45.1 Others (4,454) (5,513) 16,573 (11,741) (14,535)
CF from financing activities 230,721 (851) (8,676) (34,252) (23,703)
Net cash flow 2,882 46,220 22,046 25,791 60,473
Balance sheet (INRm)
Opening balance 38,332 41,213 87,433 109,479 135,270
Year ended 31st Mar 2009 2010 2011 2012e 2013e
Closing balance 41,213 87,433 109,479 135,270 195,743
Share Capital 5,141 5,706 6,377 6,377 6,377
Reserves & Surplus 54,266 76,359 185,338 281,260 410,891 Growth indicators (%)
Networth 59,406 82,065 191,715 287,637 417,268
Debt 349,739 353,835 327,914 305,403 296,236
Revenue 99.0 30.4 33.1 31.2 23.7
Other Liabilities 4,030 2,135 2,466 2,466 2,466
EBITDA (56.0) 339.0 107.2 31.1 28.7
Capital Employed 413,175 438,035 522,095 595,506 715,970
PAT (215.6) 202.6 260.7 16.1 33.9
Gross Fixed Assets 621,880 682,747 714,629 833,229 963,069
EPS (201.2) 131.8 700.5 27.5 26.2
Accumulated Depreciation 332,691 344,135 396,987 444,070 498,799
Adj PAT (234.9) 135.3 794.7 27.5 26.2
Capital work in progress 105,330 80,680 117,289 145,689 170,649
Net Assets 394,520 419,292 434,931 534,848 634,919 Valuation (x)
Investments 12,574 22,191 25,443 25,443 29,967 Year ended 31st Mar 2009 2010 2011 2012e 2013e
Current Assets, Loans & Advances P/E (25.0) 78.5 9.8 7.7 6.1
Inventory 109,506 113,120 140,705 190,048 237,669 P/BV 11.9 9.6 4.6 3.0 2.1
Debtors 47,949 71,912 68,774 88,541 109,533 EV/EBITDA 55.5 12.7 6.1 4.7 3.6
Cash & Bank balance 41,213 87,433 109,479 135,270 195,743 EV/Sales 1.4 1.1 0.8 0.6 0.5
Loans & advances and others 134,557 152,831 227,239 244,795 264,107 Dividend Yield (%) 0.4 1.1 1.5 1.5 1.5
Current Liabilities & Provisions
Liabilities 239,802 340,773 371,147 499,595 620,483 Financial ratios
Provisions 81,400 76,435 98,692 109,205 120,848 Year ended 31st Mar 2009 2010 2011 2012e 2013e
Net Current Assets 12,023 8,088 76,359 49,853 65,721 RoE (%) (47.6) 12.2 46.6 39.6 34.5
Deferred tax (assets)/liabilities 6,802 11,536 14,638 14,638 14,638 RoCE (%) (2.1) 11.8 30.0 35.6 38.3
Misc.Expenses 861 - - - - Net Debt/Equity (x) 5.9 4.3 1.7 0.6 0.2
Application of Funds 413,175 438,035 522,095 595,506 715,970 Interest Coverage (x) (0.3) 1.9 5.9 7.7 9.7

Market data Maruti Suzuki Reco : BUY

CMP : INR1,315
Market Cap (INRbn)
Market Cap (USDbn)
:
:
380
7
End of downgrade cycle! Target Price : INR1,552
O/S Shares : 289
Free Float (m) : 103 Pain is in the past… Positive cycle approaches!
52-wk HI/LO (INR) : 1429/900
Avg Daily Vol ('000) : 664  We believe that we are nearing the fag-end of Maruti’s long-drawn downgrade cycle with less scope of incremental
Bloomberg : MSIL IN
negative news flows from hereon. Normally, the subsequent upgrade cycle is equally long. We expect the ramp-
Source: Bloomberg
up in diesel capacity (with recent Fiat tie-up) coupled with new launches (Ertiga/new Dzire) to drive the volume
Shareholding pattern growth in FY13.
Promoters : 54%
FII : 19%  This should enable sharp improvement in margins as well. We forecast margins improving from ~7.1% in FY12e to
DII : 18% ~9.6% in FY13e, driven by positive operating leverage, better product mix (higher share of lower discount diesel
Others : 9%
variants/Swift family), coupled favourable currency movement.
Source: BSE
Price performance vs Nifty Market share argument fading!

120  We have to make our peace with high competition in small cars, but the extent of market share loss for Maruti
(which has been de-rating catalyst in the past) has been much lesser than earlier anticipated. Maruti has withheld
100 competitive pressures (peak, in our view) extremely well thus far. Competitor focus shifting from small cars to
80 SUVs, coupled with tepid performance to some of the existing competitor models is another positive. Also, the
Ertiga increases Maruti’s presence in a fast growing/relatively untapped segment which could offset any probable
60
market share losses in small cars.
Apr-11 Aug-11 Dec-11 Apr-12
Maruti Suzuki NIFTY The Maruti advantage…

Source: Bloomberg
 High localisation levels and economies of scale, keeps the cost of spares, servicing, etc. extremely economical.
Key financials (standalone) Consequently the ownership cost of a Maruti Suzuki vehicle remains relatively lower than the competition (an
enviable advantage in the cost-conscious Indian market) and resale value remains relatively higher. The service
Revenues 369,199 357,209 442,014
EBITDA 35,442 25,347 42,543 and distribution network (especially in the Tier 2 & 3 cities) remains unmatched. We expect market share gains in
EBITDA Margin (%) 9.6 7.1 9.6 the more price-conscious/under-penetrated Tier 2 & 3 cities to offset market share losses in the more brand-
Adjusted PAT 22,886 14,439 26,941
conscious Tier 1 cities.
P/E (X) 16.6 26.3 14.1
EV/EBITDA (X) 8.7 12.2 7.3
BUY!
RoE (%) 16.5 9.5 15.4  Maruti seems to be nearing the first stage of all its positive cycles - volumes, margins and consequently, multiples.
RoCE (%) 24.6 14.9 24.1
Div Yield (%) 5.7 3.8 7.1
Directionally, the stock seems to be one of the best FY13-14 plays in the sector. Reiterate BUY with a target price
Source: Company, Antique of INR1,552 (11x FY13e Cash EPS + INR50 for the subsidiaries).
Currency finally moves favourably...
 Maruti’s direct and indirect JPY exposure (including royalty), accounts for YEN (to INR) - Recent downward trend to aid margin expansion in FY13e
~23% of revenues. The company has been tentative taking long-term 0.70
hedges as parent Suzuki believed that the JPY would depreciate going 0.68
forward. While this decision impacted margins in FY12, it has finally 0.66
Average
paid off with the recent downward trend in the JPY (depreciated by ~10% 0.64 YEN/INR
against the INR). The company has just begun taking fresh hedges for 0.62 0.550
1HFY13 and we expect margins to be positively impacted by ~80 bps. 0.60

0.58
 Besides the currency benefits, there are levers for margins to improve. 0.56
Average
Average
YEN/INR
Positive operating leverage from ~20% volume growth expected in FY13e 0.54 0.659 YEN/INR
(higher than industry as they make up for lost production on account of 0.52
0.635
the strike) and better product mix (higher share of lower discount diesel 0.50 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12
variants/Swift family), should result in margins improving from ~7.1% in 0.48
FY12e to ~9.6% in FY13e. 01-Jan-11 01-Apr-11 01-Jul-11 01-Oct-11 01-Jan-12 01-Apr-12

Discounts (INR/vehicle) - Expect downward trend post diesel ramp-up Dealer network remains miles ahead of competition...
16,000 1,200 2,000
13,500
14,000 1,000
12,200 1,600
11,700
12,000 10,700 10,500 800
9,700 9,970
9,500 9,300 1,200
10,000
8,200 8,500 600
8,000 800
400
6,000
400
200
4,000
2,000 0 0
Maruti Hyundai Tata GM Toyota Honda Ford VW
0 Motors
Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Dealer Outlets (LHS) Volumes per Dealer (RHS)
Source: Company, Antique Source: Industry, Antique


Revenues 208,525 296,231 369,199 357,209 442,014 EBIT 13,097 31,293 25,307 14,095 30,016
Expenses 188,363 256,688 333,757 331,862 399,470 Depreciation & amortisation 7,065 8,250 10,135 11,252 12,527
EBITDA 20,162 39,543 35,442 25,347 42,543 Interest expense 510 335 244 408 369
Depreciation & amortisation 7,065 8,250 10,135 11,252 12,527 (Inc)/Dec in working capital 2,128 (481) (3,384) (892) (1,419)
EBIT 13,097 31,293 25,307 14,095 30,016 Tax paid 4,721 11,130 7,928 5,044 9,164
Interest expense 510 335 244 408 369 Cash flow from operating activities 12,803 28,559 30,654 20,786 34,429
Other income 6,013 4,967 6,025 6,093 7,007 Capital expenditure 15,603 12,124 23,720 25,000 25,000
Profit before tax 18,600 35,925 31,088 19,780 36,655 Inc/(Dec) in investments (20,074) 40,033 (20,699) - 2,553
Taxes incl deferred taxation 4,571 10,949 8,202 5,341 9,713 Income from investments 6,013 4,967 6,025 6,093 7,007
Profit after tax 12,187 24,976 22,886 14,439 26,941 Cash flow from investing activities 10,484 (47,190) 3,004 (18,907) (20,546)
Adjusted profit after tax 14,029 24,976 22,886 14,439 26,941 Inc/(Dec) in share capital - - - - -
EPS (INR) 42.2 86.4 79.2 50.0 93.2 Inc/(Dec) in debt (2,013) 1,225 (5,121) 62 (733)
Dividends paid (2,892) (74) (2,562) (1,689) (3,152)
Cash flow from financing activities (4,905) 1,151 (7,683) (1,627) (3,885)
Net cash flow 16,085 (18,408) 24,103 253 9,998
Opening balance 3,305 19,390 982 25,085 25,338
Share Capital 1,445 1,445 1,445 1,445 1,445
Closing balance 19,390 982 25,085 25,338 35,336
Reserves & Surplus 92,004 116,906 137,230 149,980 173,769
Networth 93,449 118,351 138,675 151,425 175,214 Growth indicators (%)
Debt 6,989 8,214 3,093 3,155 2,423
Revenue 13.7 42.1 24.6 (3.2) 23.7
EBITDA (25.4) 96.1 (10.4) (28.5) 67.8
PAT (18.9) 78.0 (8.4) (36.9) 86.6
EPS (29.6) 104.9 (8.4) (36.9) 86.6
Net Assets 49,321 54,123 69,580 83,328 95,801
Investments 31,733 71,766 51,067 51,067 53,620 Valuation (x)
Current Assets, Loans & Advances Year ended 31st Mar 2009 2010 2011 2012e 2013e
Inventory 9,023 12,088 14,150 13,701 16,954 P/E 31.2 15.2 16.6 26.3 14.1
Debtors 9,378 8,099 8,933 8,808 10,899 Cash P/E 19.7 11.4 11.5 14.8 9.6
Cash & Bank balance 19,390 982 25,085 25,338 35,336 P/BV 4.1 3.2 2.7 2.5 2.2
Loans & advances and others 17,309 16,555 15,395 15,703 15,703 EV/EBITDA 15.4 7.8 8.7 12.2 7.3
Current Liabilities & Provisions EV/Sales 1.5 1.0 0.8 0.9 0.7
Liabilities 30,358 29,394 35,540 35,903 42,389 Dividend Yield (%) 0.3 0.5 0.6 0.4 0.7
Provisions 3,807 6,284 5,258 5,521 5,797
Net Current Assets 20,935 2,046 22,765 22,126 30,706 Financial ratios
Deferred tax (assets)/liabilities 1,551 1,370 1,644 1,941 2,491 Year ended 31st Mar 2009 2010 2011 2012e 2013e
Application of Funds 100,438 126,565 141,768 154,580 177,636 RoE 15.0 21.1 16.5 9.5 15.4
RoCE 20.8 29.6 24.6 14.9 24.1
Debt/Equity (x) 0.1 0.1 0.0 0.0 0.0
EBIT/Interest (x) 25.7 93.4 103.7 34.5 81.3

Market data Hero MotoCorp Reco : BUY

CMP : INR2,010
Market Cap (INRbn)
Market Cap (USDbn)
:
:
402
8
Margin levers still intact! Target Price : INR2,363
O/S Shares : 200
Free Float (m) : 93 Margins can only improve… Royalty savings to exceed R&D spends!
52-wk HI/LO (INR) : 2250/1482
Avg Daily Vol ('000) : 491  Our positive view on Hero is less about the volume growth and more about the margin uptick. Royalty savings
Bloomberg : HMCL IN
(360bps at this JPY rate) should more than offset R&D and royalty on new models (combined should not exceed
Source: Bloomberg
1.5% of sales). This also more than offsets Hero’s Haridwar tax benefits expiring in FY14.
Shareholding pattern
Promoters : 52% Honda – Capacity expansion & aggressive targets might not be enough!
FII : 34%
 We believe that Honda’s recent market share gains in the domestic 2W market was more to do with clearing-off a
DII : 5%
Others : 9% huge order backlog in scooters and less to do with incremental market share gains (which we feel would be a tall
Source: BSE order). In our view, the mere event of “capacity expansion” affects the market dynamics of commodities, not
Price performance vs Nifty brands. The street seems to have extrapolated the lone success of the Activa brand as Honda’s ability to develop
150 strong sub-brands in motorcycles (where they have had a very poor track record thus far).
120 We differ from street on concerns regarding technology

 We do not share the same skepticism that the street does on Hero’s solo R&D ramp-up. While we factor in higher
90
R&D spend, we feel that the actual need for technological improvement in a 2W is less. Unlike cars, 2Ws within
60 a segment are very similar to each other in terms of technology and the only differentiating aspect (besides the
brand) is the styling. Hence even model churn is low and upgrades of existing models only involve minor styling
Hero MotoCorp NIFTY
changes (not a very steep mountain to climb).
Source: Bloomberg
No more Japanese leash… Opportunities post Honda split
Key financials (standalone)
YE 31 Mar (INRm) FY11 FY12e FY13e  Over the last few years, Hero has missed out on export opportunities. Post the split, we expect Hero to focus on big
Revenues 192,450 232,244 262,266
EBITDA 22,833 25,939 30,847
export markets like Africa, South America and Indonesia. Over a much longer period (5-7 years), we see no
EBITDA Margin (%) 11.9 11.2 11.8 reason why Hero can’t replicate the success that Bajaj Auto enjoys in exports.
Adjusted PAT 20,077 23,480 28,134
Adjusted EPS (INR) 100.5 117.6 140.9 BUY!
P/E (x) 20.0 17.1 14.3
EV/EBITDA (x) 15.8 13.7 11.2
 The sharp margin uptick post 1QFY15 warrants looking at the DCF as well, which throws up a value of INR2,363.
RoE (%) 67.9 79.1 81.7 Separately, the generous dividend (yield >5%) is not only a great cushion to the stock but also improves return
RoCE (%) 83.1 94.9 97.6
Div Yield (%) 5.2 5.0 5.0
ratios which were previously suppressed by the huge cash hoard (currently ~10% of market cap). BUY!

Royalty savings to exceed R&D spends...
 We feel that R&D is not a steep mountain to climb in 2Ws as the actual R&D Expense (INRm)
need for technological improvement in a 2W is less. Comparing 2Ws to 2000
how they were 5-7 years back, they have not evolved much technologically 1800
and the only improvements have been in the styling department. 1600
1400
 Technology in 2Ws seems to have hit a glass ceiling with limited
1200
requirement to improve the output of a motorcycle already delivering
1000
180 miles/gallon. This is a stark contrast to how things are in cars and
800
commercial vehicles.
600
 Bajaj Auto expenses INR1.3bn R&D p.a. We await details regarding 400
Hero’s R&D road-map and in the interim assume R&D spends to the tune 200
of INR3bn p.a. Assuming that 60% is expensed, the margin impact would 0
FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12e FY13e FY14e FY15e
be ~80bps as against the royalty saving of ~360bps.
Hero MotoCorp Bajaj Auto TVS

Royalty savings will aid margin expansion R&D expense (as % of net sales)
4.0% 16% 3.0%
3.5%
15% 2.5%
3.0%
14% 2.0%
2.5%
2.0% 13% 1.5%
1.5%
12% 1.0%
1.0%
11% 0.5%
0.5%
0.0% 10% 0.0%

FY11 FY12e FY13e FY14e FY15e FY16e FY17e FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11
Royalty as %of Sales (LHS) EBIDTA Margins (RHS)
TVS Bajaj Auto HMCL


Revenues 123,191 157,582 192,450 232,244 262,266 EBIT 15,037 24,705 20,579 23,216 27,898
EBITDA 16,844 26,620 22,833 25,939 30,847 Interest expense (317) (206) (19) (135) (155)
Depreciation & amortisation 1,807 1,915 2,254 2,723 2,949 (Inc)/Dec in working capital (2,399) (25,971) (8,557) (2,977) (3,340)
EBIT 15,037 24,705 20,579 23,216 27,898 Tax paid 4,646 5,916 (10,756) 4,968 5,627
Interest expense (317) (206) (19) (135) (155) Cash flow from operating activities 14,913 46,882 42,164 24,083 28,714
Extraordinary Items - - (798) - - Inc/(Dec) in investments 8,019 5,570 12,030 - 7,693
Profit before tax 17,815 28,317 24,048 28,448 33,762 Income from investments 2,461 3,406 4,249 5,097 5,709
Taxes incl deferred taxation 4,997 5,999 4,769 4,968 5,627 Cash flow from investing activities (8,614) (3,787) (10,908) (2,903) (7,984)
Profit after tax 12,818 22,318 19,279 23,480 28,134 Inc/(Dec) in share capital - - - - -
Adjusted PAT 12,818 22,318 20,077 23,480 28,134 Inc/(Dec) in debt (535) (125) (333) (164) (164)
Recurring EPS (INR) 64.2 111.8 100.5 117.6 140.9 Dividends paid (4,673) (25,676) (24,369) (23,365) (23,365)
Cash flow from financing activities (5,208) (25,800) (24,702) (23,528) (23,528)
Net cash flow 885 16,876 (18,357) 3,370 6,002
Opening balance 1,311 2,196 19,072 715 4,085
Closing balance 2,196 19,072 715 4,085 10,087
Share Capital 399 399 399 399 399
Networth 38,008 34,650 29,561 29,676 34,445
Debt 785 660 327 164 -
Revenue 19.2 27.9 22.1 20.7 12.9
EBITDA 24.8 58.0 (14.2) 13.6 18.9
PAT 32.4 74.1 (10.0) 16.9 19.8
EPS 32.4 74.1 (10.0) 16.9 19.8
Capital work in progress 1,205 481 1,251 4,251 6,251
Current Assets, Loans & Advances 7,939 9,754 14,331 16,096 17,219 P/E 31.3 18.0 20.0 17.1 14.3
Inventory 3,268 4,364 5,249 6,363 7,185 Cash P/E 27.4 16.6 18.0 15.3 12.9
Debtors 1,499 1,084 1,306 1,909 2,156 P/BV 10.6 11.6 13.6 13.5 11.7
Cash & Bank balance 2,196 19,072 715 4,085 10,087 EV/EBITDA 22.1 13.2 15.8 13.7 11.2
Loans & advances and others 3,172 4,306 7,775 7,824 7,878 EV/Sales 3.0 2.2 1.9 1.5 1.3
Current Liabilities & Provisions Dividend Yield (%) 1.0 4.0 5.2 5.0 5.0
Liabilities 15,259 38,051 50,637 56,007 59,961
Provisions 5,270 10,264 10,811 10,183 10,692 Financial ratios
Net Current Assets (10,393) (19,488) (46,402) (46,009) (43,347) Year ended 31st Mar 2009 2010 2011 2012e 2013e
Deferred expenses 1,444 1,528 17,052 17,052 17,052 RoE 33.7 64.4 67.9 79.1 81.7
Misc.Expenses - - 25,518 19,800 11,000 RoCE 46.6 80.7 83.1 94.9 97.6
Application of Funds 38,792 35,311 29,888 29,839 34,445 EBIT/Interest (x) (47.5) (119.8) (1,112.4) (171.9) (180.3)

Market data Eicher Motors Reco : BUY

CMP : INR2,150
Market Cap (INRbn)
Market Cap (USDbn)
:
:
59
1
Set to go Places! Target Price : INR2,410
O/S Shares : 27
Free Float (m) : 10 Royal Enfield – High economic interest for Eicher shareholder!
52-wk HI/LO (INR) : 2214/1114
Avg Daily Vol ('000) : 61  Royal Enfield (one of the few “cult” brands in India) is the biggest beneficiary of this emerging leisure biking trend
Bloomberg : EIM IN in the country. The loyalists swear by the brand and this brand loyalty is now becoming infectious (evident from the
Source: Bloomberg
8-12 month waiting period, despite a 75% production ramp-up). Based on current demand/supply, Enfield should
Shareholding pattern sell as many as they can make for at least the next 2 years. We forecast volumes of 98k units in CY12 (up 32%
Promoters : 55% YoY), and 138k units in CY13 (up 40% YoY). There are enough levers to improve margins (not factored into our
FII : 6%
DII : 18% estimates). Going ahead, we expect the company to capitalize on the strong pricing power and reduce its
Others : 20% dependence on costlier outsourcing jobs.
Source: BSE
 Fortunately, this division has high economic interest for an Eicher - Enfield accounts for only ~12% of consol
Price performance vs Nifty revenues, but since its profits aren’t shared with Volvo, it accounts for ~40% of consol PAT, and >60% of consol
150 FCF (function of 2W businesses being relatively asset light).
120 Volvo~Eicher alliance (VECV) – A great marriage!
90  VECV has multiple synergies for both partners. For Volvo, it gives them a strong foot-print in India (high priority
market for any OEM). For Eicher, Volvo’s support is bearing fruits in Eicher’s re-entry into the relatively HD segment
60 (>12T). Efforts here are channeled towards reducing overall cost of ownership (focus on fuel efficiency, superior
technology, easier access to spares, in a bid to ultimately improve resale). The management expects their HD
Eicher Motors NIFTY truck market share to increase from 3% currently to 15% in CY15e. While there are some low hanging fruits (in
Source: Bloomberg
terms of untapped geographies/segments), this target seems a little too aggressive to us, and hence, have not
Key financials (consolidated) assumed it in our estimates.
YE 31 Dec (INRm) FY11 FY12e FY13e
Revenues 57,160 68,806 84,335 Engine division – Entering the big league!
EBITDA 5,935 7,324 9,352
EBITDA Margin (%) 10.4 10.6 11.1
 The engine business (5-8 litres/Euro 3-6 compliant) makes VECV a part of Volvo’s global supply chain and provides
Adj PAT 3,088 3,771 4,810 Eicher a huge technological leap on their own CVs. More importantly, of the ~INR17bn cash hoard (~35% of
Adjusted EPS (INR) 114.4 139.7 178.2
P/E (x) 18.8 15.4 12.1
market cap), INR4.5bn gets deployed into a high RoCE business like engines (reckon ~40% on full operations).
EV/EBITDA (prorated) (x)13.0 10.1 7.3
RoE (%) 21 21 22
BUY!
RoCE (%) 34 37 37  Our SOTP target price of INR2,410, values Royal Enfield at INR818 (9x CY13e EV/EBIDTA), VECV at INR1,389
Div Yield (%) 0.7 1.1 1.5
(7x CY13e EV/EBIDTA) and engine business at INR203 (NPV). BUY!
Royal Enfield – High economic interest for Eicher Motors!
Revenues Adjusted PAT (pro-rated)

9% 4%
41%
60% 60% 58% 54%
87% 90% 88% 87%

77%
59%
40% 40% 42% 42%
13% 10% 12% 13% 14%
CY09 CY10 CY11e CY12e CY13e CY09 CY10 CY11e CY12e CY13e
Enfield VECV Engines Enfield VECV Engines

FCF (pro-rated) Royal Enfield - Volume estimate
Thousands
160
19% 21% 138
34% 140
58% 120
99
83% 100
75
80
81% 79%
66% 52 52
60
43
42%
40
17%
20
CY09 CY10 CY11e CY12e CY13e 0

Enfield VECV CY08 CY09 CY10 CY11 CY12e CY13e

VECV - A superior business to Ashok Leyland
Fixed asset turns (x) ROE (%) - VECV’s is superior despite huge cash hoard (~40% of Mcap)
8 24
19.3
6.1 6.1 6.0 20 18.4 18.1
5.9
6 15.9
16 14.6 14.8
4.3 13.2
11.5
4 12
8 6.9
1.8 2.0 5.5
2 1.7
1.2 1.2
4
0 0
2009 2010 2011 2012e 2013e 2009 2010 2011 2012e 2013e
Ashok Leyland (March ending) VECV (Dec ending) Ashok Leyland (March ending) VECV (Dec ending)
ROCE (%) VECV - Management’s optimism on HD segment is comforting...
40 36.5 100,000 Expected
35.2 35.1 Market Share
(2015)
32 80,000
44,000
15%
23.0
24 60,000
15.6
16 14.0
11.8 12.2 40,000
10.2 4,219 36,400 35%
7.7
8
20,000 26,425
17,500 16%
0 4,819
-
2009 2010 2011 2012e 2013e
CY10 CY15
Ashok Leyland (March ending) VECV (Dec ending) Buses LD/MD HD
Source: Company, Antique Source: Company

VECV - Market share gains in the HD segments
Peer Comparison
Mkt Share Industry Segment Eicher Motors Tata Motors Ashok Leyland
Analysis Vol (YTD) Contribution YTD FY11 FY10 YTD FY11 FY10 YTD FY11 FY10
Trucks
Upto 3.5 tonnes 251,410 50% 58.5% 56.1% 57.2%
3.5 - 7.5 tonnes 36,191 7% 12.5% 12.0% 9.6% 70.1% 69.4% 68.7%
7.5 - 12 tonnes 47,208 9% 38.3% 40.8% 39.1% 48.6% 46.1% 48.6% 5.9% 5.1% 3.4%
12 - 16.2 tonnes 44,041 9% 7.7% 5.7% 2.5% 64.7% 66.9% 73.0% 27.6% 27.4% 24.5%
16.2 - 25 tonnes 56,662 11% 1.5% 0.9% 0.7% 64.0% 65.1% 70.8% 21.7% 26.5% 24.5%
Above 25 tonnes 63,221 13% 1.8% 1.1% 1.2% 71.3% 67.5% 66.9% 22.6% 28.0% 26.0%
Buses
Upto 5 tonnes 21,350 28% 29.5% 32.7% 38.1% 1.7% 3.7% 3.9%
5 - 7.5 tonnes 18,143 23% 13.8% 11.7% 8.6% 58.2% 60.6% 67.2% 5.0% 4.0% 4.7%
7.5 - 12 tonnes 11,348 15% 21.5% 18.1% 17.4% 41.5% 44.5% 53.0% 16.3% 12.4% 11.2%
Above 12 tonnes 26,563 34% 4.7% 2.4% 3.0% 42.8% 43.3% 50.8% 52.5% 54.3% 46.2%
Royal Enfield: High return ratios backed by asset light business model... VECV: High asset turns for a CV business...
6.0 40% 7 45%
35% 40%
5.0 6
35%
30%
5
4.0 30%
25%
4 25%
3.0 20%
3 20%
15%
2.0 15%
2
10% 10%
1.0 1
5% 5%
0.0 0% 0 0%
CY09 CY10 CY11e CY12e CY13e CY08 CY09 CY10 CY11e CY12e CY13e
Asset Sw eating (x) (LHS) ROE (RHS) ROCE (RHS) Asset Sw eating (x) (LHS) ROE (RHS) ROCE (RHS)

BUY!
 We value Eicher Motors on SOTP considering different segments under Standalone (INRm) CY09 CY10 CY11 CY12e CY13e
one company. Prefer valuing the 2W and CV businesses on EV/EBIDTA Volumes (Nos) 51,955 52,274 74,641 98,854 138,396
due to the high cash on the books (~35% of market cap). Net Realisations (INR) 72,757 84,683 89,890 92,257 93,765
Revenues 3,780 4,427 6,709 9,120 12,977
 We value Royal Enfield on an EV/EBIDTA basis, assigning a target multiple EBITDA 396 458 810 1,187 1,723
of 9x to CY13 EBIDTA, justified by several factors - high visibility on EBITDA Margin (%) 10.5 10.3 12.1 13.0 13.3
volumes, minimal competition, cult brand positioning, strong pricing power, Adjusted PAT 492 754 1,245 1,598 2,122
Adjusted EPS (INR) 18.3 28.0 46.1 59.2 78.6
lean operations and 2Ws generally being a superior business model. 9x RoE (%) 12.7 16.5 23.1 25.6 28.8
is still a ~10% discount to Hero/Bajaj RoCE (%) 14.7 18.9 27.5 32.8 36.3
 We value the CV business on an EV/EBIDTA multiple of 7x CY13, which
seems reasonable considering superior return ratios, margin profile, fixed
VECV (INRm) CY09 CY10 CY11 CY12e CY13e
asset turns when compared to Ashok Leyland (which currently trades at Volumes (Nos) 25,733 39,853 49,705 57,135 66,339
an EV/EBIDTA of 8x FY13e). Net Realisations (INR) 1,001,395 998,316 1,014,998 1,044,638 1,075,669
Revenues 25,769 39,786 50,450 59,686 71,359
 We value the Engine business on an NPV basis, on an assumption of EBITDA 1,211 3,353 5,125 6,136 7,629
CY13 volumes at 35,000 units (gradually ramped up to full capacity, EBITDA Margin (%) 4.7 8.4 10.2 10.3 10.7
i.e. 100,000 only in CY16e), realisations of INR250k per engine, steady Adj PAT (after minority int) 459 1,135 1,842 2,173 2,688
state margins of 14% from CY15 onwards, terminal growth of 1% and Adjusted EPS (INR) 17.2 42.1 68.3 80.5 99.6
discount rate of 15%. We thereby arrive at an NPV of INR203 for the RoE (%) 7 15 19 19 19
RoCE (%) 10 23 36 38 37
engine business. We see upside risk to this number... Source: Company, Antique
SOTP sensitivity to EV/EBIDTA multiples

SOTP (INRm) Methodology Equity Eicher's Attributable Value per EV/EBIDTA Royal Enfield
Value Stake share Multiple 7.0 8.0 9.0 10.0 11.0
Royal Enfield 9x CY13e EV/EBIDTA 22,067 100% 22,067 818 5.0 1,974 2,038 2,102 2,166 2,230
VECV 6x CY13e EV/EBIDTA 68,915 54.4% 37,490 1,389 6.0 2,128 2,192 2,256 2,320 2,384
VECV
Engine Business NPV 10,072 54.4% 5,479 203 7.0 2,282 2,346 2,410 2,473 2,537
SOTP Value of Eicher Motors 2,410 8.0 2,436 2,500 2,563 2,627 2,691
Source: Antique 9.0 2,589 2,653 2,717 2,781 2,845
Source: Antique

Year ended 31st Dec 2009 2010 2011 2012e 2013e Year ended 31st Dec 2009 2010 2011 2012e 2013e
Revenues 29,549 44,213 57,160 68,806 84,335 EBIT 1,068 3,238 5,296 6,572 8,451
Expenses 27,942 40,402 51,225 61,482 74,984 Depreciation & amortisation 539 573 640 752 900
Depreciation & amortisation 539 573 640 752 900 (Inc)/Dec in working capital (2,224) (726) (527) (203) (165)
EBIT 1,068 3,238 5,296 6,572 8,451 Tax paid 578 1,108 1,628 2,145 2,679
Interest expense (net) 87 95 77 58 64 Cash flow from operating activities 3,166 3,334 4,757 5,323 6,774
Other income 892 1,034 1,383 1,575 1,790 Capital expenditure 259 1,222 5,368 4,950 3,500
PBT 1,873 4,177 6,602 8,089 10,177 Inc/(Dec) in investments 2,879 1,645 540 523 803
Taxes incl deferred taxation 578 1,108 1,628 2,145 2,679 Income from investments 892 1,034 1,383 1,575 1,790
PAT 1,295 3,069 4,974 5,944 7,498 Cash flow from investing activities (2,246) (1,833) (4,525) (3,899) (2,513)
Minority Interest (461) (1,179) (1,886) (2,173) (2,688) Inc/(Dec) in share capital (154) 143 1 0 0
Adj PAT (after minority interest) 834 1,889 3,088 3,771 4,810 Inc/(Dec) in debt (392) (307) (453) 50 55
Adj EPS (INR) 31.2 70.1 114.4 139.7 178.2 Others 109 2,656 4,212 5,196 6,505
Cash flow from financing activities (438) 2,491 3,760 5,246 6,560
Net cash flow (612) 750 (734) 1,033 3,476
Opening balance 12,318 11,707 12,457 11,723 12,755
Year ended 31st Dec 2009 2010 2011 2012e 2013e
Closing balance 11,707 12,457 11,723 12,755 16,232
Share Capital 267 269 270 270 270
Networth 10,690 12,321 14,931 17,954 21,772
Debt 1,264 956 504 554 608
Revenue na 50 29 20 23
Other Liabilities 5,747 6,774 8,377 10,550 13,238
EBITDA na 137 56 23 28
PAT na 137 62 20 26
EPS na 124 63 22 28
Adj PAT na 127 63 22 28
Capital work in progress 122 669 3,937 6,987 7,987
Investments 2,941 4,586 5,126 5,650 6,452 Year ended 31st Dec 2009 2010 2011 2012e 2013e
Current Assets, Loans & Advances P/E 68.8 30.7 18.8 15.4 12.1
Inventory 2,190 3,265 4,280 5,134 6,434 P/B 5.4 4.7 3.9 3.2 2.7
Debtors 2,325 2,609 3,434 4,163 5,199 EV/EBITDA (pro-rated) 46.4 20.7 13.0 10.1 7.3
Cash & Bank balance 11,707 12,457 11,723 12,755 16,232 EV/Sales (pro-rated) 2.7 1.8 1.4 1.1 0.8
Provisions 962 1,391 1,497 1,705 1,930 Year ended 31st Dec 2009 2010 2011 2012e 2013e
Net Current Assets 11,144 11,168 9,907 10,738 14,049 RoE 8 15 21 21 22
Deferred tax (assets)/liabilities 142 249 645 769 922 RoCE 11 22 34 37 37
Misc.Expenses - 35 182 - - Debt/Equity (x) 0.1 0.1 0.0 0.0 0.0
Application of Funds 17,701 20,052 23,812 29,058 35,618 Interest Coverage (x) 12.3 34.1 69.0 113.5 132.8

Market data Bosch India Reco : BUY

CMP : INR8,180
Market Cap (INRbn)
Market Cap (USDbn)
:
:
257
5
Last man standing! Target Price : INR9,002
O/S Shares : 31
Free Float (m) : 9 Dieselization of Indian cars - It's just the beginning!
52-wk HI/LO (INR) : 9000/6174
Avg Daily Vol ('000) : 9  Diesel car sales have been on steroids over the last year and no excise hike announced specifically on diesel vehicles
Bloomberg : BOS IN
is a positive surprise. However, we expect this buoyancy in diesel cars to continue, irrespective of the diesel tax
Source: Bloomberg
(which could always pop-up in the future). Even now, diesel cars account for only ~27% of total cars (~36% if we
Shareholding pattern include UVs) which is way below the global average of >60%. While it's irrational to extrapolate this huge
Promoters : 71%
FII : 6%
petrol~diesel disparity over a longer period, the inherent economics of a diesel vehicle (~25% more fuel efficient
DII : 13% than its petrol counterpart) makes us structurally positive on dieselization of the Indian car industry going ahead.
Others : 10%
Source: BSE
Business getting less cyclical and more profitable!
Price performance vs Nifty
 The company shies away from disclosing segment-wise details, but with buoyancy in the more profitable CRDi
150 segment, we estimate that Bosch's dependence on CVs is on the decline - from 53% of revenues in CY07e to 41%
120 in CY13e. Also, based on our analysis, ~1/3rd of CV segment sales is to the aftermarket. This not only makes the
business less cyclical, but also more profitable. Post the next emission norm change (2014), most CVs will
become eligible for CRDi as well, which is another long-term margin catalyst.
90
60
Apr-11 Aug-11 Dec-11 Apr-12 Near monopoly in fuel injection systems (FIS) to keep margins firm
Bosch NIFTY  Besides this structural uptrend in margins, Bosch’s almost monopolistic position in fuel injection equipment gives it
Source: Bloomberg
strong pricing power (stark contrast to other ancillaries!). Being a highly consolidated industry, with few players
Key financials (standalone) having the required technology, the fuel injection industry has very high entry barriers. While new players can
YE 31 Dec (INRm) FY11 FY12e FY13e
Revenues 66,991 80,179 95,643
enter when new models are being introduced, the probability of OEMs moving towards new entrants for such
EBITDA 10,704 13,705 16,608 critical engine equipment is low. OEMs involve the FIS player right from the R&D stage (much before the commercial
EBITDA Margin (%) 16.0 17.1 17.4
production begins) and once a FIS system is developed for a vehicle, the OEM generally sticks to that player/
Adjusted PAT 8,589 11,226 13,426
Adjusted EPS (INR) 273.5 357.5 427.6 system for the entire lifecycle of the vehicle.
P/E (x) 29.9 22.9 19.1
EV/EBITDA (x) 21.9 17.4 11.5
RoE (%) 23.7 23.0 22.0
BUY!
RoCE (%) 29.9 29.3 28.6  Given the enviable business model, i.e. huge entry barriers in a segment where high growth looks sustainable,
Div Yield (%) 0.5 1.6 0.8
current valuations of 16.4x CY13e P/E (13.5x Cash P/E) look attractive. BUY!
BUY!
EBIDTA margin trend Total revenue break-up
20.6%
20.7%
20.4%
100%
20.2%
19.6%
19.3%
10% 10% 10% 10% 9%
19.3%
19.1%
12% 11%
18.9%
18.4%
18.4%
18.3%
90%
10% 9% 9% 9%
17.0%
11%
16.8%
16.6%
12% 11%
80%
15.8%
15.6%
14% 21% 21%
13.7%
70% 15% 20% 21% 21%
11.4%
60%
10.6%
10.3%
10.2%
50%
8.9%
8.6%
40%
30% 65% 62% 59% 60% 60% 61%
58%
20%
10%
0%
CY07e CY08e CY09e CY10e CY11e CY12e CY13e
Mar (Q1) Jun (Q2) Sep (Q3) Dec (Q4)
FIS OEM FIS Aftermarket Other Automotive Non Automotive
CY06 CY07 CY08 CY09 CY10 CY11
Co-relation between CV growth and Bosch revenue growth… Depen- Estimated segment-wise FIS break-up (~80% of total revenues)
dence on CVs is on the gradual decline, making the business less cyclical 100%
10% 12% 10% 11% 11% 10% 10%
50% 90% 2% 3% 5% 7% 7% 7% 8%
80%
40% 19%
20% 22%
70% 26% 27% 30% 31%
30% 60% 14%
15%
20% 50% 19%
18% 18% 17% 17%
40%
10%
30%
53% 48%
0% 20% 42% 37% 36% 34% 33%
CY02
CY03
CY04
CY05
CY06
CY07
CY08
CY09
CY10
CY11
-10% 10%
0%
-20%
CY07e CY08e CY09e CY10e CY11e CY12e CY13e
-30% CVs - OEM CVs - Aftermarket PV - OEM
PV - Aftermarket Tractors - OEM Tractors - Aftermarket
Bosch Revenue Grow th CV Grow th


Year ended 31st Dec 2009 2010 2011 2012e 2013e Year ended 31st Dec 2009 2010 2011 2012e 2013e
Revenues 48,224 66,991 80,179 95,643 111,601 EBIT 3,362 8,165 11,127 13,570 16,306
EBITDA 6,399 10,704 13,705 16,608 19,672 Interest expense (1,306) (1,144) (1,843) (2,127) (2,345)
Depreciation & amortisation 3,036 2,540 2,578 3,038 3,366 (Inc)/Dec in working capital (1,072) 1,930 6,266 1,053 2,239
EBIT 3,362 8,165 11,127 13,570 16,306 Tax paid 2,344 3,607 4,608 5,408 6,325
Interest expense (1,306) (1,144) (1,843) (2,127) (2,345) Cash flow from operating activities 6,432 6,311 4,674 12,273 13,453
Other income 3,266 2,719 2,770 2,951 3,159 Capital expenditure 752 2,772 6,584 6,500 6,500
Profit before tax 7,934 12,028 15,740 18,648 21,810 Inc/(Dec) in investments 5,511 1,897 (9) 2,410 2,771
Taxes incl deferred taxation 2,028 3,439 4,514 5,221 6,107 Income from investments 3,266 2,719 2,770 2,951 3,159
Profit after tax 5,907 8,589 11,226 13,426 15,703 Cash flow from investing activities (2,996) (1,950) (3,804) (5,958) (6,112)
Adjusted profit after tax 5,907 8,589 11,226 13,426 15,703 Inc/(Dec) in share capital (6) - - - -
Adjusted EPS (INR) 188.1 273.5 357.5 427.6 500.1 Inc/(Dec) in debt 199 (79) 308 145 157
Others (3,003) (1,461) (4,922) (2,296) (2,685)
Cash flow from financing activities (2,809) (1,540) (4,614) (2,151) (2,529)
Net cash flow (30) 2,581 (3,744) 4,164 4,812
Opening balance 10,708 10,678 13,259 9,514 13,679
Share Capital 314 314 314 314 314
Closing balance 10,678 13,259 9,514 13,679 18,491
Networth 33,852 40,980 47,284 58,415 71,433 Growth indicators (%)
Debt 2,843 2,764 3,071 3,217 3,373
Revenue 4.4 38.9 19.7 19.3 17%
EBITDA (12.5) 67.3 28.0 21.2 18%
PAT (6.8) 45.4 30.7 19.6 17%
Capital work in progress 997 2,242 3,826 5,326 6,826
EPS (5.0) 45.4 30.7 19.6 17%
Net Assets 6,129 6,602 10,608 14,070 17,204
Investments 14,176 16,073 16,064 18,473 21,244 Valuation (x)
Current Assets, Loans & Advances Year ended 31st Dec 2009 2010 2011 2012e 2013e
Inventory 5,512 8,093 11,831 13,102 15,288 P/E 43.5 29.9 22.9 19.1 16.4
Debtors 5,833 7,210 9,492 11,005 12,842 P/BV 7.6 6.3 5.4 4.4 3.6
Cash & Bank balance 10,678 13,259 9,514 13,679 18,491 EV/EBITDA 37.3 21.9 17.4 14.0 11.5
Loans & advances and others 5,556 8,960 11,525 12,924 14,492 EV/Sales 4.9 3.5 3.0 2.4 2.0
Current Liabilities & Provisions Dividend Yield (%) 0.4 0.5 1.6 0.8 0.9%
Liabilities 8,545 13,371 15,271 17,548 19,919
Net Current Assets 14,376 18,887 21,409 26,626 33,678 Year ended 31st Dec 2009 2010 2011 2012e 2013e
Deferred tax (assets)/liabilities (2,014) (2,182) (2,276) (2,462) (2,681) RoE 17.4 21.0 23.7 23.0 22.0
Application of Funds 36,695 43,744 50,356 61,631 74,806 RoCE 18.6 26.2 29.9 29.3 28.6
Debt/Equity (x) 0.1 0.1 0.1 0.1 0.0
EBIT/Interest (x) (2.6) (7.1) (6.0) (6.4) (7.0)

Market data Mahindra & Mahindra Reco : BUY

CMP : INR700
Market Cap (INRbn)
Market Cap (USDbn)
:
:
428
8
Street discounting bear-case! Target Price : INR780
O/S Shares : 614
Free Float (m) : 370 Budget: Absence of specific diesel vehicle excise – Huge relief!
52-wk HI/LO (INR) : 877/616
Avg Daily Vol ('000) : 1,472  An excise hike specifically on diesel vehicles looked inevitable. Absence of the same was a huge relief for M&M
Bloomberg : MM IN
(street was building in that additional amount to range between INR20k-80k/vehicle).
Source: Bloomberg
Tractors – Was the street in denial?
Shareholding pattern
Promoters : 25%  Till 5 months ago, tractor volumes were defying the industry (even after 3 years of high growth, M&M's April-
FII : 26%
Nov'11 tractor dispatches were up 25% YoY). The street (including us) was justifying this by citing "structural"
DII : 20%
Others : 28% changes like farm labour shortage/ higher commercial usage of tractors. This was casually being extrapolated for
Source: BSE the future as well.
Price performance vs Nifty  Weak tractor sales over the last 5 months (down 8% YoY; 16% YoY in Feb/March) came as rude shock and
120 thankfully, it has discouraged the street from taking these “structural” drivers for granted. As a result, after the
110 extremely frantic downgrades, for the first time in the last 3 years, the street is much below the conservative
management’s guidance (i.e. 8-10% growth in FY13). From a stock perspective, this pessimism is a good thing as it
100
90
80
has finally provided scope for tractor volumes positively surprising again. Dealer inventory has now been corrected
70 (from ~5 weeks to ~3 weeks). Fag-end of the rate-tightening cycle can’t hurt (80% of tractors are financed).
Rural king takes on the urban boys!
M&M NIFTY
Source: Bloomberg
 M&M continues to defy the competitive landscape in the auto industry and the XUV5oo (a continuum of the
existing product range) has strengthened the UV portfolio. The phenomenal response in the more brand-conscious
metro cities is testimony to the success of the XUV (more so since the parent brand is better associated-with in rural
Revenues 234,937 289,979 334,290 regions). We reckon that the next (and bigger) leg of XUV’s success would come when the product is opened up
EBITDA 34,562 40,172 44,337
to Tier 2 & 3 cities where only the “Mahindra” name is enough to sell a product. We forecast XUV volumes of 12k
EBITDA Margin (%) 14.7 13.9 13.3
Adjusted PAT 25,446 27,266 30,249 in FY12e and 42k in FY13e.
Core Auto P/E (x) 14.4 13.5 12.2 Stock looks oversold… BUY!
Core EV/EBIDTA (x) 10.6 9.6 8.7
RoE (%) 25 22 21
 We model in a 5% tractor volume decline in FY13e. This change in product mix alone should result in margin
RoCE (%) 29 25 25 downgrades of ~30bps (we downgrade ours by ~60bps). Still, core auto business trades at 12.2x FY13e P/E -
Div Yield (%) 1.5 1.5 1.6
attractive given that a massive overhang (diesel vehicle excise) is behind us. BUY!

Stock looks oversold... BUY!
EBIDTA margins to trend downwards due to weak tractor sales... UV volumes growth to be aided by XUV5oo and 4W pick-ups (Maxximo)
74% 24% 12.0% 10.3% 12.8% 9.4% 10.6% 9.5% 9.2%
72%
15.9% 18%
14.7%
13.4% 37.0% 27.9%
12.8% 36.5% 36.3% 33.1%
70% 11.4% 11.9% 29.9% 34.5%
9.8% 12%
68%
6%
66% 54.3%
45.5% 45.1% 44.0% 48.1% 46.7% 49.3%
64% 0%
FY07 FY08 FY09 FY10 FY11 FY12e FY13e
RM to sales (%) (LHS) Staff cost to sales (%) (RHS) FY07 FY08 FY09 FY10 FY11 FY12e FY13e
Other exp to sales (%) (RHS) EBIDTA margins (%) (RHS) Uvs (incl Gio & Maxximo) Tractors LCVs Logan Exports 3W
SOTP Methodology Value (INRm) Value per share

Core Auto Business (M&M + MVML) A 14x FY13e EPS 401,331 613
Value of Key Subsidiaries & Investments: (pro-rated) Stake
Ssangyong 70% Market Value 28,350 43
Tech Mahindra 48% Market Value 37,012 56
Mahindra Forgings 53% Market Value 3,418 5
M&M Financial Services 58% Market Value 42,687 65
Mahindra Lifespaces 51% Market Value 6,671 10
Mahindra Holidays & Resorts 83% Market Value 18,895 29
Total value of Key Subsidiaries & Investments 137,032 209
Discount
Holding company discount 20% 27,406 42
Net Value of Key Subsidiaries & Investments B 109,626 167
SOTP Value of Mahindra & Mahindra Ltd A+B 510,957 780
Source: Antique

Revenues 130,488 186,021 234,937 299,499 345,212 EBIT 9,934 25,845 30,423 34,132 37,283
EBITDA 12,849 29,552 34,562 40,172 44,337 Interest expense 453 278 (503) 1,283 1,144
Depreciation & amortisation 2,915 3,708 4,139 6,039 7,054 (Inc)/Dec in working capital (8,343) 3,938 (3,413) (514) (4,227)
EBIT 9,934 25,845 30,423 34,132 37,283 Tax paid 585 7,493 7,617 8,180 9,014
Interest expense 453 278 (503) 1,283 1,144 Cash flow from operating activities 20,154 17,843 30,861 31,223 38,406
Extraordinary Items (1,513) 908 1,175 - - Inc/(Dec) in investments 15,714 6,116 29,273 11,190 12,533
Profit after tax 8,675 20,878 26,621 27,266 30,249 Inc/(Dec) in share capital 361 118 366 - -
Adjusted profit after tax 10,188 19,970 25,446 27,266 30,249 Inc/(Dec) in debt 14,657 (11,726) (4,749) 18,869 (26)
EPS (INR) 31.1 35.9 40.6 41.6 46.2 Others 84 4,652 (2,121) (7,975) (8,847)
Cash flow from financing activities 15,102 (6,957) (6,503) 10,894 (8,872)
Net cash flow 7,132 1,688 (11,286) (569) 926
Opening balance 8,612 15,744 17,432 6,146 5,578
Closing balance 15,744 17,432 6,146 5,578 6,504
Share Capital 2,792 2,910 3,276 3,276 3,276
Networth 52,621 78,268 103,134 122,424 143,826
Debt 40,528 28,802 24,053 42,922 42,897
Revenue 14.0 42.6 26.3 27.5 15.3
EBITDA (6.0) 130.0 17.0 16.2 10.4
PAT (21.4) 140.7 27.5 2.4 10.9
EPS (31.5) 15.5 13.3 2.4 10.9
Inventory 10,607 11,888 16,942 20,514 23,645 P/BV 3.7 5.2 4.4 3.7 3.2
Debtors 10,437 12,581 13,547 17,231 19,862 Dividend Yield (%) 1.4 1.3 1.5 1.5 1.6
Cash & Bank balance 15,744 17,432 6,146 5,578 6,504 Core Auto P/E (incl MVML) 16.8 16.2 14.4 13.5 12.2
Loans & advances and others 14,023 18,523 24,799 26,783 28,926 Core Auto EV/EBIDTA 29.1 12.2 10.6 9.6 8.7
Current Liabilities & Provisions Core Auto EV/Sales 2.9 1.9 1.6 1.3 1.1
Liabilities 35,202 34,000 47,617 54,362 63,032
Net Current Assets 2,833 8,458 (6,241) (7,323) (10,624) Year ended 31st Mar 2009 2010 2011 2012e 2013e
Deferred tax (assets)/liabilities (183) 2,403 3,544 4,453 5,254 RoE 19.4 25.5 24.7 22.3 21.0
Misc.Expenses 126 7 - - - RoCE 14.6 28.6 28.6 24.7 24.7
Application of Funds 93,148 107,069 127,187 165,347 186,723 Debt/Equity (x) 0.8 0.4 0.2 0.4 0.3
EBIT/Interest (x) 21.9 92.9 (60.5) 26.6 32.6

Market data Bajaj Auto Reco : BUY

CMP : INR1,640
Market Cap (INRbn)
Market Cap (USDbn)
:
:
473
9
Sticking to the basics! Target Price : INR1,858
O/S Shares : 289
Free Float (m) : 125 Domestic 2Ws – Banking on new product launches!
52-wk HI/LO (INR) : 1843/1260
Avg Daily Vol ('000) : 342  Bajaj Auto has lost ~140bps market share in the domestic motorcycle segment primarily on account of weakness
Bloomberg : BJAUT IN
in Discover 100 volumes and poor response to the Boxer 150. We are now banking on the upgrade of the entire
Source: Bloomberg
Pulsar and Discover range over the next two quarters. If the initial response of the recently launched Pulsar 200NS
Shareholding pattern is anything to go by (the design of which would flow down to all Pulsars), the company seems to be on-track to
Promoters : 50%
FII : 16%
regain some of the lost market share in the domestic motorcycle segment.
DII : 9%
Others : 25% Exports the sole savior… But margins have peaked!
Source: BSE
 Exports continue to remain in high growth trajectory primarily due to buoyancy in Africa volumes (~50% of total
exports). While we model a 20% export growth in FY13e, its comforting that the management expects to
130
maintain the ~30% export growth. However, export margins are at the mercy of the INR~USD currency movement,
120
110 which is slightly unnerving.
100
90
RE60 – A very proactive product launch!
80
70  With the rising popularity of mini-trucks, the 3W goods-carrier segment is a dying one. There is always a fear of
the same happening to the 3W passenger-carrier segment as well. This is a cause for worry for Bajaj Auto, as 3W
Bajaj Auto NIFTY
(passenger-carriers) account for ~30% of the company’s EBIDTA. Hence, the RE60 is a very proactive product
Source: Bloomberg
launch as it targets the existing 3W customers who might want to upgrade to a 4W in the future. RE60’s margins
Key financials (standalone) are expected to remain as astronomical as those of 3Ws (~30%) which should protect the company’s coveted
Revenues 166,089 202,142 233,689
~20% margins as well.
EBITDA 33,849 40,962 47,870
EBITDA Margin (%) 20.4 20.3 20.5 Valuations are comfortable… BUY!
Adjusted PAT 26,152 31,970 35,158
Adjusted EPS (INR) 90.4 110.5 121.5  In our view, the Hero and Honda split warrants looking at Bajaj Auto differently. It’s clearly two-years ahead of
P/E (X) 18.1 14.8 13.5 Hero on parameters like branding, technology, and export initiatives. However, we turn down our optimism a
EV/EBITDA (X) 12.8 10.3 8.5
RoE (%) 53.3 50.7 45.1 smidge, as the company’s Pantnagar tax benefits expire next year which leads to a dismal PAT growth of 10% in
RoCE (%) 70.2 68.1 65.9 FY13e (on a PBT growth of 18%). Post correction, valuations are still comfortable (FY13e P/E of 13.5x) and
Div Yield (%) 2.4 3.0 3.7
hence we maintain BUY. Target price - INR1,858 (15x FY13e EPS + INR35 for the company’s stake in KTM).
Valuations are comfortable... BUY!
Limited scope for Bajaj’s margins to expand from here, which is why we Return ratios remain healthy… Marginal dip going ahead due to huge
prefer Hero MotoCorp (where we expect margins to expand by ~300bp) cash hoard and conservative dividend payout
76% 28% 7.0 80%
21.7% 24% 70%
20.4% 20.3% 20.5% 6.0
74%
20% 60%
5.0
72% 14.3% 13.6% 50%
16%
4.0
40%
70% 12%
3.0
30%
8%
2.0
68% 20%
4%
1.0 10%
66% 0%
FY08 FY09 FY10 FY11 FY12e FY13e 0.0 0%
FY08 FY09 FY10 FY11 FY12e FY13e
RM to sales (%) (LHS) Staff cost to sales (%) (RHS)
Other exp to sales (%) (LHS) EBIDTA margins (%) (RHS) Asset Sw eating (x) (LHS) ROCE (RHS) ROE (RHS)
INR/USD: Currency tailwinds (difficult to extrapolate)

Tax benefits from Pantnagar plant expire next year, which leads to a
55.00
dismal PAT growth of 10% in FY13e (on a PBT growth of 18%)
33.38% Average
30.78% 30.82% 52.00 INR/USD
29.61%
27.88% 45.3
25.74%
49.00
46.00
10.6% Average Average
6.8% INR/USD INR/USD
5.0% 5.5% 4.9% 4.6% 51 50.3
43.00

FY08 FY09 FY10 FY11 FY12e FY13e 40.00
Tax Rate Excise duty 01-Jan-11 01-A pr-11 01-Jul-11 01-Oct-11 01-Jan-12 01-A pr-12
Source: Company, Antique Source: Bloomberg, Antique


Revenues 88,104 119,210 166,089 202,142 233,689 EBIT 10,725 24,561 32,621 39,612 46,449
Depreciation & amortisation 1,298 1,365 1,228 1,350 1,421 (Inc)/Dec in working capital 345 (11,263) (2,638) (1,117) (1,655)
EBIT 10,725 24,561 32,621 39,612 46,449 Tax paid 3,084 7,126 9,830 11,081 15,665
Interest expense 210 60 17 219 15 Cash flow from operating activities 8,384 30,002 26,640 30,779 33,845
Other income 1,117 1,225 3,658 3,658 4,390 Capital expenditure 3,371 648 400 2,500 2,500
Extraordinary Items (2,071) (1,650) 7,246 (1,063) - Inc/(Dec) in investments (486) 22,130 7,737 11,029 13,566
Profit after tax 6,545 17,001 33,397 30,907 35,158 Inc/(Dec) in share capital - - 1,447 - -
Adjusted profit after tax 8,052 18,109 26,152 31,970 35,158 Inc/(Dec) in debt 2,357 (2,314) (10,134) (1,567) (795)
EPS (INR) 45.2 117.5 115.4 106.8 121.5 Others (3,724) (6,415) (15,025) (16,928) (20,314)
Adjusted EPS (INR) 27.8 62.6 90.4 110.5 121.5 Cash flow from financing activities (1,367) (8,729) (23,713) (18,495) (21,109)
Net cash flow 808 (355) 4,551 1,284 1,060
Opening balance 561 1,369 1,014 5,565 6,849
Closing balance 1,369 1,014 5,565 6,849 7,909
Share Capital 1,447 1,447 2,894 2,894 2,894 Growth indicators (%)
Networth 18,697 29,283 49,102 63,081 77,926
Revenue (2.6) 35.3 39.3 21.7 15.6
Debt 15,700 13,386 3,252 1,684 889
EBITDA (7.1) 115.6 30.6 21.0 16.9
Adj PAT (2.3) 124.9 44.4 22.2 10.0
Adj EPS (2.3) 124.9 44.4 22.2 10.0
Capital work in progress 221 415 699 1,199 1,699 Valuation (x)
Net Assets 15,481 15,211 15,483 16,632 17,712 Year ended 31st Mar 2009 2010 2011 2012e 2013e
Investments 18,085 40,215 47,952 58,981 72,547 P/E (Adj) 58.9 26.2 18.1 14.8 13.5
Current Assets, Loans & Advances P/BV 25.4 16.2 9.7 7.5 6.1
Inventory 3,388 4,462 5,473 6,646 7,683 EV/EBITDA 39.8 17.6 12.8 10.3 8.5
Debtors 3,587 2,728 3,628 5,538 6,402 EV/Sales 5.4 3.8 2.6 2.1 1.8
Cash & Bank balance 1,369 1,014 5,565 6,849 7,909 Dividend Yield (%) 0.7 1.2 2.4 3.0 3.7
Loans & advances and others 14,909 21,805 14,061 16,927 19,466
Current Liabilities & Provisions Financial ratios
Liabilities 12,134 20,263 24,267 29,805 34,219 Year ended 31st Mar 2009 2010 2011 2012e 2013e
Provisions 12,242 22,487 15,286 16,815 18,496 RoE (%) 43.1 61.8 53.3 50.7 45.1
Net Current Assets (1,123) (12,740) (10,827) (10,660) (11,255) RoCE (%) 34.6 61.0 70.2 68.1 65.9
Deferred tax (assets)/liabilities 42 17 297 297 297 Debt/Equity (x) 0.8 0.5 0.1 0.0 0.0
Misc.Expenses 1,996 - 43 109 109 EBIT/Interest (x) 51 411 1,930 181 3,012
Application of Funds 34,397 42,669 52,354 64,765 78,814

Market data Ashok Leyland Reco : HOLD

CMP : INR31
Market Cap (INRbn)
Market Cap (USDbn)
:
:
83
2
Favourable tailwinds approach! Target Price : INR33
O/S Shares : 2,661
Free Float (m) : 287 High sensitivity to any relief on the macro side…
52-wk HI/LO (INR) : 33/20
Avg Daily Vol ('000) : 8,475  The CV segment (MHCVs in particular) are very sensitive to any relief on the macro side. While freight rates
Bloomberg : AL IN
haven’t moved up commensurately with the recent cost pressures (diesel, driver, maintenance, tyres, etc.), suggesting
Source: Bloomberg
that transporter profitability is under pressure, as we reach the seemingly fag-end of the deteriorating macro,
Shareholding pattern Ashok Leyland (with its predominantly heavy CV portfolio) appears to be nearing its positive cycle.
Promoters : 39%
FII : 16%  Long term demand drivers for the CV segment remain intact. There are multiple volume triggers – A) A more
DII : 16%
stringent implementation of the overloading ban which will result in the need for addition of capacities. B) Gradual
Others : 30%
Source: BSE
uptick in replacement demand – currently around 50% of the trucks population is over 10 years old and 30% is
over 15 years old. C) The development of newer highways which will boost the demand for higher horsepower
trucks as it will enable higher turnaround time.
110
100 Rising contribution of Dost to offset Pantnagar benefits!

90  The contribution of Dost (their SCV) would increase from 6% in FY12e to 28% in FY13e of total volumes, on
80 which the company earns marketing margins (reckon 6-7%). Hence, while there are favourable tailwinds on a
70 macro level, the company’s margins are structurally on a downtrend, which would offset the benefit of rising
Apr-11 Aug-11 Dec-11 Apr-12 contribution of Pantnagar volumes (from 13.6% in FY11 to ~33% in FY12e; ~40% in FY13e).
Ashok Leyland NIFTY
Digression from core competencies could keep ROEs suppressed…
Source: Bloomberg
 While the company’s JV with Nissan has kicked-off with a decent product launch in the SCV segment (Dost), we
are concerned about their foray into the small car space through this JV. The other JVs - with ALTEAMS and John
Revenues 111,177 129,871 152,025 Deere (construction equipment) are other instances where the company is digressing from its core competencies,
EBITDA 12,176 12,301 14,527
which we believe would keep the blended ROEs suppressed.
EBITDA Margin (%) 11.0 9.5 9.6
Adjusted PAT 6,313 5,687 6,964
HOLD… Prefer VECV in the CV space!
P/E (x) 13.1 14.7 11.8  For the stock, there are some cushions, i.e. the seemingly fag-end of the worsening macro, comfortable valuations
EV/EBITDA (x) 8.7 9.3 7.9
RoE (%) 16 13 15
(11.8x FY13e P/E) and high dividend yield (~3%). However, we maintain HOLD (target price of INR33 - 12x
RoCE (%) 16 12 14 FY13e EPS + INR1.6 per share for the company’s investment in IndusInd Bank) and believe that Eicher Motors is
Div Yield (%) 3.2 2.4 3.0
a better play on the CV cycle due to the much superior return ratios, fixed asset turns, and margin profile.

HOLD... Prefer VECV in the CV space!
Volumes 2009 2010 2011 2012e 2013e Strong margin~volume co-relation would weaken post Dost launch
MHCV (Passengers) - Total 19,981 18,481 25,226 24,793 26,551 35,000 16%
MHCV (Goods) - Total 33,071 44,345 68,009 71,583 77,757 30,000 14%
LCVs - Total 1,379 1,100 871 1,038 1,115 12%
25,000
Exports 6,812 5,979 10,306 12,099 13,914
10%
Dost - - - 6,000 40,000 20,000
8%
Total Volumes (incl-Dost) 54,431 63,926 94,106 103,414 145,424 15,000
6%
Growth (%)
10,000
4%
MHCV (Passengers) - Total (10) (8) 36 (2) 7
5,000
MHCV (Goods) - Total (45) 34 53 5 9 2%
LCVs - Total 68 (20) (21) 19 7 0 0%

Dec-07 Dec-08 Dec-09 Dec-10 Dec-11
Exports (6) (12) 72 17 15
Total Volumes (incl-Dost) (35) 17 47 10 41 Volumes (In Nos) (LHS) EBIDTA margins (RHS)
MHCV Passenger Carrier - Market share trend... MHCV Goods Carrier - Market share trend...
75% 80%
60%
60%
45%
40%
30%
20%
15%
0% 0%
Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12
Tata Motors Ashok Leyland Eicher Motors Others Tata Motors Ashok Leyland Eicher Motors Others
Source: SIAM, Antique Source: SIAM, Antique


Revenues 59,811 72,447 111,177 129,871 152,025 EBIT 2,910 5,587 9,501 8,819 10,795
EBITDA 4,694 7,628 12,176 12,301 14,527 Interest expense 1,187 811 1,637 2,239 2,698
Depreciation & amortisation 1,784 2,041 2,674 3,481 3,732 (Inc)/Dec in working capital 7,886 (2,806) (6) 3,142 1,147
EBIT 2,910 5,587 9,501 8,819 10,795 Tax paid 60 - 1,112 1,142 1,300
Interest expense 1,187 811 1,637 2,239 2,698 Cash flow from operating activities (4,439) 9,623 9,433 5,778 9,382
Other income 496 704 153 199 219 Capital expenditure 24,799 6,285 4,698 5,500 5,000
Extraordinary Items (135) (33) - 95 - Inc/(Dec) in investments (3,463) 626 9,038 6,150 1,845
Profit before tax 2,084 5,448 8,018 6,874 8,316 Income from investments 496 704 153 199 219
Taxes incl deferred taxation 185 1,211 1,705 1,187 1,352 Cash flow from investing act (20,839) (6,207) (13,583) (11,451) (6,626)
Profit after tax 1,900 4,237 6,313 5,687 6,964 Inc/(Dec) in share capital 0 - - 1,330 -
Adjusted profit after tax 1,900 4,237 6,313 5,687 6,964 Inc/(Dec) in debt 10,706 2,457 3,644 8,657 841
EPS (INR) 0.76 1.60 2.37 2.10 2.62 Others 11,349 (2,288) (3,371) (3,659) (2,852)
Cash flow from financing activities 22,056 169 273 6,328 (2,011)
Net cash flow (3,633) 4,308 (3,394) 729 745
Opening balance 4,514 881 5,189 1,795 2,524
Closing balance 881 5,189 1,795 2,524 3,269
Share Capital 1,330 1,330 1,330 2,661 2,661
Networth 34,739 36,688 39,630 42,988 47,100
Debt 19,581 22,039 25,683 34,340 35,181
Revenue (23) 21 53 17 17
EBITDA (43) 63 60 1 18
PAT (60) 123 49 (10) 22
EPS (58) 110 48 (11) 25
Inventory 13,300 16,382 22,089 25,618 28,739 P/BV 2.4 2.2 2.1 1.9 1.8
Cash & Bank balance 881 5,189 1,795 2,524 3,269 EV/Sales 1.7 1.4 1.0 0.9 0.8
Provisions 2,681 3,687 4,903 5,148 5,663 Year ended 31st Mar 2009 2010 2011 2012e 2013e
Net Current Assets 10,287 11,789 8,390 12,261 14,153 RoE (%) 5.5 11.5 15.9 13.2 14.8
Deferred tax (assets)/liabilities 2,634 4,611 5,338 5,384 5,436 RoCE (%) 7.7 11.8 15.6 12.2 14.0
Misc.Expenses 58 176 43 65 65 Debt/Equity (x) 0.6 0.6 0.6 0.8 0.7
Application of Funds 54,320 58,726 65,312 77,328 82,281 EBIT/Interest (x) 2.5 6.9 5.8 3.9 4.0

Market data Exide Industries Reco : HOLD

CMP : INR146
Market Cap (INRbn)
Market Cap (USDbn)
:
:
124
2
Operating metrics finally improve! Target Price : INR157
O/S Shares : 850
Free Float (m) : 419 3Q results – Last year’s dreams come true!
52-wk HI/LO (INR) : 188/99
Avg Daily Vol ('000) : 1,364  After continuously disappointing the street for the last 4 quarters, Exide’s operating metrics finally improved last quarter.
Bloomberg : EXID IN
Sequentially margins improved on the back of: A) Improvement in product mix: replacement/OEM ratio for 4W
Source: Bloomberg
improved to 1.24x (0.84x QoQ), for 2Ws it improved to 0.38x (0.32x QoQ) and B) Positive operating leverage:
Shareholding pattern stemming from higher capacity utilization (industrial capacity utilization @ 74% as against 62% QoQ; automotive
Promoters : 46%
FII : 19%
capacity utilization @82% as against 70% QoQ). For 4Ws, blended margins improved to 14.8% from 9.2% QoQ –
DII : 14% a function of a better mix coupled with the full benefit of price hikes taken in the OEM segment last quarter.
Others : 22%
Source: BSE
Getting its act together…
 Exide’s performance over the last year wasn’t the fairy tale it was supposed to be. With the lull in OEM sales and
120
capacities coming on stream, the sales mix was expected to improve towards the more profitable replacement
100 segment and the resultant margin swing was expected to be huge. Exide seems to have finally gotten its act
together with the much-awaited improvement in the replacement/OEM mix. The management expects the
80
performance to continue improving from here on as it further improves its product mix and finally exhausts its high
60 cost lead inventory, built over the last 2 quarters. However, we see less room for any meaningful product mix
improvement as OEM sales could witness an uptick in volumes going ahead.
Exide NIFTY
Source: Bloomberg Astronomical replacement margins don’t look sustainable!
Key financials (standalone)  Market share erosion in the replacement market (both auto and industrial) coupled with limited pricing power
Revenues 45,536 50,201 59,287
raises questions about the premium that Exide has always commanded for its “brand”. By the management’s own
EBITDA 8,788 6,788 10,092 admission, competition in the aftermarkets is on the rise, which coupled with the limited entry barriers in the battery
EBITDA Margin (%) 19.3 13.5 17.0
business, makes us structurally negative on the company’s astronomical margins in the replacement segment.
Adjusted PAT 6,194 4,637 6,965
Core P/E (x) 18.7 25.0 16.6 Bull-case target provides less upside… HOLD!
EV/EBITDA (x) 13.6 17.6 11.7
RoE (%) 22.6 14.9 18.8  Core battery business trades at a P/E of ~17x our fairly optimistic estimates, and hence, our target price of
RoCE (%) 33.6 21.6 27.2 INR157 (18x FY13e EPS + INR10 for the company’s stake in ING) provides less room for any meaningful upside
Div Yield (%) 1.0 0.7 0.7
from current levels. HOLD!
Bull-case target price provides less upside... HOLD!
High cost lead inventory built up in 1Q impacted margins in 2Q... 4W battery OEM/aftermarket mix - Improves on account of lower off-
take by OEMs and higher off-take replacement (post price cuts)
3500
3250 Average Average

1.51
Average Price Price
1.39 1.37
3000 Price $1992.5/t $2092/t 1.29
1.33
1.27 1.24
$2602/t 1.17
1.13
2750 1.11
2500
0.84
2250
2000
1750
1QFY10
2QFY10
3QFY10
4QFY10
1QFY11
2QFY11
3QFY11
4QFY11
1QFY12
2QFY12
3QFY12
1500
1250
01-Jan-11 01-Apr-11 01-Jul-11 01-Oct-11 01-Jan-12 01-Apr-12 OEM / Replacement M ix
Source: Bloomberg, Antique Source: Company, Antique
Estimated revenue breakup Captive smelters to account for 70% of lead procurement...
8% 8% 10% 11% 12% 12%

12% 11% 8% 6% 5% 4%
35% 35% 35% 35% 35% 35% 30%
20% 19% 18%
20% 21% 22%
7% 7%
6% 8% 6%
7% 12%
15%
12% 13% 28%
12% 11% 10%
42% 45% 50% 53%
29% 70%
26% 27% 27% 27%
27%
50%
37%
23%
15% 15% 15% 17% 18% 18% 20% 15% 12%
2008e 2009e 2010e 2011e 2012e 2013e Dec 08 June 09 March 10 Sep 10 Mar 11 Dec 11 FY13e
4W OEM 4W Replacement 2W OEM 2W Replacement UPS & Inverter Telecom Infrastructure Imported Captive Domestic


Revenues 33,930 37,940 45,536 50,201 59,287 EBIT 4,768 8,088 7,953 5,787 8,924
Expenses 28,483 29,046 36,748 43,413 49,195 Depreciation & amortisation 679 807 835 1,001 1,168
Depreciation & amortisation 679 807 835 1,001 1,168 (Inc)/Dec in working capital (808) 945 2,015 356 1,569
EBIT 4,768 8,088 7,953 5,787 8,924 Tax paid 1,577 2,557 2,655 1,829 2,747
Interest expense 479 103 57 88 72 CF from operating activities 4,200 5,289 4,061 4,515 5,705
Other income 65 121 1,038 832 957 Capital expenditure 1,299 1,002 2,529 3,750 2,500
Extraordinary Items - - 469 - - Inc/(Dec) in investments 1,499 6,672 426 689 2,894
Profit before tax 4,354 8,106 9,404 6,531 9,809 Income from investments 65 121 1,038 832 957
Taxes incl deferred taxation 1,510 2,735 2,740 1,894 2,845 CF from investing activities (2,733) (7,553) (1,917) (3,607) (4,437)
Profit after tax 2,844 5,371 6,664 4,637 6,965 Inc/(Dec) in share capital - 50 - - -
Adjusted profit after tax 2,844 5,371 6,194 4,637 6,965 Inc/(Dec) in debt (326) (2,272) (878) 979 (500)
Adjusted EPS (INR) 3.55 6.32 7.29 5.46 8.19 Others (604) 4,273 (1,437) (995) (995)
CF from financing activities (930) 2,051 (2,315) (16) (1,495)
Net cash flow 320 (308) 119 892 (227)
Opening balance 17 337 29 148 1,040
Closing balance 337 29 148 1,040 813
Share Capital 800 850 850 850 850
Networth 12,504 22,198 27,425 31,067 37,037
Debt 3,172 900 22 1,000 500
Revenue 19% 12% 20% 10% 18%
EBITDA 16% 63% -1% -23% 49%
PAT 14% 89% 24% -30% 50%
EPS 14% 78% 15% -25% 50%
Capital work in progress 173 378 660 1,410 1,210
Inventory 4,385 6,068 8,590 9,628 11,370 Core Battery P/E 38.4 21.6 18.7 25.0 16.6
Debtors 2,310 2,546 3,665 4,126 4,873 P/BV 9.3 5.6 4.5 4.0 3.4
Cash & Bank balance 337 29 148 1,040 813 EV/EBITDA 22.9 13.6 13.6 17.6 11.7
Loans & advances and others 387 476 885 973 1,071 EV/Sales 3.7 3.2 2.6 2.4 2.0
Current Liabilities & Provisions Dividend Yield (%) 0.4% 0.7% 1.0% 0.7% 0.7%
Liabilities 3,807 4,943 6,603 7,765 8,712
Provisions 1,059 985 1,362 1,430 1,501 Financial ratios
Net Current Assets 2,552 3,190 5,323 6,571 7,914 Year ended 31st Mar 2009 2010 2011 2012e 2013e
Deferred tax (assets)/liabilities 412 590 675 740 838 RoE 23% 24% 23% 15% 19%
Application of Funds 15,675 23,098 27,446 32,067 37,537 RoCE 31% 36% 34% 22% 27%
Debt/Equity (x) 0.3 0.0 0.0 0.0 0.0
EBIT/Interest (x) 10.0 78.6 138.8 65.5 124.3

Market data Escorts Ltd. Reco : HOLD

CMP : INR75
Market Cap (INRbn)
Market Cap (USDbn)
:
:
8
0
When will the sun shine? Target Price : INR78
O/S Shares : 106
Free Float (m) : 90 Recent performance – Disappointment becoming a habit!
52-wk HI/LO (INR) : 149/63
Avg Daily Vol ('000) : 2,063  Adjusted standalone PAT at INR127m (down 49% YoY; 77% QoQ) was 47% below our estimate of INR240m
Bloomberg : ESC IN
(consensus – INR250m). Revenues (down 1% YoY; up 7% QoQ) were 8% below our estimates. EBIDTA margins
Source: Bloomberg
at 4% (down 121bps YoY, 99bps QoQ) were lower than our estimate of 5.4%. Disappointment stemmed from a
Shareholding pattern sudden loss in the railway equipment division (EBIT loss of INR6m) and continual losses in the auto ancillary
Promoters : 28%
FII : 20%
division (EBIT loss of INR50m).
DII : 17%
Others : 35%
Multiple margin levers ahead… But it might test your patience!
Source: BSE  Profitability of the other businesses couldn’t get much worse from here, in our view:
Price performance vs Nifty 1. Escorts’ tractor margins at 5.8% remain a staggering ~1,000bps lower than those of M&M’s and hence there
120 is enough headroom for catch-up once utilisation levels increase from the current ~65%.
100 2. For the auto ancillary division, the management had guided that the segment would have broken even this
80 year, but the losses continue to increase. Whenever (or if ever) the same does happen, it will provide a ~50bps
60 blended margin kicker.
40 3. For the construction equipment division, we expected a stronger margin improvement. Historically, this has
been a 7-8% margin business and scale up to that level remains an additional margin kicker.
Escorts NIFTY
Source: Bloomberg  Hence, multiple margin levers remain. However, we must warn that we have been waiting for these levers to pan
out for the past 7 quarters now and have continuously been disappointed.
Key financials (consolidated)
YE 30 Sep (INRm) FY11 FY12e FY13e HOLD on wishful thinking…
Revenues 41,234 46,270 52,062
EBITDA 2,035 1,944 2,369  Hopes galore - there are multiple margin levers if the company manages to deliver. At a FY13e (Sep year-end) P/
EBITDA Margin (%) 4.9 4.2 4.6
E of 8.2x, EV/EBIDTA of 4.1x, EV/Sales of 0.2x and P/B of 0.4x, valuations don’t seem uncomfortable at all.
Adjusted PAT 1,349 654 936
Adjusted EPS (INR) 13.2 6.4 9.1 But sluggishness in all business segments coupled with a cyclical slowdown in the core tractor industry itself
PE (X) 5.7 11.7 8.2 provides limited re-rating triggers for the company in the near-term.
EV/EBITDA (X) 4.6 5.2 41.4
RoE (%) 8 4 5  Maintain HOLD on some wishful think and a presumption that earnings can’t get much worse from here. Target
RoCE (%) 7 6 7
Div Yield (%) 2.3 1.0 1.3
price - INR78 (5x consol Sep ‘12 EV/EBIDTA).

HOLD on wishful thinking!
Segmental Margins - Disappointment stemmed from sudden loss in rail- M&M vs. Escorts: Agri equipment division EBIT margins - huge gap
ways... Tractor margins remain steady; Auto-ancs continue to bleed... provides some headroom for catch-up...
22% 20.0%
14%
16.0%
6%
Huge gap betw een
-2%
12.0% M&M and Escorts
Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11
tractor margins
-10%
-18% 8.0%
-26%
4.0%
-34% Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11
Agri Machinery Products Auto Ancilliary Products
Railw ay Equipments M&M Escorts
Escorts group - Revenue break-up Construction equipment - Expected to account for 25% of consol revenues
10% 14,000 30%
16% 21% 16% 17% 20%
34% 34% 36% 34% 12%
4% 7% 6% 12,000 25%
4% 3% 5% 3% 3% 5%
4% 3% 3%
4% 10,000
3% 7% 9% 20%
4% 15%
5% 5% 8,000
5% 5% 4%
15%
9%
70% 75% 72% 73% 72% 6,000
69%
54% 10%
47% 48% 4,000
37%
2,000 5%
0 0%
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12e FY13e
Agri Machinery Products Auto Ancillary Products Railw ay Equipments
Construction equipment division revenues (LHS) Contribution to Consol Revenues (RHS)
Construction Equipments Others (Telecom, Healthcare)


Year ended 30th Sep 2009 2010 2011 2012e 2013e Year ended 30th Sep 2009 2010 2011 2012e 2013e
Revenues 26,617 33,783 41,234 46,270 52,062 EBIT 1,629 1,918 1,549 1,384 1,790
Expenses 24,392 31,333 39,199 44,326 49,693 Depreciation & amortisation 595 532 487 560 579
Depreciation & amortisation 595 532 487 560 579 (Inc)/Dec in working capital (4,502) 1,895 171 1,086 386
EBIT 1,629 1,918 1,549 1,384 1,790 Tax paid 290 490 (153) 205 302
Interest expense (net) 717 181 372 546 576 Cash flow from operating activities 5,720 (116) 1,646 107 1,105
Other Income 23 19 19 21 23 Capital expenditure 5,724 1,069 964 650 650
Exceptional Items (359) 57 (99) (18) - Inc/(Dec) in investments (1,315) 8 10 183 -
Profit before tax 576 1,813 1,097 841 1,238 Income from investments 23 19 19 21 23
Taxes incl deferred taxation 290 490 (153) 205 302 Cash flow from investing activities (4,386) (1,058) (955) (812) (627)
Profit after tax 286 1,323 1,251 635 936 Inc/(Dec) in share capital - 116 0 - -
Adjusted profit after tax 645 1,266 1,349 654 936 Inc/(Dec) in debt (4,382) 34 840 483 (76)
Adjusted EPS (INR) 7.1 12.4 13.2 6.4 9.1 Others 4,624 853 (266) (84) (116)
Cash flow from financing activities 242 1,002 574 399 (192)
Net cash flow 540 153 1,074 (310) 277
Opening balance 1,423 1,964 2,117 3,191 2,881
Year ended 30th Sep 2009 2010 2011 2012e 2013e
Closing balance 1,964 2,117 3,191 2,881 3,159
Share Capital 907 1,023 1,023 1,023 1,023
Networth 14,353 16,962 17,939 18,491 19,311
Year ended 30th Sep 2009 2010 2011 2012e 2013e
Debt 4,020 4,053 4,893 5,377 5,300
Revenue (3.8) 26.9 22.1 12.2 13%
Other Liabilities 401 84 91 91 91
EBITDA 65.0 10.1 (16.9) (4.5) 22%
PAT (176.1) 362.6 (5.5) (49.2) 47%
EPS (581.8) 74.0 6.5 (51.5) 43%
Adj PAT (581.8) 96.1 6.6 (51.5) 43%
Capital work in progress 123 203 766 766 766
Investments 1,169 1,177 1,187 1,370 1,370 Year ended 30th Sep 2009 2010 2011 2012e 2013e
Inventory 3,292 4,365 4,991 5,966 6,780 P/BV 0.5 0.5 0.4 0.4 0.4
Cash & Bank balance 1,964 2,117 3,191 2,881 3,159 EV/Sales 0.4 0.3 0.2 0.2 0.2
Provisions 1,370 1,338 790 869 955 Year ended 30th Sep 2009 2010 2011 2012e 2013e
Net Current Assets 1,527 3,575 4,820 5,596 6,259 RoE (%) 4.5 7.5 7.5 3.5 5%
Deferred tax (assets)/liabilities (302) (40) (132) (139) (147) RoCE (%) 8.7 9.2 7.0 6.0 7%
Misc.Expenses 57 21 21 - - Debt/Equity (x) 0.3 0.2 0.3 0.3 0.3
Application of Funds 18,773 21,099 22,923 23,958 24,701 Interest Coverage (x) 2.3 10.6 4.2 2.5 3.1

Important Disclaimer:
This report is prepared and published on behalf of the research team of Antique Stock Broking Limited (ASBL). This is intended for private circulation and should not be taken as recommendation to trade in the securities mentioned or any legal or taxation advice. We have exercised
due diligence in checking the correctness and authenticity of the information contained herein, so far as it relates to current and historical information, but do not guarantee its accuracy or completeness. The opinions expressed are our current opinions as of the date appearing in the
material and may be subject to change from time to time without any notice. ASBL or any persons connected with it do not solicit any action based on this report and do not accept any liability arising from the use of this document. The recipients of this material should rely on their
own judgment and take their own professional advice before acting on this information. The research reports are not, and are not to be construed as, an offer to sell or solicitation of an offer to buy any securities. Unless otherwise noted, all research reports provide information of
a general nature and do not address the circumstances of any particular investor. ASBL or any of its connected persons including its directors or subsidiaries or associates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any
inadvertent error in the information contained, views and opinions expressed in this publication. ASBL, its affiliates, directors, officers or employees may, from time to time, deal in the securities mentioned herein, as principal or agent. ASBL or its affiliates may have acted as an Investment
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in whole or in part without express consent of ASBL.
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India Research

Ashish Nigam Kunal Jhaveri

Antique Stock Broking Limited 2

Antique Stock Broking Limited 3

FY12 – A year we’d like to forget!

Segment-wise volume growth Cost pressures impacting freight operator profitability

Antique Stock Broking Limited 4

Seemingly fag-end of deteriorating macro…

Repo rate (%) Two-wheelers: Almost oblivious to interest rates...

7.0 20% 14%

5.0 -40% 10%

Source: Bloomberg, Antique Source: Bloomberg, Antique

Time to play the bad boys?

uptick in volumes (which can even be 2-3 quarters away). 14%

hyper competitive pressures, royalty increase by Suzuki, etc.) the 5

Indian Demographics (Quantity & Quality) - The perpetual saviour...

Antique Stock Broking Limited 7

The headroom for growth!

Source: IMF, Antique

Cars per 1000 people

505 497 487 600

Germany Spain France Italy UK USA China India Brazil

Source: IMF, Antique Source: IMF, Antique

Antique Stock Broking Limited 8

Can India go the China way?

Even in terms of passenger vehicle sales, India currently lags China by 8

12000 6000 8000

9000 4500 6000

India~China - Similar past... Could the future be similar too?

coveted $1,000 mark).

currently). India: Car sales v/s per capita GDP

with passenger vehicle sales growing 10x in the last decade.

Cars – War of the hatchbacks!

 Maruti has done a commendable job of withstanding this onslaught in (250)

Source: CRISIL, Antique

500 i10 24.4% 21.9%

Cars - Those without diesel variants have suffered...

Hatchback (A2 segment) market share

Antique Stock Broking Limited 12

India Inc is hiring!

Hiring Index Hiring Trend <5% 5 - 10% 10 - 20% >20%

Source: Naukri, Antique Source: Naukri, Antique

Antique Stock Broking Limited 13

Consumer sentiment – Biggest driver of high discretionary purchases...

Antique Stock Broking Limited 14

Waiting for GST...

Auto OEM revenues (as a % of GDP)

industry as a whole (including component makers) to attract investments

Antique Stock Broking Limited 15

High multiplier effect!

7.3% 7.5% 7.4% 7.4%

bearing on the economy. Source: CMIE, Antique

Current excise duty structure

Antique Stock Broking Limited 16

Existing players enjoy first-mover advantage!

competitiveness over a longer period.

Company-wise Gross Leverage Population by Income Class

Annual Income (in 1000s)

Source: Company, Antique Source: McKinsey

Indian dieselization – It’s just the beginning!

60% 40% 35%

Petrol Diesel CNG Small Cars Sedans

Source: CRISIL, Antique Source: CRISIL, Antique