Ashok Leyland reports 133% Net Income growth in 2017 and almost no change in EBITDA Margin of 14.4%

25-05-2017 • About Ashok Leyland ($ASHOKLEY) • By InTwits

Ashok Leyland reported FY2017 financial results today. Here are the key drivers of the company's long term financial model:

Ashok Leyland is a growth stock: FY2017 revenue growth was 9.6%, 5 year revenue CAGR was 12.1% at FY2017 ROIC 14.8%
EBITDA Margin is quite volatile: 14.4% in FY2017, 14.3% in FY2016, 10.7% in FY2015, 4.1% in FY2014, 7.0% in FY2013
Ashok Leyland has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.7%. At the same time it's in pair with industry average of 3.2%
CAPEX is quite volatile: ₹4,489m in FY2017, ₹2,619m in FY2016, ₹2,509m in FY2015, ₹4,081m in FY2014, ₹6,492m in FY2013
The company has highly profitable business model: ROIC is 14.8%

Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

The company's Revenue increased on 9.6%. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 4.6 pp from 26.5% to 21.9% in FY2017. EBITDA Margin grew at 2.5 pp per annum in the last 5 years.

SG&A as a % of Revenue increased slightly on 0.92 pp from 1.4% to 2.3% in FY2017.

Net Income margin increased on 3.7 pp from 3.3% to 6.9% in FY2017. During the last 5 years Net Income margin bottomed in FY2014 at -1.4% and was growing since that time.

Investments (CAPEX, working capital and M&A)

In FY2017 Ashok Leyland had CAPEX/Revenue of 2.0%. CAPEX/Revenue decreased slightly on 1.6 pp from 3.6% in FY2014 to 2.0% in FY2017. It's average level of CAPEX/Revenue for the last three years was 1.6%. During the last 5 years CAPEX as a % of Revenue bottomed in FY2016 at 1.3%.

Return on investment

The company operates at high and attractive ROE (27.3%) while ROIC is a bit lower (14.8%). ROIC decreased slightly on 0.82 pp from 15.7% to 14.8% in FY2017. ROE surged on 13.3 pp from 14.0% to 27.3% in FY2017. During the last 5 years ROE bottomed in FY2014 at -3.9% and was growing since that time.

Leverage (Debt)

Debt level is 3.7x Net Debt / EBITDA and 4.0x Debt / EBITDA. Net Debt / EBITDA surged on 0.5x from 3.1x to 3.7x in FY2017. Debt surged on 19.1% while cash dropped on 38.2%.

Ashok Leyland has short term refinancing risk: cash is only 24.6% of short term debt.

Financial and operational results

FY ended 31-03-2017

Ashok Leyland ($ASHOKLEY) key annual financial indicators

mln. INR	2013	2014	2015	2016	2017	2017/2016
P&L
Revenue	124,812	114,867	153,409	208,708	228,710	9.6%
SG&A			4,332	2,845	5,224	83.6%
EBITDA	8,765	4,709	16,361	29,789	32,939	10.6%
Net Income	4,337	-1,641	1,339	6,819	15,894	133.1%
Balance Sheet
Cash	78	1,064	8,990	17,111	10,577	-38.2%
Short Term Debt	16,176	30,088	28,505	35,265	42,922	21.7%
Long Term Debt	27,378	54,912	62,194	75,271	88,764	17.9%
Cash flow
Capex	6,492	4,081	2,509	2,619	4,489	71.4%
Ratios
Revenue growth	-3.3%	-8.0%	33.6%	36.0%	9.6%
EBITDA growth	-29.9%	-46.3%	247.5%	82.1%	10.6%

EBITDA Margin	7.0%	4.1%	10.7%	14.3%	14.4%	0.1%
SG&A, % of revenue			2.8%	1.4%	2.3%	0.9%
Net Income Margin	3.5%	-1.4%	0.9%	3.3%	6.9%	3.7%
CAPEX, % of revenue	5.2%	3.6%	1.6%	1.3%	2.0%	0.7%

ROIC	5.8%	-0.5%	7.6%	15.7%	14.8%	-0.8%
ROE	10.0%	-3.9%	3.2%	14.0%	27.3%	13.3%
Net Debt/EBITDA	5.0x	17.8x	5.0x	3.1x	3.7x	0.5x

Peers in Commercial Vehicles

Below you can find Ashok Leyland benchmarking vs. other companies in Commercial Vehicles industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %


Top 5	FY2013	FY2014	FY2015	FY2016	FY2017
V.S.T.Tillers Tractors ($VSTTILLERS)	-9.2%	29.6%	-11.6%	17.2%	-
Beml ($BEML)	3.2%	3.7%	-3.5%	6.3%	-
Tata Motors ($TATAMOTORS)	13.5%	23.3%	13.4%	4.5%	-
Hmt ($HMT)	-15.9%	-23.9%	2.2%	2.5%	-
Trf ($TRF)	-16.0%	5.4%	-4.2%	-0.3%	-
Median (5 companies)	-12.6%	4.5%	-3.8%	4.5%	-
Ashok Leyland ($ASHOKLEY)	-	-8.0%	33.6%	36.0%	9.6%

Top companies by EBITDA margin, %


Top 5	FY2013	FY2014	FY2015	FY2016	FY2017
V.S.T.Tillers Tractors ($VSTTILLERS)	15.1%	19.2%	19.1%	17.5%	-
Tata Motors ($TATAMOTORS)	12.2%	13.5%	14.4%	14.2%	-
Beml ($BEML)	-1.5%	4.0%	2.6%	4.4%	-
Trf ($TRF)	-1.5%	1.3%	-0.9%	2.8%	-
Hmt ($HMT)	-39.5%	-118.3%	-104.2%	-93.5%	-
Median (5 companies)	5.4%	8.8%	0.8%	4.4%	-
Ashok Leyland ($ASHOKLEY)	7.0%	4.1%	10.7%	14.3%	14.4%

Top companies by CAPEX/Revenue, %


Top 5	FY2013	FY2014	FY2015	FY2016	FY2017
Tata Motors ($TATAMOTORS)	10.2%	11.8%	12.4%	12.1%	-
Hmt ($HMT)	4.2%	0.1%	0.0%	1.6%	-
Trf ($TRF)	1.1%	0.4%	0.5%	1.0%	-
V.S.T.Tillers Tractors ($VSTTILLERS)	6.7%	5.9%	4.1%	0.9%	-
Beml ($BEML)	4.8%	1.5%	1.5%	0.8%	-
Median (5 companies)	5.8%	3.7%	1.2%	1.0%	-
Ashok Leyland ($ASHOKLEY)	5.2%	3.6%	1.6%	1.3%	2.0%

Top companies by ROIC, %


Top 5	FY2013	FY2014	FY2015	FY2016	FY2017
V.S.T.Tillers Tractors ($VSTTILLERS)	29.3%	41.0%	28.0%	25.2%	-
Tata Motors ($TATAMOTORS)	16.6%	17.2%	17.8%	14.5%	-
Cranex ($CRANEX)	5.3%	5.2%	5.3%	6.2%	-
Beml ($BEML)	-2.9%	1.9%	0.6%	2.7%	-
Trf ($TRF)	-4.1%	0.5%	-3.2%	2.6%	-
Median (10 companies)	7.5%	3.4%	0.6%	4.4%	-
Ashok Leyland ($ASHOKLEY)	5.8%	-0.5%	7.6%	15.7%	14.8%

Top companies by Net Debt / EBITDA


Top 5	FY2013	FY2014	FY2015	FY2016	FY2017
Trf ($TRF)	-	36.0x	-	19.0x	-
Cranex ($CRANEX)	9.9x	9.0x	10.8x	12.2x	-
Beml ($BEML)	-	8.0x	6.9x	3.4x	-
Tata Motors ($TATAMOTORS)	1.7x	1.2x	1.2x	1.1x	-
Stone India ($STONEIN)	3.5x	0.0x	0.0x	0.0x	-
Median (7 companies)	1.6x	8.0x	0.6x	1.1x	-
Ashok Leyland ($ASHOKLEY)	5.0x	17.8x	5.0x	3.1x	3.7x

Ashok Leyland stock price chart

Ashok Leyland financials

mln.	FY2010	FY2011	FY2012

Revenue	72,447	111,771	129,043
EBITDA	7,714	12,244	12,504
Net income	4,237	6,313	5,660
CAPEX	6,947	3,526	6,978
Debt	28,784	25,683	30,979
Cash	5,189	1,795	325.6

About Ashok Leyland

Ashok Leyland Limited manufactures and sells commercial vehicles in India and internationally. Its products include buses, such as city, sub-urban, inter-city, school and staff, and special buses; trucks for various applications, including long-hauls, distribution, construction, and mining; light vehicles; and defense vehicles, such as rapid intervention vehicles, field artillery tractors, light recovery vehicles, water bowsers, truck fire fighters, and fuel dispensers for the armed forces and other international customers. The company also offers power solutions, such as engines that power generator sets, marine applications, earth-moving equipment, compressors, cranes, harvester combines, and others. In addition, it provides crankshafts, gears and shafts, crown wheels and pinions, filters, brake linings, clutch plates and pressure, face plates, cylinder liners, pistons and rings, hubs and brake-drums, thinwall bearings, ball and roller bearings, gasket kits, trailer axle assemblies, king pin kits and tie rod end kits, water pump assemblies and kits, oil pump assemblies, and engine and gear oils. The company was founded in 1948 and is headquartered in Chennai, India. Ashok Leyland Limited is a subsidiary of Hinduja Automotive Limited.