Ashok Leyland Limited · NSE:ASHOKLEY
Ashok Leyland — Investor Conference August 2010
64 slides from Ashok Leyland's conference presentation, August 2010
Slide 1: Investor Conference August, 2010
Investor Conference August, 2010
Slide 2: Presentation outline
Presentation outline Overview of Hinduja Group 2009-10 Economy & CV Market performance AL’s Performance Product Introductions in FY ’10 2010-11 Outlook for CV Industry I Qtr performance Strategies / Plans Volume & Margin Outlook Capex & cash flows Strategic investment & Progress on J
Slide 3: Hinduja Group Overview
Hinduja Group Overview ` Hinduja group was established in 1914 in Mumbai Employs more than 35,000 personnel worldwide Global presence across 30 countries Automotive Energy & Chemicals Ashok Leyland is India's second largest Gulf Oil is arguably one of the most commercial vehicles and diesel engine e
Slide 4: 2009-10
ae 2009-10
Slide 5: Economy - Drivers of CV Demand
Economy - Drivers of CV Demand Economic Outlook conducive Economy has been registering consistent growth since the decline in Oct – Dec ’08 Qtr. Quarter GDP Growth % IIP Growth % Apr – Jun ‘09 6.0 5.0 CV industry Jul – Sep ‘09 8.6 8.3 growth - twice Oct – Dec ‘09 6.5 11.6 the IIP Jan – Mar ‘10 8.6 1
Slide 6: Infrastructure plan – NHAI projects
Infrastructure plan – NHAI projects NHAI Projects Kms Total length 49 987 Completed (till Jun ’10) 14 250 Under Imp. / Balance 35 737 Total Completed Kms Kms % Golden Quad 5846 5793 99% NS-EW Ph I & II 7300 5172 71% NHDP Ph III 12109 1778 15% NHDP Ph IV 14799 -- -- NHDP Ph V 6500 301 5% NHDP Ph VI /
Slide 7: CV Market Performance - Trucks
CV Market Performance - Trucks Segment Q3 Q3 Q-o- Q4 Q4 Y-o-Y FY FY Y-o-Y FY ’10 FY’09 Q% FY ‘10 FY ’09 % 2009-10 2008-09 % Haulage 7596 3870 96 10500 5959 76 29962 22380 34 Tippers 7918 5036 57 11649 6161 89 30534 33834 (10) Tractors 4038 603 570 6560 1157 467 16717 9205 82 MAV 19960 7528 165 30052
Slide 8: CV Market Performance – Trucks contd…
CV Market Performance – Trucks contd… Growth registered in Q 4 FY ‘10 over Q 3 in all segments Though Tippers registered overall –ve growth for the year, Q 3 and Q 4 witnessed a Y-o-Y growth of 57% & 89% respectively During Q 4, Tippers registered growth of 47% over Q3 Growth in Heavy end segments (
Slide 9: CV Market Performance - Buses
CV Market Performance - Buses Segment Q3 Q3 Y-o-Y Q4 Q4 Y-o- Y FY FY Y-o-Y FY ’10 FY’09 % FY ’10 FY ’09 % 2009-10 2008-09 % Private 3361 1521 121 4819 4404 9 15238 13361 14 STU (Incl. 6555 3591 83 6972 3322 110 18179 14780 23 JnNURM) ICV 1848 600 208 2697 1558 73 9664 6751 43 Total 11764 5712 106 14
Slide 10: But there were growth dampeners
But there were growth dampeners Increase in fuel prices (Rs. 2.55 /ltr: Feb ‘10 – 6% increase) Softening of freight rates in some routes during Jan – Mar ’10. Rates have picked up now. RBI’s CRR hike in Jan ‘10 hardened interest rates Excise duty hike of 2% in the Union Budget made vehicles dearer b
Slide 11: Ashok Leyland Performance 2009-10
2009-10 Ashok Leyland Performance
Slide 12: AL’s performance FY 2009-10
AL’s performance FY 2009-10 Segment Q1 Q2 Q3 Q4 Full Yr FY ’10 FY ’10 FY ’10 FY ’10 2009-10 Consistent MS growth observed Bus – TIV 7482 9347 11764 14488 43081 Growth Y-O-Y % (16.2) (14.8) 106.0 56.1 23.5 Drop in Q 1 MS due to - ALL 2211 3647 5062 5485 16405 cash & carry policy Growth Y-O-Y % (44.
Slide 13: MS Movement
MS Movement 30.0 26.0 22.0 18.0 14.0 10.0 % 29.0 28. 28.4 K 26.7 26.3 2 f- SIT 25.0 25.1 V.. a) 23.4 A227 4 22.6 219 22.9 22.6 21.6 21.3 AVA 21.6 20. 4.4 13.5 AprilMay June July Aug Sep Oct Nov Dec Jan Feb MarjAprilMay June July Aug Sep Oct Nov Dec Jan Feb Mar 2008-09 2009-10
Slide 14: A sluggish start; a strong finish
A sluggish start; a strong finish Began the year with ‘Cash-and-Carry’ system to clean up the inventory pipeline 2009-10 50000 40000 30000 20000 10000 0 first half second half Outperformed TIV in Q4; TIV up 116%, AL up 163%
Slide 15: Highlights – Trucks
Highlights – Trucks ALL’s MAV and Tractor sales growth in Q 4 FY ‘10 over Q 3 at 112% & 118% is significantly higher than TIV growth of 58% and 62%. Similarly, ALL’s Haulage segment growth in Q 4 at 99% is better than TIV growth of 38%. ALL’s Tipper growth in Q 4 at 43% is lower than TIV growth of 4
Slide 16: Bus segment up thanks to JnNURM
Bus segment up thanks to JnNURM Orders recd. Deliveries made JnNURM Status (Nos.) 5,209 3,342 35% of the orders remain to be executed Along with the regular STU orders, the order book position is very healthy 369 Nos. invoiced in Q 1 FY ‘11 Current order outstanding 1498 Nos.
Slide 17: AL’s exports performance
AL’s exports performance Country / zone wise export in CY and PY is given under: 2009-10 2008-09 Sri Lanka 1948 1076 12% drop B ‘desh 2303 1214 in export Middle East 867 2523 volume in Others 861 1999 FY ‘10 Total 5979 6812 Middle East - yet to recover from the downturn. Robust growth in Sri Lanka
Slide 18: Concentration on non-cyclical business as de-risk policy continued
Concentration on non-cyclical business as de-risk policy continued 2008-09 Revenue break up 2009-10 Revenue break up Bus Cyclical 22% Cyclical Bus 55% 50% 18% Def. Kits & Spares 11% Def kits & Spares 10% Exports Exports 15% 8% Engines Engines 6% 4% Noncyclical business revenues around 45%; will im
Slide 19: Product Introductions in 2009-10
Product Introductions in 2009-10
Slide 20: Trucks
Trucks CT 1616 ETK 3116 2518 H Tipper 20 cum. 3516 Super
Slide 21: 2516S (32’)
2516S (32’) Product Highlights First batch of 10 no’s produced in March 2010 Optimized power for improved fuel average Highest in loading span (32’) Inline FIP advantage Heavy duty aggregates Application Areas Contract load, Parcel Automotive carrier (car, tractors, two wheelers) FMCG Another 32’ –
Slide 22: Hybus & intelligent vehicle
India’s first plug-in CNG hybrid bus & intelligent vehicle Hybus India’s first plug-in CNG AL and Cisco signed an MOU to develop hybrid bus was unveiled by AL in sector specific solution to enable vehicle recent auto expo. to infrastructure communication. Focus Greener than CNG, 20-30% more fuel on
Slide 23: Defence Vehicles
Defence Vehicles Armored Bus, Mine protected vehicle and Armored Stallion displayed at Defence Expo at New Delhi during Feb ’10 AL signed principle of cooperation with Paramount Group South Africa for development and manufacture of mine protected vehicles
Slide 24: After-market strength
After-market strength Added Current during FY ’10 2516 HT Dealership outlets 20 180 Authorized Service Centres 13 151 (ASCs) Work bays 96 2396
Slide 25: Customer Care: Raising the bar
Customer Care: Raising the bar The national helpline comes with the promise of Response within 4 hours anywhere on the Golden Quadrilateral Restoration (vehicle back on road) in 48 hours TatkaAL rolled out along GQ in 2nd Jan ’10 & well received by customers.
Slide 26: Capacity expansion
Capacity expansion Modern, fully-integrated manufacturing facility at Pantnagar commissioned in Mar ’10 Balanced capacity availability between North & South. Benefits of logistics to accrue. At full capacity, will roll out 50,000 vehicles, including the U-Truck on two shift basis. Set up with an inv
Slide 27: Capacity expansion contd..
Capacity expansion contd.., Alwar: New bus body building facility put up with globally bench-marked processes and machinery – Capacity: 1800 buses; Investment Rs. 20 Cr. High-end ULE buses roll out from Alwar Unit for supply to Northern STUs
Slide 28: Unbroken track record of profitability maintained
Unbroken track record of profitability maintained Rs Lakhs % of % of % 2008-09 Net 2009-10 Net growth Sales Sales Net Sales / income from operations 598107 100.0 724471 100.0 21.1 Gross operating margin 46944 7.8 76284 10.5 62.5 Financial expenses 11871 2.0 8113 1.1 (31.7) Other income 4962 0.8 7045
Slide 29: Reasons for margin improvement
Reasons for margin improvement Focused on improving operating margin through: – Pricing – Cost control Pricing: 5% (Rs. 47500/- per vehicle) pricing action taken in three tranches comprising 2.1% in July ‘09, 1.5% in Oct ‘09 and 1.4% in Jan ’10.
Slide 30: Reasons for margin improvement contd..
Reasons for margin improvement contd.., Cost Control Material cost – Recovery of material cost increases sanctioned during HY 1 of FY ’09 (Around Rs. 55000/- per vehicle) – Effectively contained steel and rubber cost increases during Q 3 & Q 4 (Increase granted Rs. 16000/- per vehicle). Operating Co
Slide 31: Highlights of Financial performance
Highlights of Financial performance Working Capital: Rs. Cr Inventory Vehicle Receivables Net Inventory Working (in Nos.) Capital Mar ‘09 1330 6358 931 1090 Sep ‘09 1252 5890 637 885 Dec ‘09 1747 9169 785 1618 Mar ‘10 1638 7062 915 892 Cash & carry system introduced in May ’09. Days outstanding im
Slide 32: CV Industry Outlook 2010-11
ae 2010-11 CV Industry Outlook
Slide 33: Economic outlook conducive
Economic outlook conducive Economic growth estimates by CMIE are as under: 2009-10 2010-11 Agriculture 0.2 5.8 Industry 9.3 9.6 Services 9.3 9.8 Outlay planned in Construction 8.5 10.0 Union Budget for Exports -3.8 15.2 Road building Rs. 199 bn. – Imports -7.1 14.4 increase by 13%. GDP 7.4 9.2 RBI h
Slide 34: Infrastructure plan – NHAI projects
Infrastructure plan – NHAI projects Project Awards 2009 - 11E (Rs. 62039 Cr.) East - 13% North - 26% West - 26% Central - 2% South - 32% North South Central West East Source: NHAI JM Financial NHAI awarded Contracts worth Rs. 19930 Cr for South South market likely to witness significant growth in
Slide 35: Outlook – appears promising
Outlook – appears promising Positives: With the economy doing well and infrastructure high on Govt’s priority list, CV industry should do well Better road systems will increase demand for superior, factory built, fully built vehicles Govt. mandate for use of school buses over private utility vehicle
Slide 36: I Qtr performance
ae 2010-11 | Qtr performance
Slide 37: Economic growth sustained in Q1
Economic growth sustained in Q 1 Q 1 FY ’11 Q 4 FY ’10 GDP 9.0 8.6 Agriculture 3.7 0.7 Industry 11.4 13.3 Service 9.4 8.4 Mining & quarrying 11.0 14.0 Construction 6.0 8.7 Indian Rail Revenue 9.0* 2.4 Exports 24.3* 24.2 Imports 29.1* 44.2 * YTD May ‘10 only Source: CMIE Growth Dampners: Diesel pri
Slide 38: CV Market Performance – Trucks
CV Market Performance – Trucks Segment Q1 Q4 Q1 Q-o-Q Y-o-Y FY ’11 FY ‘10 FY’10 % % Haulage 8022 10500 4953 (24) 62 Tippers 7824 11649 5094 (33) 54 Tractors 6065 6560 1464 (8) 314 MAV 26208 30052 12450 (13) 111 ICV 11523 15415 7447 (25) 55 Total 59642 74176 31408 (20) 90 Q 4 growth momentum mainta
Slide 39: CV Market Performance - Buses
CV Market Performance - Buses Segment Q1 Q4 Q1 Q-o- Q Y-o-Y FY ’11 FY ’10 FY ’10 % % Private 3895 4819 3007 (19) 30 STU (Incl. JnNURM) 3575 6972 2202 (49) 62 ICV 4104 2697 2273 52 81 Total 11574 14488 7482 (20) 55 Bus market continues to grow at 55% in last two quarters. ICV bus segment has witn
Slide 40: AL’s performance Q1 2010-11
AL’s performance Q 1 2010-11 Segment Q4 Full Year Q1 FY ’10 2009-10 FY ’11 Consistent volume & MS growth Bus – TIV 14488 43081 11574 observed Growth Y-O-Y % 56.1 23.5 54.7 - ALL 5485 16405 4184 Highest ever I Qtr sale Growth Y-O-Y % 29.6 2.4 89.2 volume in Company’s history - ALL MS% 37.9 38.1 36.
Slide 41: AL’s exports performance
AL’s exports performance Country / zone wise export in Q 1 FY ‘11 and Q 4 FY ‘10 is given under: Q 1 2010-11 Q 4 2009-10 Q 1 FY ‘11 Sri Lanka 761 750 export B ‘desh 644 688 volumes at Middle East 371 338 about Q 4 FY ‘10 Others 164 180 level Total 1940 1956 Middle East - showing signs of recovery.
Slide 42: Concentration on non-cyclical business as de-risk policy continued
Concentration on non-cyclical business as de-risk policy continued IV Qtr FY ‘10 Revenue break up I Qtr FY ‘11 Revenue break up Bus Bus 20% 17% Cyclical Cyclical 64% Defence 66% Kits & Spares 6% Defence Kits & Spares 7% Exports Exports 8% 6% Engines Engines 3% 3% Noncyclical business revenues arou
Slide 43: Q1 FY ‘11 Financial Performance
Q 1 FY ‘11 Financial Performance Rs Lakhs % of % of % of I Qtr IV Qtr I Qtr YOY % Net Net Net 2010-11 2009-10 2009-10 growth Sales Sales Sales Net Sales / income from operations 234798 100.0 293904 100.0 91807 100.0 155.8 Gross operating margin 23540 10.0 37839 12.9 1779 1.9 1223.2 Financial expense
Slide 44: AL's Strategies/Plans
a AL's Strategies/Plans
Slide 45: Unveiling U Truck range
Unveiling U Truck range The U TRUCK platform Roll out by Oct, 2010 25 models planned for launch in next 18 months U 4932 Tractor & U 2523 Tipper unveiled in Jan ‘10 Auto Expo. U Truck platform will straddle entire range of tractors, tippers and haulage covering 16 – 49 tonnage segments Powered by BS
Slide 46: U Truck 4932 Tractor
U Truck 4932 Tractor Faster turnaround, more up time, higher pay load Increased fuel efficiency greater comfort and safety Configuration: 6x4 Tractor 16 Speed Synchro Mesh overdrive GVW – 49 T with triple axle trailer Gear Box (16 forward + 2 reverse) Neptune 6 Cyl 8 ltr inline engine Brakes: Dual L
Slide 47: U Truck 2523 Tipper
U Truck 2523 Tipper Faster turnaround, more uptime Increased and higher fuel payload efficiency greater comfort & fully built solutions Configuration: 6x4 Tipper Brakes: Dual Line air brakes GVW – 25 Tonne Cab: Suspended tiltable day cab with H Series 6 Cylinder 5.7 ltr inline CRS optional a/c engin
Slide 48: Bus on the anvil
Bus on the anvil The IT 09 – Developed by the AL-TVS-IRIZAR joint venture.
Slide 49: Ready for migration
Ready for migration Now slated for October ’10 Ready with the products for upgrading and both technologies SCR – with the ‘H’ series engines EGR – with the Neptune range BS III trucks to cost around Rs. 40k more than BS II Similarly, BS IV costs around Rs. 100k more than BS III
Slide 50: Capacity creation
Capacity creation Bus plant at Ras Al Khaimah A vital manufacturing facility to feed GCC and African markets Production has already begun Initially to produce 2,000 buses annually Eventually to produce trucks too
Slide 51: Hinduja Leyland Finance gets RBI nod
Hinduja Leyland Finance gets RBI nod A much-needed financing arm HLF has commenced operations in 130 centres covering 16 states Target to have a presence in all Indian states in a year’s time and network strength of 300 centers in three years Initial capital of Rs 100 crore - contribution by Ashok L
Slide 52: Volume projection Vs Capacity available
Volume projection Vs Capacity available Qtr I Full Year Full Year YOY 2010-11 2010-11 2009-10 Growth Actual Estimate Actual FY ’11 BUSES - TIV 11574 47000 43081 9 - ALL 4184 18500 16405 13 - MS % 36 39 38 TRUCKS - TIV 59642 248000 201977 23 - ALL 15059 61500 40734 51 - MS % 25 25 20 TOTAL - TIV 7121
Slide 53: Margin Outlook
Margin Outlook Targeting to maintain / improve operating margins above 10% for FY ‘11 to be supported by: Pricing actions Rs. 38000/- per vehicle (around 4%) taken during Apr ’10 & June ‘10 Commodity based price increase pressure (mainly steel, rubber and aluminum) to be contained. Stringent control
Slide 54: Profit predictions by research analysts of broking firms
Profit predictions by research analysts of broking firms CLSA Morgan Stanley BNP Paribas Edelweiss FY ‘11 FY ’12 FY ‘11 FY ’12 FY ’11 FY 12 FY ’11 FY’12 Vehicle (Nos.) 91265 103651 88187 98769 91879 100738 89860 102371 Revenue (Rs. Cr) 10432 12313 10436 12055 10850 12422 10000 11450 EBITDA (Rs. Cr)
Slide 55: Capex and funding Plans
Capex and funding Plans In FY 2010 Capex incurrence was Rs. 810 Cr Investments in JVs Rs. 142 Cr Total loan outstanding at Rs. 2200 Cr by Mar ’10 with gearing at 0.9:1 In next 2 years likely level of: Capex Rs. 1200 Cr Investment in JVs Rs. 800 Cr Plan to contain total borrowings within Rs.800 Cr. o
Slide 56: Progress on JVs & Strategic investments
Progress on JVs & Strategic investments
Slide 57: Investment in Optare UK
Investment in Optare UK To subscribe for a 26% stake in Optare Plc UK (US$ 7.5 Mln). Pioneer of low floor double decker in UK. Optare known for its low carbon range of low floor, mid buses and modern range of city buses. Optare’s electric bus has secured several orders as more countries in Europe pr
Slide 58: Light truck JV with Nissan
Light truck JV with Nissan LCV JV progressing well Product introduction in mid 2011. Investment by AL in JV to be around Rs. 350 Cr. over few years.
Slide 59: Construction equipment JV with John Deere
Construction equipment JV with John Deere New company formed with 50:50 partnership with John Deere Manufacturing facility being built at Gummidipoondi (near Chennai) Pilot production to start by November ‘10 Product roll out early 2011 Investment by AL in JV to be around Rs. 50 Cr spread over few y
Slide 60: Joint venture with ALTEAMS
Joint venture with ALTEAMS Plant inaugurated in January 2010 Fully established to meet both Telecom and automobile sector requirements Production on in full swing Supplying Gear box casing, case oil coolers & connection housings to AL. Cost advantage 5% Future supplies to include cylinder headcover
Slide 61: Thank You
ae Thank You
Slide 62: Freight rates movement
Freight rates movement Truck rates from Kolkata to major cities Truck rates from Chennai to major cities 4.00 5.00 4.00 3.00 3.00 (Rs. '000) (Rs. '000) 2.00 2.00 1.00 1.00 0.00 0.00 Jul-07 Jul-08 Jul-09 Oct-09 Jan-10 Apr-10 Jun-10 Jul-10 Jul-07 Jul-08 Jul-09 Oct-09 Jan-10 Apr-10 Jun-10 Jul-10 Chenna
Slide 63: Wider presence in Automobile Sector
Automotive Sector LCVs M&HCV Defence Construction equipment Foundry Engines & Components Business Auto Electronics Exhaust System Engineering and Testing Services Technology Wider presence in Automobile Sector
Slide 64: Ashok Leyland shareholding pattern
Ashok Leyland shareholding pattern (as on 30th June, 2010) Hinduja Automotive Ltd 50.98% Residents 9.55% Body corporate & others 6.43% Banks & MFs 5.21% Fis, Insurance FIIs Co, State Govt, 13.62% Govt Companies 14.21%