Ashok Leyland Limited · NSE:ASHOKLEY
Ashok Leyland — Investor Presentation (October 2007)
39 slides from Ashok Leyland's investor presentation, Oct 30, 2007
Slide 1: Annual Investor Meet
Annual Investor Meet October 30, 2007
Slide 2: Presentation outline
Presentation outline 1. Hinduja Group profile 2. Economy / Commercial Vehicle Industry (CV) 3. Performance 4. Plans & Strategies AL/30/10/07 2
Slide 3: Hinduja Group Profile
1 Hinduja Group Profile AL/30/10/07 3
Slide 4: The Hinduja Group
The Hinduja Group AL/30/10/07 4
Slide 5: The Hinduja Group Profile
The Hinduja Group Profile The Group was established in 1914 in Mumbai Entered Middle East in 1919 to grow trading initiatives Presence in more than 25 countries and operates across the globe Entered India for significant business activities in 1987 Employs over 35,000 personnel worldwide AL/30/10/07
Slide 6: Global Investments
Global Investments Media & Entertainment Automotive Banking & Finance Energy & Chemicals Real Estate IT/ITES AL/30/10/07 6
Slide 7: Global Investments: Automotive - Ashok Leyland
Global Investments Automotive Ashok Leyland Second Largest Commercial Vehicle manufacturer in India with turnover > USD 2 Bn. Operating in CV Truck & Bus segments > 7.5T GVW Employing over 12,000 people ISO / TS 16949 certificate – representing International quality standards specific to Auto indust
Slide 8: Economy / CV Industry
2 Economy / CV Industry AL/30/10/07 8
Slide 9: Commercial Vehicle (CV) Industry
Commercial Vehicle (CV) Industry CV Growth – CAGR 25% Growth over 5 years for five years - propelled (Avg. p.a.) by IIP – 8.2% Buoyant Economy Agriculture – 2.8% Freight generating sectors registering Exports – 23.5% robust growth Energy – 4.3% Focus on Infrastructure NHAI road projects development
Slide 10: M&HCV TIV: Bus and Truck
M&HCV TIV: Bus and Truck 275 549 R 25% CAG 207 472 198 506 161 395 246857 Bus 115 711 179345 172868 Truck 89 999 136804 95741 73185 16814 19970 24591 25638 28127 28692 '01-02 '02-03 '03-04 '04-05 '05-06 '06-07 Witnessed longest growth cycle Source: SIAM AL/30/10/07 10
Slide 11: Market Segment and growth
Market Segment and growth CAGR >16.2T 38% <3.5T 55% Source:CRISIL Research Growing segments: > 16.2 T GVW and < 3.5 T GVW AL/30/10/07 11
Slide 12: Freight Rates movement
Freight Rates movement Operating margins remain robust AL/30/10/07 12
Slide 13: Future growth drivers
Future growth drivers Continued Economic & Industrial Economy / Growth Industry Impetus to Infrastructure development thru’ Road building: NHAI Projects FY08 Estimates SEZ IIP : 9.7% Agriculture : 4.1% Industries in backward areas Exports : 12.0% CMIE Sept ’07 Logistics management by organised secto
Slide 14: Future growth drivers (Contd)
Future growth drivers (Contd) Statutory Slow and steady progress in retiring overaged vehicles Ban on Overloading – Mixed reaction by States Overloading restrictions in Jharkhand, West Bengal and Orissa Rated load practice in Uttar Pradesh Golden token for overload stopped in Rajasthan Marginal over
Slide 15: Average age of M & HCV
Average age of M & HCV AL/30/10/07 15
Slide 16: Future growth drivers (contd)
Future growth drivers (contd) NHAI Projects Projects Total Length 24 791 Kms 6 500 Kms Completed Phase V Nil 4 000 Kms Phase IIIA 3% 1 325 Kms Port & Others 36% 7 300 Kms NS-EW 18% Phase V covers 13 states with estimated cost of USD 10 Bn. 5 846 Kms GQ 96% Prospects Completed Under Imp Balance Devel
Slide 17: Current developments
Current developments II Half to register 4% growth to reach last year TIV Finance availability to CV sector has improved Interest rates softening Second hand vehicle prices remain firm Continued availability of freight TIV in Bus segment improved by 61 % in I Half Growth rate projections by research
Slide 18: Performance
3 Performance AL/30/10/07 18
Slide 19: M & HCV: TIV and MS
M & HCV: TIV and MS YOY Year Bus Truck Total Growth % HY108 TIV 19,777 96,305 116,082 AL 9,940 23,871 33,811 MS % 50.3% 24.8% 29.1% 120 Bps FY07 TIV 28,692 246,857 275,549 AL 11,673 65,063 76,736 MS % 40.7% 26.4% 27.8% 80 Bps FY06 TIV 28,127 179,345 207,472 AL 13,409 42,614 56,023 MS % 47.7% 23.8% 2
Slide 20: Operating Margin
Operating Margin FY06 FY07 AL % Industry % AL % Industry % Net Sale Revenue 100.0 100.0 100.0 100.0 Variable Cost 78.3 78.3 80.6 79.7 Employee Cost 7.7 6.2 6.7 5.5 Other Expenses 3.7 5.3 3.1 5.1 Gross Operating Margin 10.3 10.1 9.6 9.7 Gross Operating Margin in line with Industry average AL/30/10/07
Slide 21: Break-up of Sales in HY1 FY08
Break-up of Sales in HY1 FY08 HY1FY07 HY1FY08 % Inc (Dec) Domestic Buses 4482 10188 127 Trucks 29578 23858 (19) Total 34060 34046 - Exports 2843 2987 5 Total vehicles 36903 37033 - Engines 4095 5468 33.5 Spares incl Defence (Rs million) 2235 3796 69.8 Volume maintained inspite of drop in TIV by 5.2
Slide 22: Financials HY1 FY08
Financials HY1 FY08 Rs million HY1FY07 % HY1FY08 % Net Sales / Income from operations 30,996 100.0 33,670 100.0 Expenditure Material Cost 23,672 76.4 25,139 74.7 Staff cost 2,495 8.0 3,010 8.9 Other expenditure 2,293 7.4 2,093 6.2 Gross operating margin 2,537 8.2 3,428 10.2 Depreciation 692 2.2 879
Slide 23: TIV Volumes and AL growth FY08
TIV Volumes and AL growth FY 08 AL targeting around 90,000 veh. sale in FY 08; To sell 53,000 veh in HY2. Domestic market STU order book position comfortable Pvt. Pass. TIV registered > 20% growth in HY1. Expect trend to continue. Pvt. Passenger MS improvement by 53%. Expect to consolidate further D
Slide 24: Performance
Performance Target to maintain Operating Margin around 10% Achieved 10.2% Operating Margin in HY1 Pricing action at 2% (avg.) will improve average sales realisation Commodity prices softening Improved deliveries to Export / Defence markets Growth in Engine / Parts business: Target to achieve 25% gro
Slide 25: Plans & Strategies
4 Plans & Strategies AL/30/10/07 25
Slide 26: Plans & Strategies
Plans & Strategies Product Launches (Focus on Fully built solutions) Strategic Alliances Technology upgradation Plans and Spreading global Priorities Capacity footprint Build-up Cost Management De-risking Initiatives Focus on Engine / Thru’ employee Defence / Export involvement markets AL/30/10/07 2
Slide 27: Engine Development
Engine Development BS III Common Rail Engine successfully developed BS IV compliant engine development on target New platform for Euro IV and beyond under development AL/30/10/07 27
Slide 28: Capex / Capacity plans
Capex / Capacity plans Veh. P.a. Capacity enhancement Plan over 3 years Capacity - March 07 84,000 By June’08 – Ennore 50,000 By Sept’09 – Uttarkhand 50,000 Total Capacity over next 3 years 1,84,000 Capex for Capacity build up planned at Rs.40 bn. over 3 years including Product Development / Technol
Slide 29: Increasing Capacities
Increasing Capacities Uttarkhand Integrated manufacturing plant for 50,000 vehicles per annum to maximise in-house value addition Layouts made for lean manufacturing and automation Production start up : phase 1 by 2 nd half of FY09; Full capacity production by March FY10 Fiscal incentives will repay
Slide 30: De-Risking - Non Cyclical business to grow
De-Risking - Non Cyclical business to grow Engines Defence, Exports, Engines and Spare Parts contributing 18% of revenue. Defence, spare parts Engines Business Non Cyclical Engine volumes to double in 2 yrs Cyclical Exports Tied up with Chinese sources for procurement of 25 hp to 75 hp engines Targe
Slide 31: Cost Management / Resource utilisation
Cost Management / Resource utilisation Mission Gemba : A move focused on value addition in the shop floor through attitudinal alignment and process improvements resulted in through-put improvements across the company. Reflected in operating cost reduction by 120 bps in HY1 Project YE : To bring abou
Slide 32: Spreading The Global Footprint
Spreading The Global Footprint AVIA in Czech Republic Acquired AVIA TBU in FY07 Vehicles are Euro IV compliant. Scope exists to improve margins through cost reduction and scale up operations Organisation rebuilding, alternate sourcing and value engineering programme for cost reduction on course Oper
Slide 33: Strategic Alliances - Vertical integration
Strategic Alliances - Vertical integration JV with Alteams A 50:50 JV with the Alteams Group, Finland to produce High Pressure Die Casting (HPDC) aluminum components pre-dominantly for telecommunications & automotive sectors Target turnover of Rs. 6.5 billion in about 3 years, with total investment
Slide 34: Strategic Alliances
Strategic Alliances JV with Nissan To develop / manufacture and sell LCV range (2.5T - to 8T GVW) Bulk production in 2010 JVs to give synergy benefits to AL, in procurement, marketing and product technology Focus on both domestic and export market AL will explore participation by existing shareholde
Slide 35: Growth Prospects – Medium Term Outlook
Growth Prospects – Medium Term Outlook New generation engine and application centric vehicle development likely to differentiate product performance and improve customer profitability. Market share improvement to 33% from current 29% targeted over 3 years with customer centric initiatives Engines /
Slide 36: Growth Prospects in ROIC
Growth Prospects in ROIC Share of high margin business (Defence, Engines and Parts) to increase. Capacity build up at lower costs. Pricing action plus global sourcing to offset any commodity price increases and protect margins. Gemba initiatives plus productivity improvements through labour agreemen
Slide 37: Prospect for Shareholder Value Enhancements
Prospect for Shareholder Value Enhancements Business growth prospects Improvement in ROIC Debt infusion to maximise financial leverage Consistent dividend policy – around 50% payout Strategic investments (e.g.EFL) to appreciate in value Prospect of shareholder participation in many of the new ventur
Slide 38: The Share-holding Pattern
The Share-holding Pattern LRLIH 51% Resident Individuals / Trust / Clearing members 12% FIIs 18% FIs, Ins.Co, Banks,MFs 19% AL/30/10/07 38
Slide 39: Thank you
Thank you AL/30/10/07 39