Balance Sheet

Mar '05

Mar '06

Mar '07

Mar '08

12 mths

12 mths

12 mths

12 mths
(Rs. in crores)

Sources Of Funds
Total Share Capital
Equity Share Capital
Share Application Money
Preference Share Capital
Reserves
Revaluation Reserves
Networth
Secured Loans
Unsecured Loans
Total Debt
Total Liabilities

39.94
39.94
0
0
1,453.44
0
1,493.38
0
201.76
201.76
1,695.14

39.94
39.94
0
0
1,969.39
0
2,009.33
0
185.78
185.78
2,195.11

39.94
39.94
0
0
2,430.12
0
2,470.06
0
165.17
165.17
2,635.23

39.94
39.94
0
0
2,946.30
0
2,986.24
0
132
132
3,118.24

Application Of Funds
Gross Block

1,104.19

1,471.97
367.78
522.60
92.89
0.06
949.37
274.89
44.19
2,061.89
226.55
158.66
23.22
408.43
278.63

1,800.63
328.66
635.10
112.50
0.06
1,165.53
216.16
189.92
1,973.87
275.58
335.25
35.26
646.09
268.04

1,938.78
138.15
782.52
147.42
0.08
1,156.26
-9.27
408.49
2,566.82
317.1
297.44
130.58
745.12
196.37

Less: Accum. Depreciation

429.71

Net Block

674.48

Capital Work in Progress

Investments
Inventories
Sundry Debtors
Cash and Bank Balance
Total Current Assets
Loans and Advances

40.85
2,026.65
204.26
89.55
17.14
310.95
243.75

Fixed Deposits
Total CA, Loans & Advances
Deffered Credit
Current Liabilities
Provisions
Total CL & Provisions
Net Current Assets
Miscellaneous Expenses
Total Assets
Contingent Liabilities
Book Value (Rs)
Working capital

0.46

135.5

0.52

0.51

555.16
0
1,117.29
484.71
1,602.00
-1,046.84
0
1,695.14

822.56
0
1,192.98
489.92
1,682.90
-860.34
0
2,195.11

914.65
0
1,171.50
437.24
1,608.74
-694.09
0
2,635.23

942
0
1,455.57
499.76
1,955.33
-1,013.33
0
3,118.24

0
74.79

73.48
100.62

165.59
123.7

56.37
149.55

-823.48

-807.77

-560.67

-841.03

Mar '09

Mar '10

Mar '11

Mar '12

12 mths

12 mths

12 mths

12 mths

39.94
39.94
0
0
3,760.81
0
3,800.75
0
78.49
78.49
3,879.24

39.94
39.94
0
0
3,425.08
0
3,465.02
0
66.03
66.03
3,531.05

39.94
39.94
0
0
2,916.12
0
2,956.06
1,458.45
32.71
1,491.16
4,447.22

39.94
39.94
0
0
4,249.89
0
4,289.83
994.85
0
994.85
5,284.68

2,516.27
577.49
942.56
160.04
0.06
1,573.71
417.45
120.54
3,368.75
326.83
149.94
217.49
694.26
325.8

2,750.98
234.71
1,092.20
149.64
0.05
1,658.78
85.07
48.14
3,925.71
436.4
108.39
1,863.48
2,408.27
438.46

5,538.46
2,787.48
1,458.18
365.98
0.07
4,080.28
2,421.50
125.14
5,128.75
524.93
130.59
47.75
703.27
783.48

6,308.26
769.80
2,522.75
1,064.57
0.17
3,785.51
-294.77
193.95
3,964.26
675.57
272.31
56.1
1,003.98
926.99

(Rs. in crores)

2.08

43.73

23.77

20.72

1,022.14
0
1,678.93
526.97
2,205.90
-1,183.76
0
3,879.24

2,890.46
0
3,965.69
1,026.35
4,992.04
-2,101.58
0
3,531.05

1,510.52
0
5,316.40
1,081.07
6,397.47
-4,886.95
0
4,447.22

1,951.69
0
3,520.66
1,090.07
4,610.73
-2,659.04
0
5,284.68

100.54
190.33

73.04
173.52

131.9
148.03

252.62
214.83

-1,202.16 -3,420.90 -4,660.88 -2,572.78

pr
H
2
0
H
ofi
0
M
50
9
t3
Mar '05

Hero Honda Motors

Mar '06

12 mths

12 mths

Annualised

Annualised

Income
Sales Turnover
Excise Duty
Net Sales
Other Income
Stock Adjustments
Total Income

8792.46
1178.22
7614.24
26.62
14.95
7655.81

Y-O-Y Growth in Sales

Expenditure
Raw Materials
Power & Fuel Cost
Employee Cost
Other Manufacturing Expenses
Selling and Admin Expenses
Miscellaneous Expenses
Total Expenses
Expenses to Sales Ratio

Operating Profit
PBDIT
Interest
PBDT
Depreciation
Depreciation rate
EBIT
Operating Profit Margin
Other Written Off
Profit Before Tax
Extra-ordinary items
PBT (Post Extra-ord Items)
Tax
Effective Tax Rate

10254.06
1377.96
8876.10
26.51
14.97
8917.58
0.17

5207.22
32.88
267.97
177.46
358.03
144.40
6187.96
0.81

5956.74
46.65
320.61
238.39
446.98
156.79
7166.16
0.70

1441.23
1324.39
17.76
1306.63
89.38

1724.91
1542.44
15.58
1526.86
114.62
0.10
1427.82
0.16
0.00
1412.24
0.00
1412.24
440.90
0.3122

1235.01
0.16
0.00
1217.25
0.00
1217.25
406.78
0.3342

Reported Net Profit

Preference Dividend
Equity Dividend
Corporate Dividend Tax
Per share data (annualised)
Shares in issue
Earning Per Share (Rs)
Equity Dividend (%)
Book Value (Rs)

810.47
0
399.38
56.52

971.34
0
399.38
56.01

19.9688
40.59
1000.00
74.79

19.9688
48.64
1000.00
100.62

Hero Honda Motors

Mar '07

Mar '08

Mar '09

Mar '10

Mar '11

Mar '12

12 mths

12 mths

12 mths

12 mths

12 mths

12 mths

Annualised

Annualised

Annualised

Annualised

Annualised

Annualised

11731.75
1647.52
10084.23
36.53
3.20
10123.96

(Rs. In crores)
12518.83
14106.04
1703.29
1227.85
10815.54
12878.19
31.27
36.82
-14.14
22.09
10832.67
12937.10

16856.43
1016.85
15839.58
290.69
-11.54
16118.73

0.14

0.07

0.13

0.19

20787.27
1420.30
19366.97
238.27
27.00
19632.24
0.23

25252.98
1666.18
23586.80
347.46
94.03
24028.29
0.21

7375.38
52.45
353.81
280.17
558.99
206.11
8826.91
0.75

7935.89
56.55
383.45
304.11
563.27
190.36
9433.63
0.75

9394.95
73.70
448.65
354.08
669.34
206.54
11147.26
0.79

10822.99
81.05
560.32
454.36
885.03
280.64
13084.39
0.78

14236.45
100.47
618.95
409.89
1090.72
340.42
16796.90
0.81

17485.65
112.66
735.52
51.62
1257.84
389.52
20032.81
0.79

1260.52
1399.64
13.76
1385.88
139.78
0.09
1259.86
0.12
0.00
1246.10
0.00
1246.10
388.21
0.3115

1367.77
1584.07
13.47
1570.60
160.32
0.09
1423.75
0.13
0.00
1410.28
0.00
1410.28
442.40
0.3137

1753.02
1975.16
13.04
1962.12
180.66
0.09
1794.50
0.14
0.00
1781.46
0.00
1781.46
499.70
0.2805

2743.65
3,034.34
11.14
3,023.20
191.47
0.08
2842.87
0.18
0.00
2,831.73
0.00
2831.73
599.90
0.21

2597.07
2,835.34
28.2
2,807.14
402.38
0.15
2432.96
0.12
0.00
2,404.76
0.00
2,404.76
476.86
0.20

3,648.02
3,995.48
33.43
3962.05
1097.34
0.20
2898.14
0.12
0.00
2,864.71
0.00
2,864.71
486.58
0.17

857.89
0
339.47
57.69

967.88
0
379.41
64.48

1281.76
0
399.38
67.87

2231.83
0
2,196.56
371

1927.90
0
2,096.72
340.14

2378.13
0
898.59
145.77

19.9688
42.96
850.00
123.70

19.9688
48.47
950.00
149.55

19.9688
64.19
1000.00
190.33

19.9688
111.77
5500
173.52

19.9688
96.55
5250
148.03

19.9688
119.09
2250
214.83

Cash Flow Statement

Mar '05
12 mths

Mar '06
12 mths

Net Profit Before Tax

Net Cash From Operating Activities

1217.25
746.83

1412.24
936.08

Net Cash (used in)/from investing activities

-562.85

-323.49

Net Cash (used in)/from Financing Activities

-203.51

-471.23

-19.53
37.12
17.59

141.36
17.60
158.96

Net (decrease)/increase In Cash and Cash

Equivalents
Opening Cash & Cash Equivalents
Closing Cash & Cash Equivalents

Mar '07
12 mths
1246.10
625.05

Mar '08
Mar '09
12 mths
12 mths
(Rs. In crores)
1410.28
1781.46
1211.78
1359.03

Mar '10
12 mths

Mar '11
12 mths

2831.73
2686.64

2404.76
2288.11
-1322.31

-273.13

-781.01

-861.19

-527.63

-474.34

-432.33

-499.93

-2109.31

-122.42
158.72
36.30

-1.56
16.66
15.10

-2.09
15.19
13.10

49.70
13.45
63.15

Mar '12
12 mths
2864.71
2359.78
92.79

-989.18 -2458.16
-23.38
62.61
39.23

-5.59
39.32
33.73

FCFF Valuation - Stable Growth Model

Effective tax rate Calculation
Provision for tax. (in Rs.Crores)
PBT (in Rs.Crores)

Effective tax rate

Cost of equity
Risk free rate
Risk Premium
Beta

2010-11
476.86
2404.76

2011-12
486.58
2864.71

0.198

0.1699

(Ke)

2012
0.085
0.1076
0.66

Sources :
Rf; From Trading Economics
(Rm - Rf); From Hero Honda annual re
; Refer to beta values on RHS

Cost of equity

0.1560

Rf+(Rm-Rf)*

Cots of Debt

(Kd)
2010-11
0.0189
0.015
0.014

(Kd)
2011-12
0.0336
0.028
0.012

Cost of Debt (before-tax)

Cost of Debt (after-tax)
Cost of Debt After-tax (Annual Report)
Weight of equity (Annual Report)
Weight of debt
WACC

0.978
0.022

0.967
0.033

0.1529

0.1513

Income
Manufacturing & other expenses
PBDIT
Depreciation
EBIT

2010-11
19,632.24
16,796.90
2,835.34
402.38
2,432.96

2011-12
24,028.29
20,032.81
3,995.48
1,097.34
2,898.14

Net block (current year)

Net block (previous year)
Net Capital investment

2010-11
4,080.28
1,658.78
2,421.50

2011-12
3,785.51
4,080.28
(294.77)

Working capital (current year)

Working capital (previous year)
Increase in working capital

(4,660.88)
(3,420.90)
(1,239.98)

(2,572.78)
(4,660.88)
2,088.10

FCFF
Growth of firm

Valuation of firm, Crores

Value of Debt
PTPGPM

Company Annual Report (

1,710
0.050

17730
994.85
OCT 2009 BATCH, GROUP 10

Value of Equity
No. of Shares outstanding
Value per Equity Share
Market price on 3rd Dec, 2012

16735
19.97
838.06
Rs. 1820.70 per share

Summary :

The company has had an annual avg growth of 17% in the last few years
If we compare the stable growth scenario to market capitalization, the stable growth valuation is n
to market capitalization
We will futher evaluate using the 2 stage growth model

PTPGPM

OCT 2009 BATCH, GROUP 10

Equity Risk Premiums:

Years
2006-07
2007-08
nnual report 2008-09
S
2009-10
2010-11
2011-12
Average
Adjusted

0.1076
0.10
0.07
0.09

Average Risk Premium (1979-2011)

Company's annual report
Bloomberg (May, 2012)
Damodaran (July, 2012)

Beta
0.75
0.59
0.59 Company's Annual
0.63
Report
0.64
0.66
0.64
0.76

Report (Pg. 33) reports cost of debt as 1.2% for 2011-12

PTPGPM

OCT 2009 BATCH, GROUP 10

ation is no where close

PTPGPM

OCT 2009 BATCH, GROUP 10

PTPGPM

OCT 2009 BATCH, GROUP 10

PTPGPM

OCT 2009 BATCH, GROUP 10

FCFF Valuation-2 Stage Growth Mod

Effective Tax rate, as calculated in previous sheet
WACC, as calculated in previous sheet
Stable growth, assumption

0.1699
0.1513
0.05

Top-line growth (%)

2011-12

0.215

2012-13 (E)
2013-14 (E)
2014-15 (E)
2015 (E) onwards

0.130
0.130
0.130
0.050

Capex.
2007-08
2008-09
2009-10
2010-11
2011-12
Avg capex in the last 5 yrs

Crores
138.15
577.49
234.71
2,787.48
769.80
902

Based on inputs from

Management
For 2012-15 & 2015 onwards
2014-15

675
1900

Revenue
Expenditure
% exp to Revenue
PBDIT
Net block opening
Addition
Closing
Depreciation for yr.
Working capital

EBIT
Adjusted EBIT EBIT(1-tax)
Gross Cash flow
( adj EBIT+Dep)
Less :
Capital expenditure
Increase in WC
Free cash flow
Present value discounted using WACC

ICRA estimate for

Anand Rathi (two

Depreciation
Years
2008-09
2009-10
2010-11
2011-12
Average

Rate
0.09
0.08
0.15
0.20
0.128

2011-12
25252.98
20032.81
0.82
5220.17
4080.28
769.80
4850.08
1097.34
-2572.78
-10.19%
4122.83
3422.55
4519.89

769.80
-2572.78
6323

Value for growth period, crores

PTPGPM

OCT 2009 BATCH, GROUP10

TERMINAL VALUE
Terminal value at t= 3 yrs.
Terminal value at t=0
Total Value of firm, crores
Value of Debt
Value of Equity
No. of Equity Shares
Value of Equity Share
Market price on 3rd Dec, 2012
EPS
PE Multiple
Value today
EBITDA
EBITDA Multiple
Value today
Average

PTPGPM

55225.29
36192.10
45377.56
994.85
44382.71
19.97
2222.60
Rs. 1820.70 per share
119
13.00
2234
5220
6
1892
2063

OCT 2009 BATCH, GROUP10

PTPGPM

OCT 2009 BATCH, GROUP10

owth Model

timate for two wheelers volume growth

Rathi (two wheelers)

0.13
0.12

approx.
10-12%

Industry
reports
Annual
Report
2011-12

Highest
Lowest
2011-12
Historical average

0.81
0.70
0.79
0.77

2012-13 (E) 2013-14 (E) 2014-15 (E) 2015 (E) onwards

28535.87
32245.53
36437.45
38259.32
23475.96
26527.84
29976.45
31475.28
5059.91
3752.74
675.00
4427.74
877.27
-2907.24

5717.70
3550.47
675.00
4225.47
837.20
-3285.18

6461.00
3388.27
2575.00
5963.27
1181.51
-3712.26

6784.05
4781.76
675.00
5456.76
1081.15
-3897.87

4182.64
3472.20
4349.47

4880.50
4051.53
4888.73

5279.49
4382.75
5564.26

5702.89
4734.24
5815.39

675.00
-334.46
4009
3482

675.00
-377.94
4592
3464

2575.00
-427.07
3416
2239

675.00
-185.61
5326

9185
PTPGPM

OCT 2009 BATCH, GROUP10

Analysts's report

Date of recommendation

Motilal Oswal

3rd May 2012

2072

2336

Anand Rathi

9th April 2012

2055

2087

Emkay

2nd May 2012

2045

2045

Equitymaster

13th Jan 2012

1790

2270

re

Buy

Target Price

Is is a growth stock or a
value stock?

135

152

172

5060

5718

6461

PTPGPM

CMP

OCT 2009 BATCH, GROUP10

PTPGPM

OCT 2009 BATCH, GROUP10

Conservative
0.82

PTPGPM

Aggressive
0.79

OCT 2009 BATCH, GROUP10

View
Buy
Sell
Reduce
Hold

PTPGPM

OCT 2009 BATCH, GROUP10

PTPGPM

OCT 2009 BATCH, GROUP10

FCFF Valuation - Multi Stage Growt

Effective Tax rate, as calculated in previous sheet
WACC, as calculated in previous sheet
Stable growth, assumption
Capex.
2007-08
2008-09
2009-10
2010-11
2011-12
Avg capex in the last 5 yrs

Crores
138.15
577.49
234.71
2,787.48
769.80
902

Growth Rate

Revenue
Expenditure
% exp to Revenue
PBDIT
Net block opening
Addition
Closing
Depreciation for yr.
Working capital

0.82

EBIT
Adjusted EBIT EBIT(1-tax)
Gross Cash flow
( adj EBIT+Dep)
Less :
Capital expenditure
Increase in WC
Free cash flow
Present value discounted using WACC

Value for growth period, crores

TERMINAL VALUE
Terminal value at t= 3 yrs.
Terminal value at t=0
Total Value of firm, crores
Value of Debt
Value of Equity

53595.85
35124.25
44253.44
994.85
43258.59

No. of Equity Shares

Value of Equity Share

Market price on 3rd Dec, 2012

19.97
2166.18

Rs. 1820.70 per shar

Multi Stage Growth Model

16.99%
15.13%
5.00%
Projected growth in top-line
2011-12
0.15
2012-13
0.12
2013-14
0.09

2011-12 2012-13 (E) 2013-14 (E) 2014-15 (E)

0.214
0.15
0.12
0.09

2015 (E) onwards

0.05

2011-12 2012-13 (E) 2013-14 (E) 2014-15 (E)

25252.98 29040.93
32525.84
35453.16
20775.19 23891.46
26758.44
29166.70

2015 (E) onwards

37225.82
30625.03

4477.79
4080.28
769.80
4850.08
1097.34
-2572.78
-10.19%
3380.45
2806.27
3903.61

769.80
-2572.78
5707

5149.46
3752.74
675.00
4427.74
877.27
-2958.70

5767.40
3550.47
675.00
4225.47
837.20
-3313.74

6286.46
3388.27
2575.00
5963.27
1181.51
-3611.98

6600.79
4781.76
675.00
5456.76
1081.15
-3792.58

4272.19
3546.55
4423.82

4930.20
4092.79
4929.99

5104.96
4237.86
5419.37

5519.63
4582.11
5663.26

675.00
-385.92
4135
3591

675.00
-355.04
4610
3478

2575.00
-298.24
3143
2060

675.00
-180.60
5169

9129

20.70 per share