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Maruti Suzuki India -Expected disappointment, bottom likely hit…
Maruti Suzuki India’s (MSIL) Q3FY11 numbers had an expectedly
disappointing stance with net sales at | 9276.7 crore (I-direct estimate:
| 9489.5 crore) with 26.5% YoY and marginal 1.4% QoQ jump. This was
lower even with a strong volume performance (28.2% YoY, 5.4% QoQ
increase) as realisations dipped 1.5% QoQ due to higher average
discounts (10.3% QoQ). MSIL’s EBITDA margin declined 100 bps
sequentially to 9.7% due to higher seasonal discounts coupled with
unhedged forex positions and higher restructured employee payouts.
On the PAT front, MSIL saw a decline of 5.5% QoQ and 17.8% YoY to
touch | 565.2 crore driven by a weak operating performance. However,
we expect MSIL to have hit bottom on margins subject to steeper hikes
in commodity prices and a strong demand slowdown.
Highlights of the quarter
MSIL has witnessed strong volume growth at 3.3 lakh units in Q3FY11
and maintained its market share at 45.4% even in the wake of increasing
competition. The capacity expansion is in full tilt with capacity expected
to grow to 1.4 million units by April 2011 and 1.65 million units post
H1FY12. We expect the company to mitigate costs with increased
scalability and volume expansion as in the wake of higher running and
after sales costs MSIL would remain the preferred customer choice. On
the forex exposure front, MSIL has now hedged the euro exposure for the
next two quarters. However, on the yen front, which has the maximum
impact, it has gone ahead and kept it unhedged as it expects lifetime high
yen to correct, going ahead. MSIL has also restructured employee
payouts with recurring increase of 20 bps, going ahead, and one-time
payout of ~| 51 crore for the previous quarters.
Valuation
In view of real demand momentum, we have factored in strong volume
growth and increasing realisations with improving product mix with new
favourable product launches in FY12. In the short-term, untoward RM
prices, forex movement could play spoilsport. At the CMP of | 1239, the
stock is trading at 12.2x FY12E consolidated EPS of | 107.0. We have
valued MSIL at 13x FY12E cons. EPS of | 107 to arrive at a value of | 1390
per share. We change our rating from Strong Buy to Buy on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Maruti Suzuki India -Expected disappointment, bottom likely hit…
Maruti Suzuki India’s (MSIL) Q3FY11 numbers had an expectedly
disappointing stance with net sales at | 9276.7 crore (I-direct estimate:
| 9489.5 crore) with 26.5% YoY and marginal 1.4% QoQ jump. This was
lower even with a strong volume performance (28.2% YoY, 5.4% QoQ
increase) as realisations dipped 1.5% QoQ due to higher average
discounts (10.3% QoQ). MSIL’s EBITDA margin declined 100 bps
sequentially to 9.7% due to higher seasonal discounts coupled with
unhedged forex positions and higher restructured employee payouts.
On the PAT front, MSIL saw a decline of 5.5% QoQ and 17.8% YoY to
touch | 565.2 crore driven by a weak operating performance. However,
we expect MSIL to have hit bottom on margins subject to steeper hikes
in commodity prices and a strong demand slowdown.
Highlights of the quarter
MSIL has witnessed strong volume growth at 3.3 lakh units in Q3FY11
and maintained its market share at 45.4% even in the wake of increasing
competition. The capacity expansion is in full tilt with capacity expected
to grow to 1.4 million units by April 2011 and 1.65 million units post
H1FY12. We expect the company to mitigate costs with increased
scalability and volume expansion as in the wake of higher running and
after sales costs MSIL would remain the preferred customer choice. On
the forex exposure front, MSIL has now hedged the euro exposure for the
next two quarters. However, on the yen front, which has the maximum
impact, it has gone ahead and kept it unhedged as it expects lifetime high
yen to correct, going ahead. MSIL has also restructured employee
payouts with recurring increase of 20 bps, going ahead, and one-time
payout of ~| 51 crore for the previous quarters.
Valuation
In view of real demand momentum, we have factored in strong volume
growth and increasing realisations with improving product mix with new
favourable product launches in FY12. In the short-term, untoward RM
prices, forex movement could play spoilsport. At the CMP of | 1239, the
stock is trading at 12.2x FY12E consolidated EPS of | 107.0. We have
valued MSIL at 13x FY12E cons. EPS of | 107 to arrive at a value of | 1390
per share. We change our rating from Strong Buy to Buy on the stock.
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