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Maruti Suzuki India
Margin bottoms, valuations attractive; upgrade to Buy
While Maruti Suzuki India’s (MSIL) 3Q results were
unimpressive, as expected, we believe the outlook is better
hereon. Also, at current market price, valuations are attractive.
We upgrade MSIL to Buy from Sell and trim our estimates.
Results slightly below estimates. In 3Q, MSIL’s income grew
26.5% yoy to `94.9bn; EBITDA margin was 10% and adjusted
profit was `6.01bn (our estimate: `6.4bn).
Market share sustains. Despite competition concerns, MSIL has
maintained its domestic PV market share at 45.5% in 9MFY11
(lower only 20bps yoy). Overall PV market share (including
exports) was higher 50bps yoy, in 9MFY11. We expect ramp-up in
capacity to help MSIL maintain market share at current levels.
Margin bottoms. MSIL’s FY11e EBITDA margin, at 10.1%, is
the lowest since FY03. FY11 margin was impacted by increase in
royalty, wage hike, lower realization on exports and unfavorable
currency movement together with commodity pressure. We
believe margins have bottomed out, and estimate steady margin
improvement of 90bps over FY11-13e.
Valuation and risks. Assuming conservative volume growth
estimate of 12.3% in FY12e and 9.7% in FY13e, MSIL trades at
attractive valuations of 12.7x FY12e and 10.5x FY13e EPS (past
6-year average one-year forward PE is 14x). We upgrade to Buy
and trim our price target to `1,475 from `1,539. Risks: Slump in
car sales, unfavorable currency movement; rise in commodities.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Maruti Suzuki India
Margin bottoms, valuations attractive; upgrade to Buy
While Maruti Suzuki India’s (MSIL) 3Q results were
unimpressive, as expected, we believe the outlook is better
hereon. Also, at current market price, valuations are attractive.
We upgrade MSIL to Buy from Sell and trim our estimates.
Results slightly below estimates. In 3Q, MSIL’s income grew
26.5% yoy to `94.9bn; EBITDA margin was 10% and adjusted
profit was `6.01bn (our estimate: `6.4bn).
Market share sustains. Despite competition concerns, MSIL has
maintained its domestic PV market share at 45.5% in 9MFY11
(lower only 20bps yoy). Overall PV market share (including
exports) was higher 50bps yoy, in 9MFY11. We expect ramp-up in
capacity to help MSIL maintain market share at current levels.
Margin bottoms. MSIL’s FY11e EBITDA margin, at 10.1%, is
the lowest since FY03. FY11 margin was impacted by increase in
royalty, wage hike, lower realization on exports and unfavorable
currency movement together with commodity pressure. We
believe margins have bottomed out, and estimate steady margin
improvement of 90bps over FY11-13e.
Valuation and risks. Assuming conservative volume growth
estimate of 12.3% in FY12e and 9.7% in FY13e, MSIL trades at
attractive valuations of 12.7x FY12e and 10.5x FY13e EPS (past
6-year average one-year forward PE is 14x). We upgrade to Buy
and trim our price target to `1,475 from `1,539. Risks: Slump in
car sales, unfavorable currency movement; rise in commodities.
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