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Year ends with positive surprise…
Maruti Suzuki India’s (MSIL) Q4FY11 numbers were above our
estimates with net sales at | 9863.7 crore (I-direct estimate: | 9765.7
crore), a 19.8% YoY and 6.3% QoQ jump. This was driven by strong
volume growth (19.5% YoY, 3.8% QoQ increase) and realisations
improving 2.4% QoQ with richer product mix with sales of Kizashi and
SX4 diesel. EBITDA margins improved 50 bps sequentially to 10.2% due
to lower RM expenses with asset adjustment from vendors to the tune
of ~| 50 crore. Other expenses rose 90 bps QoQ due to higher R&D,
maintenance expenses. On the PAT front, MSIL’s profits were boosted
by lower tax rates as tax benefits pertaining to R&D were accounted for.
PAT came in at | 659.9 crore (I-direct estimate: | 595.7 crore)
Highlights of the quarter
MSIL has seen positive volume growth of 19.5% YoY at 3.4 lakh units and
maintained its overall market share of ~45%. The company expects to
maintain the industry outlook of 10-15% volume growth in FY12E though
footfalls have been declining. Capacity expansion is expected to grow to
1.65 million units post H1FY12. MSIL has undertaken capex of | 2,200
crore in FY11 and expects to spend | 4,000 crore in FY12E. The company
has also modified its accounting policies in line with IFRS that has caused
a 50 bps decline in RM costs QoQ and increase in depreciation expenses
by ~| 50 crore. On the forex front, MSIL has now hedged 40% of its yen
exposure and continues to monitor the same. The company also has seen
higher R&D spending (in Q4) at ~1.3% of net sales, which has also
provided tax benefits.
Valuation
We are positive on the demand scene and improving product mix.
However, we remain cautiously optimistic due to commodity price
uncertainties. At the CMP of | 1320, the stock is trading at 13.0x, 11.1x
FY12E, FY13E consolidated EPS of | 102.0, |118.6 respectively. We have
valued MSIL at 12x FY13E consolidated EPS of | 118.6 to arrive at a value
of | 1482 per share. We maintain our BUY rating on the stock and suggest
investors who have entered at higher levels make fresh entry on dips.
Outlook and valuation
Outlook
The passenger vehicle (PV) segment has witnessed strong demand in
FY11 with the overall PV segment growing at ~24%. MSIL has
undertaken capacity expansion with consistent demand growth and
would reach a capacity of 1.65 million by H2FY12. The new product
launches in the Swift, Dzire and SX4 segment along with the launch of the
premium sedan Kizashi has improved the product mix to a great degree
(2.4% QoQ realisation improvement). The company is also expected to
gain a strong edge with the increasingly stronger penetration in Tier-II, III
cities as it continues to increase its reach with 2,879 service networks
covering 1,373 cities with a target of ~4,000 service networks in the
coming years.
We continue to remain positive on volume growth even as short-term
challenges have emerged with rising interest rates and higher fuel costs.
Input prices and currency movements remain intermediate challenges
that MSIL continues to face with in-house costs rationalisation measures.
We have maintained our volume growth estimates for FY12E and
introduced FY13E with 1.68 million volume target. MSIL follows various
Kaizen and six sigma measures to improve operating efficiencies. We
expect increasing scalability to provide higher operating leverage and
support the margins movement upwards.
Valuation
We are positive on the demand scene and improving product mix.
However, we remain cautiously optimistic on account of commodity price
uncertainties. At the CMP of | 1320, the stock is trading at 13.0x, 11.1x
FY12E, FY13E consolidated EPS of | 102.0, | 118.6 respectively. We have
valued MSIL at 12x FY13E consolidated EPS of | 118.6 to arrive at a value
of | 1482 per share. We maintain our BUY rating on the stock and suggest
investors who have entered at higher levels make fresh entry on dips.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Year ends with positive surprise…
Maruti Suzuki India’s (MSIL) Q4FY11 numbers were above our
estimates with net sales at | 9863.7 crore (I-direct estimate: | 9765.7
crore), a 19.8% YoY and 6.3% QoQ jump. This was driven by strong
volume growth (19.5% YoY, 3.8% QoQ increase) and realisations
improving 2.4% QoQ with richer product mix with sales of Kizashi and
SX4 diesel. EBITDA margins improved 50 bps sequentially to 10.2% due
to lower RM expenses with asset adjustment from vendors to the tune
of ~| 50 crore. Other expenses rose 90 bps QoQ due to higher R&D,
maintenance expenses. On the PAT front, MSIL’s profits were boosted
by lower tax rates as tax benefits pertaining to R&D were accounted for.
PAT came in at | 659.9 crore (I-direct estimate: | 595.7 crore)
Highlights of the quarter
MSIL has seen positive volume growth of 19.5% YoY at 3.4 lakh units and
maintained its overall market share of ~45%. The company expects to
maintain the industry outlook of 10-15% volume growth in FY12E though
footfalls have been declining. Capacity expansion is expected to grow to
1.65 million units post H1FY12. MSIL has undertaken capex of | 2,200
crore in FY11 and expects to spend | 4,000 crore in FY12E. The company
has also modified its accounting policies in line with IFRS that has caused
a 50 bps decline in RM costs QoQ and increase in depreciation expenses
by ~| 50 crore. On the forex front, MSIL has now hedged 40% of its yen
exposure and continues to monitor the same. The company also has seen
higher R&D spending (in Q4) at ~1.3% of net sales, which has also
provided tax benefits.
Valuation
We are positive on the demand scene and improving product mix.
However, we remain cautiously optimistic due to commodity price
uncertainties. At the CMP of | 1320, the stock is trading at 13.0x, 11.1x
FY12E, FY13E consolidated EPS of | 102.0, |118.6 respectively. We have
valued MSIL at 12x FY13E consolidated EPS of | 118.6 to arrive at a value
of | 1482 per share. We maintain our BUY rating on the stock and suggest
investors who have entered at higher levels make fresh entry on dips.
Outlook and valuation
Outlook
The passenger vehicle (PV) segment has witnessed strong demand in
FY11 with the overall PV segment growing at ~24%. MSIL has
undertaken capacity expansion with consistent demand growth and
would reach a capacity of 1.65 million by H2FY12. The new product
launches in the Swift, Dzire and SX4 segment along with the launch of the
premium sedan Kizashi has improved the product mix to a great degree
(2.4% QoQ realisation improvement). The company is also expected to
gain a strong edge with the increasingly stronger penetration in Tier-II, III
cities as it continues to increase its reach with 2,879 service networks
covering 1,373 cities with a target of ~4,000 service networks in the
coming years.
We continue to remain positive on volume growth even as short-term
challenges have emerged with rising interest rates and higher fuel costs.
Input prices and currency movements remain intermediate challenges
that MSIL continues to face with in-house costs rationalisation measures.
We have maintained our volume growth estimates for FY12E and
introduced FY13E with 1.68 million volume target. MSIL follows various
Kaizen and six sigma measures to improve operating efficiencies. We
expect increasing scalability to provide higher operating leverage and
support the margins movement upwards.
Valuation
We are positive on the demand scene and improving product mix.
However, we remain cautiously optimistic on account of commodity price
uncertainties. At the CMP of | 1320, the stock is trading at 13.0x, 11.1x
FY12E, FY13E consolidated EPS of | 102.0, | 118.6 respectively. We have
valued MSIL at 12x FY13E consolidated EPS of | 118.6 to arrive at a value
of | 1482 per share. We maintain our BUY rating on the stock and suggest
investors who have entered at higher levels make fresh entry on dips.
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