Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Maruti Suzuki India Ltd
Neutral
MRTI.BO, MSIL IN
4QFY11 PAT above estimates on lower tax rate;
growth to moderate over FY12E
• 4Q PAT at Rs.6.6B (flat yoy): Maruti’s reported PAT was above ours and
Street estimates. The variance was driven by a lower tax rate, which declined to
20.2% (vs.31.2% qoq) as the company claimed R&D benefits for FY11 in the
current quarter. Results highlights: Maruti reported 4Q revenues of Rs99B
(+20% yoy) driven by healthy volume growth. EBITDA margins came in at
8.3% (+40bp qoq) – margins were aided by lower wage costs, given a writeback
of Rs200m related to gratuity expenses. Further, the company reallocated
Rs500m of tooling costs from raw materials to depreciation charges. However,
other costs increased (+100bp qoq) due to increased R&D expenses and repair
charges (on gas turbines), which partially offset the impact of the above.
• Management conference call takeaways: Volume Outlook: Management
highlighted that they expect demand to moderate to 12-15% over FY12. The
footfalls/customer conversions have declined (as compared to December), given
the impact of rising interest rates and fuel prices. Over FY11, Maruti’s volumes
have benefitted from rising rural sales (which account for 20% of sales).
Exports volume continued to decline on weaker demand from Europe
(contribution of Europe has declined to 40% of overseas sales) Limited impact
of earthquake on production: Management does not expect production to be
impacted due to the recent natural disaster (unlike Toyota and Honda, which
have announced production cuts). However, they are monitoring the situation
closely. Currency Hedges: Management has covered 40% of its JPY imports for
FY12E. Margins: Commodity costs, particularly for steel, rubber and copper
are expected to rise. The company expects to incur a 10-15% increase in steel
prices over 1HFY12E. Further, product discounts are likely to remain at
elevated levels. R&D: The company is ramping up its R&D spend in FY12E to
1.4% of sales (from 1.1% in FY11) Capex: The new unit at Manesar with a
capacity of 250,000 units will come onstream in 3QFY12E; this will raise the
production to 1.65m units p.a. Management expects to incur a capex of Rs40B
in FY12E (Rs22B in FY11).
• Price Target & Estimates: We are raising our EPS estimates by c.5% for
FY12-13 to factor in lower tax rates. We consequently set a revised Sep’11
target price of Rs1,400 based on 14x forward earnings (in line with mid-cycle
multiples). We believe that increasing cost of ownership will likely impact
growth rates from hereon and reiterate our neutral stance. Key downside risks:
weaker-than-anticipated industry growth rates, Upside risks: lower-thanexpected
build-up in competitive intensity.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Maruti Suzuki India Ltd
Neutral
MRTI.BO, MSIL IN
4QFY11 PAT above estimates on lower tax rate;
growth to moderate over FY12E
• 4Q PAT at Rs.6.6B (flat yoy): Maruti’s reported PAT was above ours and
Street estimates. The variance was driven by a lower tax rate, which declined to
20.2% (vs.31.2% qoq) as the company claimed R&D benefits for FY11 in the
current quarter. Results highlights: Maruti reported 4Q revenues of Rs99B
(+20% yoy) driven by healthy volume growth. EBITDA margins came in at
8.3% (+40bp qoq) – margins were aided by lower wage costs, given a writeback
of Rs200m related to gratuity expenses. Further, the company reallocated
Rs500m of tooling costs from raw materials to depreciation charges. However,
other costs increased (+100bp qoq) due to increased R&D expenses and repair
charges (on gas turbines), which partially offset the impact of the above.
• Management conference call takeaways: Volume Outlook: Management
highlighted that they expect demand to moderate to 12-15% over FY12. The
footfalls/customer conversions have declined (as compared to December), given
the impact of rising interest rates and fuel prices. Over FY11, Maruti’s volumes
have benefitted from rising rural sales (which account for 20% of sales).
Exports volume continued to decline on weaker demand from Europe
(contribution of Europe has declined to 40% of overseas sales) Limited impact
of earthquake on production: Management does not expect production to be
impacted due to the recent natural disaster (unlike Toyota and Honda, which
have announced production cuts). However, they are monitoring the situation
closely. Currency Hedges: Management has covered 40% of its JPY imports for
FY12E. Margins: Commodity costs, particularly for steel, rubber and copper
are expected to rise. The company expects to incur a 10-15% increase in steel
prices over 1HFY12E. Further, product discounts are likely to remain at
elevated levels. R&D: The company is ramping up its R&D spend in FY12E to
1.4% of sales (from 1.1% in FY11) Capex: The new unit at Manesar with a
capacity of 250,000 units will come onstream in 3QFY12E; this will raise the
production to 1.65m units p.a. Management expects to incur a capex of Rs40B
in FY12E (Rs22B in FY11).
• Price Target & Estimates: We are raising our EPS estimates by c.5% for
FY12-13 to factor in lower tax rates. We consequently set a revised Sep’11
target price of Rs1,400 based on 14x forward earnings (in line with mid-cycle
multiples). We believe that increasing cost of ownership will likely impact
growth rates from hereon and reiterate our neutral stance. Key downside risks:
weaker-than-anticipated industry growth rates, Upside risks: lower-thanexpected
build-up in competitive intensity.
No comments:
Post a Comment