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Operating results in line; Maintain Buy
Maruti Suzuki’s (MSIL) 3QFY12 operating results were largely in line with our
expectations with EBITDA margins at 5.3% compared to our estimate of 5.2%.
Higher than expected increase in blended realization helped the company absorb
the increase in RMC. As a result despite higher than expected RMC and other
expenditure, operating performance came in line. However, PAT stood higher at
Rs.2.1bn compared to our estimate of Rs.1.6bn on account of higher than
expected other income (Rs.1.6bn vs. est. Rs.1.2bn) and lower tax rate (21% vs.
est.28%). Though, the company will continue to face margin pressure in mediumterm,
we believe that the worst is behind and margins should improve from
3QFY12 levels. We continue to remain positive on the stock and maintain BUY
with a revised target price of Rs.1,307 (earlier Rs.1,288).
Operating results in line; PAT beats expectation: Driven by better than expected
realizations (up 7% QoQ driven by price hike in Nov 2010 on its diesel portfolio,
favourable product-mix change and better exports due to rupee depreciation) helped
the company absorb higher than expected RMC and other overheads, leading to in line
operating performance. However, PAT stood higher at Rs.2.1bn compared to our
estimate of Rs.1.6bn on account of higher than expected other income (Rs.1.6bn vs. est.
Rs.1.2bn) and lower tax rate (21% vs. est. 28%). Company hiked prises by 1-3% across its
product range effective 20 Jan 2011.
Conference call highlights: 1.) Discount stood lower in 3QFY12 at
Rs.12,200/vehicle vs. Rs.13,500/vehicle in 2QFY12, 2.) MSIL to source 100,000 diesel
engines annually from Fiat, current capacity for diesel engines at SPIL stands at
290,000 units 3.) MSIL has incurred capex of Rs.20bn YTDFY12 and has guided for
capex of Rs.25-30bn in FY12E and FY13E each. 4.) 4QFY12 will have an Impact
related to indirect imports by vendors as this is compensated to vendors with a
quarter lag, the impact is likely to be higher than in 3QFY12 5.) Company has
hedged $/Yen, Euro/Yen for 4QFY12E but $/Re is kept open.
Valuations and Recommendations: At the CMP of Rs.1,161, the stock is currently
trading at 23x FY12 EPS of Rs.51 and 14x FY13E EPS of Rs.82. We reiterate our BUY
rating with a revised target price of Rs1,307 (core business valued at 15x FY13E
earnings + Rs63 as value of investments in subsidiaries + Rs240 value of cash and
cash equivalents).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Operating results in line; Maintain Buy
Maruti Suzuki’s (MSIL) 3QFY12 operating results were largely in line with our
expectations with EBITDA margins at 5.3% compared to our estimate of 5.2%.
Higher than expected increase in blended realization helped the company absorb
the increase in RMC. As a result despite higher than expected RMC and other
expenditure, operating performance came in line. However, PAT stood higher at
Rs.2.1bn compared to our estimate of Rs.1.6bn on account of higher than
expected other income (Rs.1.6bn vs. est. Rs.1.2bn) and lower tax rate (21% vs.
est.28%). Though, the company will continue to face margin pressure in mediumterm,
we believe that the worst is behind and margins should improve from
3QFY12 levels. We continue to remain positive on the stock and maintain BUY
with a revised target price of Rs.1,307 (earlier Rs.1,288).
Operating results in line; PAT beats expectation: Driven by better than expected
realizations (up 7% QoQ driven by price hike in Nov 2010 on its diesel portfolio,
favourable product-mix change and better exports due to rupee depreciation) helped
the company absorb higher than expected RMC and other overheads, leading to in line
operating performance. However, PAT stood higher at Rs.2.1bn compared to our
estimate of Rs.1.6bn on account of higher than expected other income (Rs.1.6bn vs. est.
Rs.1.2bn) and lower tax rate (21% vs. est. 28%). Company hiked prises by 1-3% across its
product range effective 20 Jan 2011.
Conference call highlights: 1.) Discount stood lower in 3QFY12 at
Rs.12,200/vehicle vs. Rs.13,500/vehicle in 2QFY12, 2.) MSIL to source 100,000 diesel
engines annually from Fiat, current capacity for diesel engines at SPIL stands at
290,000 units 3.) MSIL has incurred capex of Rs.20bn YTDFY12 and has guided for
capex of Rs.25-30bn in FY12E and FY13E each. 4.) 4QFY12 will have an Impact
related to indirect imports by vendors as this is compensated to vendors with a
quarter lag, the impact is likely to be higher than in 3QFY12 5.) Company has
hedged $/Yen, Euro/Yen for 4QFY12E but $/Re is kept open.
Valuations and Recommendations: At the CMP of Rs.1,161, the stock is currently
trading at 23x FY12 EPS of Rs.51 and 14x FY13E EPS of Rs.82. We reiterate our BUY
rating with a revised target price of Rs1,307 (core business valued at 15x FY13E
earnings + Rs63 as value of investments in subsidiaries + Rs240 value of cash and
cash equivalents).
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