Maruti Suzuki - In Line Quarter; Volume Outlook Conservative; Result :: Edelweiss

Please Share::

�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

��

-->

Maruti Suzuki’s (MSIL) Q2FY15 EBITDA at INR15.2bn (12.4% margin) was marginally below our estimate (but in line with consensus), largely owing to the MTM impact (~25bps) from adverse currency. Management commentary was positive: (1) retail sales during festive period moved up 10% YoY; (2) revival in urban demand - up 10% in H1FY15 largely due to recovery in Q2FY15 ; (3) rising share of first-time buyers to 42% in H1FY15 versus 37% in same period last year; and (4) strong demand for Ciaz and AMT variants. Even so, the conservative H2FY15 growth guidance of 6% (ex Ciaz, it implies growth of 2-3%) surprised. We expect 11% growth in H2FY15 (Q3FY15E at 5%) versus 15% in H1FY15. We expect strong uptick in margins, led by currency and better product mix in H2FY15 and FY16. Higher discounts and limited recovery in entry segment cars remain key monitorables.

Operating performance marginally below estimate

Revenue/EBITDA at INR123bn/INR15.2bn was ~1%/~2% below our estimate, but in line with consensus. EBIDTA margin at 12.4% was in line. Operating leverage benefits were offset by adverse currency impact of ~25bps. APAT at INR9bn was ~4% below estimate owing to lower other income (INR1.9bn versus estimate of INR2.6bn). Tax rates dropped to ~21% (~25% in Q1FY15) due to deferred tax.

Performance set to improve further

Management remains cautious over demand outlook for FY15 with ~10% YoY growth (~15% YTD) as demand pull remains elusive (discounts remain high). We, however, beg to differ. We believe there are sufficient levers for a ~15% volume growth led by new launches, higher AMT capacity, rising preference for petrol segment and lower diesel penetration (versus industry). There are enough catalysts too - favourable currency, product mix and lower discounts will drive ~290bps rise in margins over FY14-16E.

LINK

https://www.edelweiss.in/research/Maruti-Suzuki--In-Line-Quarter;-Volume-Outlook-Conservative;-Result-Update-Q2FY15/27401.html