Maruti, Steady performance; fx tailwinds drive earnings momentum :: HDFC Securities

Please Share::

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

��

-->
Steady performance; fx tailwinds drive earnings momentum MSIL’s 3QFY15 adjusted EBITDA at Rs 16.6bn (+23% YoY, 10% QOQ) was slightly better than expected. EBITDA margins expanded by ~90bps QoQ to 13.2%, of which 50bps was driven by favorable fx rates and balance by lower commodity costs and a richer mix. APAT at Rs 8.58bn (+26% YoY, -0.5% QoQ) missed consensus estimates by a small margin due to lower other income and higher depreciation. While the overall demand momentum continues to remain tepid, MSIL has gained market share (~320bps in past 4 quarters) with demand shifting back towards petrol models along with incremental volumes from its recent launches. Mgt believes that demand recovery and discount reductions could show up 2HFY16 onwards. We have raised our FY16E/FY17E by 12.2%/11.9% to incorporate current fx rates. Current valuations at 20.2x/15.4x P/E on FY16E/FY17E appear rich to us, considering MSIL’s earnings growth are significantly levered on favorable fx rates. We maintain our Neutral rating with a revised TP of Rs 3,816 based on 16x FY17E EPS.  Result summary : MSIL’s topline grew by 15.4% YoY on the back of 12.4% YoY increase in volumes and Net ASP improvement by ~3% YoY. EBITDA margin expansion of 90bps QoQ was driven largely by ~110bps improvement in gross margins on account of better JPY/INR realisation and lower commodity costs. Lower than expected treasury income and higher depreciation charges led to APAT coming in 2-3% below consensus estimates.  Earnings call highlights : (i) Share of diesel models in total industry PV sales has come down from 54% in the previous year to 46% at present (ii) Per the mgt, rural sales maintained a decent growth while urban markets have shown double digit growth in the past nine months (iii) Despite price hikes on vehicles post reversal in excise duty rates, footfalls have been relatively healthy, though conversions are yet to improve (iv) MSIL has a current capacity of 1.55mn units. In case of a higher than expected demand surge, MSIL would look to ramp-up production from its existing locations before the Gujarat plant commences operations in mid 2017 (v) Mgt expects exports to be flat in FY16 given the uncertain economic conditions in some of the markets.

LINK
http://www.hdfcsec.com/Share-Market-Research/Research-Details/StockReports/3010960