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Maruti Suzuki India Ltd
Neutral
MRTI.BO, MSIL IN
Apr '11 - Moderating sales growth (+4% yoy) reaffirms
our neutral stance
• April sales at 97,155 units; growth rates moderate sharply: Sales
growth at Maruti moderated to 4% yoy in April 2011 (against 25%
growth in FY11). The management in its recently held conference call
had highlighted that sales are being impacted by higher ownership costs
which are impacting footfalls and customer conversions. They expect
growth rates for FY12E to moderate to c.12-15%. We re-iterate our
Neutral stance on the stock as growth will ease, given a) a demanding
base effect b) higher monthly running cost. See our note dated 27th Mar,
2011: Indian Automobiles: Getting Pricey
• Domestic segment sales at 87,114 (+9% yoy): Sales growth in mass
market A2 segment has grown at just 2% yoy, while growth was driven
by the C segment (+22% yoy) and the A3 segment (+39% yoy).
• Export sales continue to moderate: Maruti’s export shipments at 10,011
units (-23% yoy) declined, given sedate demand in Europe. In FY11,
exports to Europe declined to c.40% of volumes.
• Management conference call takeaways: Post results MSIL
management highlighted the following: 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).
• Over the month, the stock +1% mom outperformed the broad BSE Sensex
(-2% mom) as 4Q results were ahead of estimates.
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
Apr '11 - Moderating sales growth (+4% yoy) reaffirms
our neutral stance
• April sales at 97,155 units; growth rates moderate sharply: Sales
growth at Maruti moderated to 4% yoy in April 2011 (against 25%
growth in FY11). The management in its recently held conference call
had highlighted that sales are being impacted by higher ownership costs
which are impacting footfalls and customer conversions. They expect
growth rates for FY12E to moderate to c.12-15%. We re-iterate our
Neutral stance on the stock as growth will ease, given a) a demanding
base effect b) higher monthly running cost. See our note dated 27th Mar,
2011: Indian Automobiles: Getting Pricey
• Domestic segment sales at 87,114 (+9% yoy): Sales growth in mass
market A2 segment has grown at just 2% yoy, while growth was driven
by the C segment (+22% yoy) and the A3 segment (+39% yoy).
• Export sales continue to moderate: Maruti’s export shipments at 10,011
units (-23% yoy) declined, given sedate demand in Europe. In FY11,
exports to Europe declined to c.40% of volumes.
• Management conference call takeaways: Post results MSIL
management highlighted the following: 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).
• Over the month, the stock +1% mom outperformed the broad BSE Sensex
(-2% mom) as 4Q results were ahead of estimates.
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