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UBS Investment Research
Maruti Suzuki India
V aluations remain compelling [EXTRACT]
Reiterate Buy on compelling valuation
We believe Maruti Suzuki India’s (Maruti) valuation reflects near-term volume and
macro headwinds. We expect the competitive environment to stabilise in FY13.
Maruti remains our preferred stock in the sector. The stock continues to trade at the
low end of its historical range (trading at FY12E PE of 13x and EV/EBITDA of
7x, versus the historical average of 14x and 8x, respectively).
Muted outlook for H1 FY12; recovery expected in H2
We believe the sharp increase in petrol prices has further impacted a slowing
demand environment. We believe Maruti will likely be affected in H1 FY12 due
inadequate capacity for diesel models. However, we expect a strong recovery in H2
FY12 as the second unit of the Manesar factory comes online. We expect two to
three new launches (New Swift, New Dzire [under 4m sedan] and the R3 conceptbased
UV) in H2 FY12 that are likely to drive growth momentum in FY13.
We reduce our EPS estimates for FY12/13
We reduce our EPS estimates 4%/5% to Rs91.08/105.41 for FY12/13 due to weak
volumes and a rising depreciation expense partially offset by declining exports
(lower-margin segment) and an appreciating euro. Management expects to
maintain the EBITDA margin of around 10%. We expect EBITDA margins of
10.2%/10.2% for FY12/FY13.
Valuation: maintain Buy, lower price target from Rs1,650 to Rs1,580
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation drivers using UBS’s VCAM tool, assuming a WACC of
11.5%.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Maruti Suzuki India
V aluations remain compelling [EXTRACT]
Reiterate Buy on compelling valuation
We believe Maruti Suzuki India’s (Maruti) valuation reflects near-term volume and
macro headwinds. We expect the competitive environment to stabilise in FY13.
Maruti remains our preferred stock in the sector. The stock continues to trade at the
low end of its historical range (trading at FY12E PE of 13x and EV/EBITDA of
7x, versus the historical average of 14x and 8x, respectively).
Muted outlook for H1 FY12; recovery expected in H2
We believe the sharp increase in petrol prices has further impacted a slowing
demand environment. We believe Maruti will likely be affected in H1 FY12 due
inadequate capacity for diesel models. However, we expect a strong recovery in H2
FY12 as the second unit of the Manesar factory comes online. We expect two to
three new launches (New Swift, New Dzire [under 4m sedan] and the R3 conceptbased
UV) in H2 FY12 that are likely to drive growth momentum in FY13.
We reduce our EPS estimates for FY12/13
We reduce our EPS estimates 4%/5% to Rs91.08/105.41 for FY12/13 due to weak
volumes and a rising depreciation expense partially offset by declining exports
(lower-margin segment) and an appreciating euro. Management expects to
maintain the EBITDA margin of around 10%. We expect EBITDA margins of
10.2%/10.2% for FY12/FY13.
Valuation: maintain Buy, lower price target from Rs1,650 to Rs1,580
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation drivers using UBS’s VCAM tool, assuming a WACC of
11.5%.
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