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EARNINGS REVIEW
Maruti Suzuki India (MRTI.BO)
Neutral Equity Research
Above expectations on below EBITDA items; remain Neutral
What surprised us
Maruti Suzuki reported 1QFY12 net income of Rs5.4bn, up 18% yoy, down
17% qoq, 23% above our and 30% above Bloomberg consensus estimates.
The positive surprise was mainly driven by higher other income (Rs400mn
capital gains) and lower depreciation cost. EBITDA at Rs8.1bn was up 3%
yoy, down 19% qoq, 4% above our and 12% above Bloomberg consensus
estimates. Per unit pricing improved sequentially mainly due to higher
proportion of diesel powered vehicles in the sales mix. Raw material cost
as percentage of sales was up by about 70bps qoq and 80bps qoq. Key
takeaways from the conference call – 1) Management continues to see
higher customer enquiries but lower conversions, with high fuel and
interest cost being commonly cited as reasons behind postponement. 2)
Management reported 4-5 weeks of channel inventory (vs normal 3-4
weeks) in advance of expected stronger festive season demand. We revise
our EPS estimates for FY12-14E by 2-3% mainly on lower depreciation
estimate.
What to do with the stock
We maintain our Neutral rating on the stock and our 12-m FY2012E P/Ebased TP of Rs1,173. We see structural increase in competition and cyclical
risks on account of an unfavourable rate cycle as key concerns for the
stock. The stock is currently trading at FY12E P/E of 14X vs. Indian peers at
13X and global peers at 10.7X. Risks: Higher-/lower-than-expected demand
or commodity costs.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
EARNINGS REVIEW
Maruti Suzuki India (MRTI.BO)
Neutral Equity Research
Above expectations on below EBITDA items; remain Neutral
What surprised us
Maruti Suzuki reported 1QFY12 net income of Rs5.4bn, up 18% yoy, down
17% qoq, 23% above our and 30% above Bloomberg consensus estimates.
The positive surprise was mainly driven by higher other income (Rs400mn
capital gains) and lower depreciation cost. EBITDA at Rs8.1bn was up 3%
yoy, down 19% qoq, 4% above our and 12% above Bloomberg consensus
estimates. Per unit pricing improved sequentially mainly due to higher
proportion of diesel powered vehicles in the sales mix. Raw material cost
as percentage of sales was up by about 70bps qoq and 80bps qoq. Key
takeaways from the conference call – 1) Management continues to see
higher customer enquiries but lower conversions, with high fuel and
interest cost being commonly cited as reasons behind postponement. 2)
Management reported 4-5 weeks of channel inventory (vs normal 3-4
weeks) in advance of expected stronger festive season demand. We revise
our EPS estimates for FY12-14E by 2-3% mainly on lower depreciation
estimate.
What to do with the stock
We maintain our Neutral rating on the stock and our 12-m FY2012E P/Ebased TP of Rs1,173. We see structural increase in competition and cyclical
risks on account of an unfavourable rate cycle as key concerns for the
stock. The stock is currently trading at FY12E P/E of 14X vs. Indian peers at
13X and global peers at 10.7X. Risks: Higher-/lower-than-expected demand
or commodity costs.
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