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UBS Investment Research
Maruti Suzuki India
Q 1FY12: Reaffirming FY12 estimates
�� Event: Q1FY12 – Strong beat to UBS-e and consensus estimates
Sales increased 3%YoY despite 1%YoY fall in volumes as ASP increased ~3%qoq
helped by better mix with higher proportion of diesel models and lower discounts.
EBITDA at Rs 8.1bn (+3%YoY) was 9% ahead of UBS-e of Rs 7.45bn as lower
exports helped lower other expenses (royalty and shipping costs). PAT at Rs 5.5bn
was significantly ahead of UBS-e of Rs 4bn, helped by lower than est. depreciation
and higher other income. However, there were no one-offs during the quarter.
�� Impact: Reaffirms FY12 estimates
We believe this is a strong result given rising commodity prices and loss of 10days
of sales/production due to strike at Manesar plant. We see limited downside to our
FY12 estimates of 10.1% EBITDA margin and 5% overall volume growth. While
discounts are increasing, we believe the same is manageable. The only potential
risk is sharp appreciation of the Yen as the co. remains unhedged for H2FY12.
�� Action: Maintain Buy, things should start improving in H2FY12
Maruti remains our preferred stock in the sector. 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 and UV) in H2 FY12 that are likely
to drive growth momentum in FY13. We expect the competitive environment to
stabilise in FY13. Valuations at 13xFY12 PE are at lower end of historical range.
�� Valuation: Maintain Buy, PT of Rs. 1,580
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation drivers with UBS’s VCAM tool with a WACC of 11.5%.
�� Maruti Suzuki India
Maruti Udyog Limited is the largest passenger car manufacturer in India with a
market share of over 50%. The company was formed in 1983 and commenced
operations in 1984, as a joint venture between the Government of India (GOI)
and Suzuki Motor Corporation. In 2002, GOI ceded majority control to Suzuki
by not subscribing to a rights issue. GOI subsequently sold 27.5% of its stake to
investors in an IPO. Suzuki owns 54.6% of Maruti. Suzuki selected Maruti to be
its small car manufacturing hub for the European market and also as an R&D
centre.
�� Statement of Risk
Higher raw material costs and slowdown in demand remain the key risks to our
estimates for Maruti. Increasing competitive pressure due to entry of newer
players in its core segment could further impact margins negatively.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Maruti Suzuki India
Q 1FY12: Reaffirming FY12 estimates
�� Event: Q1FY12 – Strong beat to UBS-e and consensus estimates
Sales increased 3%YoY despite 1%YoY fall in volumes as ASP increased ~3%qoq
helped by better mix with higher proportion of diesel models and lower discounts.
EBITDA at Rs 8.1bn (+3%YoY) was 9% ahead of UBS-e of Rs 7.45bn as lower
exports helped lower other expenses (royalty and shipping costs). PAT at Rs 5.5bn
was significantly ahead of UBS-e of Rs 4bn, helped by lower than est. depreciation
and higher other income. However, there were no one-offs during the quarter.
�� Impact: Reaffirms FY12 estimates
We believe this is a strong result given rising commodity prices and loss of 10days
of sales/production due to strike at Manesar plant. We see limited downside to our
FY12 estimates of 10.1% EBITDA margin and 5% overall volume growth. While
discounts are increasing, we believe the same is manageable. The only potential
risk is sharp appreciation of the Yen as the co. remains unhedged for H2FY12.
�� Action: Maintain Buy, things should start improving in H2FY12
Maruti remains our preferred stock in the sector. 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 and UV) in H2 FY12 that are likely
to drive growth momentum in FY13. We expect the competitive environment to
stabilise in FY13. Valuations at 13xFY12 PE are at lower end of historical range.
�� Valuation: Maintain Buy, PT of Rs. 1,580
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation drivers with UBS’s VCAM tool with a WACC of 11.5%.
�� Maruti Suzuki India
Maruti Udyog Limited is the largest passenger car manufacturer in India with a
market share of over 50%. The company was formed in 1983 and commenced
operations in 1984, as a joint venture between the Government of India (GOI)
and Suzuki Motor Corporation. In 2002, GOI ceded majority control to Suzuki
by not subscribing to a rights issue. GOI subsequently sold 27.5% of its stake to
investors in an IPO. Suzuki owns 54.6% of Maruti. Suzuki selected Maruti to be
its small car manufacturing hub for the European market and also as an R&D
centre.
�� Statement of Risk
Higher raw material costs and slowdown in demand remain the key risks to our
estimates for Maruti. Increasing competitive pressure due to entry of newer
players in its core segment could further impact margins negatively.
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