Maruti Suzuki: Good run to continue :: Business Line

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Maruti Suzuki India Ltd. | Q3FY15 Result Update | In-line wih expectation numbers, maintain SELL rating, with target price of Rs. 3,218 (based on 18x FY17e EPS) :: IndiaNivesh

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Maruti Suzuki: Operationally in line :: Kotak Sec, report

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Operationally in line. We maintain a BUY rating, as we believe it is well positioned to improve its market share in the passenger-vehicle industry, led by new-model launches and muted competition. EBITDA margins should improve led by currency tailwind, a decrease in discounts and Maruti’s cost-reduction efforts. We have increased our target price to `4,200 (from `4,000) based on a roll over to December 2016. Our earnings estimates remain unchanged.

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Maruti, Valuation re-rating precedes earnings uptick! :: ICICI Securities, report

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

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Maruti -New launches, FX to prop up earnings, multiples :: ICICI Securities PDF link

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Maruti Suzuki - In Line Quarter; Volume Outlook Conservative; Result :: Edelweiss

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Buy MARUTI ::Kotak Securities report

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Maruti Suzuki India Ltd.|Q2FY15 Result Update | In line with our expectation, change our rating from HOLD to SELL with revised target price of Rs. 2,522 :: IndiaNivesh

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Maruti Suzuki - Company Update - In a sweet spot; retain Buy :: Centrum

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Rating: Buy; Target Price: Rs3,580; CMP: Rs3,066; Upside: 16.8%



In a sweet spot; retain Buy



We re-iterate Buy on MSIL with a revised TP of Rs3,580. Recent
interaction with dealers signals continued recovery in urban demand
and traction in rural demand. While the industry has seen YoY growth
of 5% YTDFY15, MSIL has grown by 14%, improving its market share by
220bps due to the success of new launches, deeper rural penetration
and recovery in urban markets. Market share gains will continue as it
is entering a very strong product cycle 1) new sedan “Ciaz” to replace
SX4, will be available shortly 2) more models are due in the UV space
starting with the Sx4 Cross, 3) it is set to enter the small LCV
segment and 4) face-lifted Swift is expected soon (last facelift was
in 2011).

$ Discounts to trend lower: Analysis of model wise discounts for MSIL
indicates that the company has reduced discounts across models for
September’14. Discounts on Alto and Wagon-R (36% of domestic sales)
have dropped by Rs 3,000/vehicle to Rs32k from Rs35k while that on
Ertiga was down by Rs2k per vehicle and Omni by Rs 5k per vehicle.
With no discount on Celerio (unlikely in the near term as waiting
period is 2-3 months) and likely launch of Ciaz coupled with
traditionally lower discounts during festive period, we expect blended
discounts to trend lower from 3QFY15 onwards (Rs21k in 1QFY15).

$ YTDFY15 market share gains by 220bps, entering into strong product
cycle: YTDFY15 market share gains by 220bps to 52% (vs.  49% in FY14)
in domestic passenger car industry reflect better than industry growth
for MSIL. The company is entering a very strong product cycle (India
is Suzuki’s key market – there are plans to launch 14 new models
/refreshes in India over FY13-FY17E). Post the successful launch of
Celerio, the Ciaz will be shortly available in showrooms this festive
season (the company has already received bookings of 5,250 units).
This will be followed by entry into new segments like SUV/MUVs with
the launch of Sx4 Cross and XA Alpha. The company is also open to
leveraging opportunities in the LCV space and compact diesel engines.
Further, dealers indicated that a face-lifted Swift is expected soon.

$ Volume and earnings upside remains: We are upgrading our earnings
for FY15E/FY16E each by 3.9%/3.3% respectively to factor in better
than expected volume growth for the company. Also the Fx remains
favourable (Yen/INR rate has depreciated from 0.60 to 0.57 over the
past month. For MSIL, costs equivalent to 22% of sales, including
royalty to Suzuki, are Yen-linked; 1% depreciation in Yen can lead to
~2% EPS increase) and discounts are likely to trend lower from current
levels.

$ Valuation and risks: We expect MSIL to deliver strong 31% EPS CAGR
over FY14-16E led by gradual demand recovery, market share gains,
rising exports and improving margins. We also see the potential for
earnings upgrades as industry demand and margins could surprise on the
upside in the first year or two of recovery. Retain Buy with revised
TP of Rs3,580 (20x September’16E EPS, 1-sd above historical average).
Key risks are, 1) Unfavourable Fx and 3) Failure of new launches to
gain expected market share.



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Buy Maruti :: Kotak Sec, PDF report link

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MARUTI SUZUKI INDIA LIMITED (MSIL)

RECOMMENDATION: BUY
TARGET PRICE: RS.3404 FY16E P/E: 16.5X

Domestic passenger car demand is expected to do well over the next 2-3
years driven by expected revival in the economy. MSIL being the market
leader will benefit from expected strong surge in demand. Recovery in entry
level car segment and new products will be the key volume growth driver
for the company over the next two years. Operating margins will receive
support from reduction in discounting and positive operating leverage. We
expect MSIL earnings to grow by 40% CAGR between FY14-FY16E. We revise
our estimates upwards and raise our target price on the stock to Rs3,404
(earlier Rs2,951). We retain our BUY rating on MSIL.


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Maruti Suzuki - Good Q3 overlooked by Suzuki's ambitions:: LKP

Gujarat foray of Suzuki puts a cloud of uncertainty over the stock

Suzuki Motor Corp (SMC) would be investing Rs30 bn in the Gujarat plant at Mehsana for a capacity of 2.5 lakh which would come on stream by 2017. This was initially planned to be done by MSIL. This will be a contract manufacturing agreement wherein SMC would sell vehicles solely to MSIL as per their demand. The price of the vehicle to be sold by SMC to MSIL will be including only the cost of production actually incurred by the subsidiary plus just adequate cash (net of taxes) to cover incremental capex requirements. Return on this investment for SMC would be realized only through growth and expansion of MSIL’s business. This means after the initial capacity of 2.5lakhs units have been setup, the financing of the second unit with similar capacity will be done from the earnings of the sale of first 2.5lakh cars. According to the management this would not hamper the net margins of MSIL but would be maintained at current levels (~8%). SMC would sell vehicles to MSIL at zero % profit margins and would earn only 56% of the profit earned by MSIL. The rational given by SMC is cheap money in Japan plus lack of investment opportunities in Japan thus saving MSIL from straining its balance sheet from incurring capex itself. This would in turn save depreciation costs to MSIL. Given that MSIL has excess cash and investments to the tune of Rs 80 bn on their balance sheet, the rationale behind SMC investing in Gujarat plant through establishing a new subsidiary is still unclear despite the management stating that this move is EPS accretive. This to our mind puts an overhang on the stock especially because going forward this subsidiary could end up with a capacity equivalent to MSIL’s existing capacities.

Strong set of numbers in Q3 FY14

Maruti Suzuki India Ltd (MSIL)’s Q3 FY14 numbers were in-line with our expectations. The topline fell by 2.7% yoy and grew by 4.1% qoq at Rs108.9 bn. The company’s numbers are to be compared on sequential basis as the SPIL merger had not happened in the last year same quarter. Volumes in the quarter decreased by 4.4% yoy while growing at 5% qoq to 2.88 lakh units. EBITDA grew by 2.5% qoq while margins remained almost stable at 12.8% qoq. Company’s efforts on vendor rationalization, localization and cost reduction at the employee costs front along with reduction in ocean freight on low export demand led to stable and strong margin performance. Net realizations grew by just 1.4% yoy, while declined 0.5% qoq as discounting grew sequentially and exports remained weak. RM to sales came went up to 73.5% from 71.1% qoq as ASPs declined and RM cost increased on unfavorable currency. Employee costs to sales moved down to 2.82% of net sales as there was a one-time bonus payment to employees in the last quarter. Other expenses also moved down to 13.5% from 14.8% qoq as the ocean freight charges for MSIL fell on the back of lower exports. Depreciation moved up 8% qoq as the  Manesar Phase 3 (which commissioned this quarter) plant got commissioned this quarter along with the SPIL engine plant which recently got merged. Other income fell by 16% qoq to Rs1.17 bn. Tax rate moved down to 23.1%, lower than our expectations. In line with operational outperformance PAT surpassed market expectations at Rs6.82bn.

Outlook and Valuation

MSIL’s volume performance has been shaky in FY 14 on the back of the weak macros. However, with expectations of economy revival in FY 15 along with new launches from the company in the form of an SUV XA Alpha in FY 15 and compact car Celerio in Q4 FY14, we believe the strength in volume will return. MSIL is aproxy to the recovery in auto industry. Considering the resilience observed in margins despite a few concerns, we are maintaining our margin forecast for FY14E/15E to 12.3%/12.8%, while slightly increasing our volume forecast for FY 14E/15E as well to 1.2%/6.5% respectively. However, the Gujarat plant investment by Suzuki is a new overhang on the stock as the uncertainty behind the rationale of SMC to invest in an altogether new subsidiary in India will play on the minds of the investors. Although the real impact of this development will be felt in FY 17/18 when the plant goes on stream in the near to medium term the impact of this will be negligible. We are downgrading the stock to Neutral from BUY, but slightly increasing our target price on better volume expectations in FY 15E to Rs 1,828

Maruti Suzuki Margins to improve, but premium valuations; Sell :: Anand Rathi

Maruti Suzuki
Margins to improve, but premium valuations; Sell
Key takeaways
Vehicle sales lower. Maruti Suzuki’s 3QFY14 sales volume was weak, as it
declined 4.4% yoy to 288,151 units. We expect it to grow 2.4% in FY14
against 3.3% in FY13, yoy. In early Jun’13, the company had to control
production at its diesel plant, which till last year was running at full utilisation.
We estimate residual growth of 7.5% for the rest of the year.
Decent results expected. We expect 1.8% yoy revenue decline (4.4%
volume decline and 2.5% growth in realisations) to `110.03bn. Our EBITDA
margin expectation is 12% (up 400bps yoy, 60bps lower qoq). Our EBITDA
growth estimate is 47.5% and our profit growth estimate is 38.6% yoy, to
`6.9bn. Profit growth in 3QFY14 is also inflated due to Suzuki Powertrain
merger in 4QFY13, which has not been accounted for in the base for 3Q.
New lines onstream. The new diesel engine plant at Gurgaon and the third
assembly facility at Manesar went on stream during Jul-Sep’13. With this,
capacity for vehicle assembly is now 1.5 million vehicles per annum.
Our take. In FY14, a favourable exchange rate and low base for its vehicle
sales would benefit the company. Most carmakers are looking to increase
prices 1-2% in Jan’14 to compensate for increasing input costs, higher
overheads and the impact of a depreciated rupee. Nevertheless, headwinds
from curtailed demand for passenger cars and from launches by competitors
would be the rough road in the next two quarters. We believe the price
factors in the short-term positives, while possible downgrades in sales
estimates have not yet been fully captured. Even the pick-up in exports is not
likely in the near term. Hence, we retain a Sell, with a target of `1,476. Our
target price is based upon 13.5x FY15e EPS. At CMP, the stock trades at
16.2x FY15e EPS. Risks. Above-expected volume growth, currency-related
benefits, lower commodity costs, possibility of stake increase by Suzuki.

Stock strategy: Consider bear put strategy in Maruti :: Business Line

Maruti Suzuki (Rs 1,606.1): The long-term outlook remains positive for Maruti Suzuki, as long as it stays above Rs 1,315. However, in the short-term, the stock can turn weak. Key support and resistance are placed at Rs 1,509 and Rs 1,670 respectively.

A close below Rs 1,509 will trigger a fresh fall. In that event, the stock could touch Rs 1,482. On the other hand, a conclusive close above Rs 1,670 will trigger a fresh rally in the stock that could take it to astronomical heights.

F&O pointers: Maruti Suzuki saw an accumulation of open positions on the short side though the Maruti June futures is trading in premium of over Rs 10 with respect to the spot close of Rs 1,605.6. Both puts and calls witnessed accumulation of open interest, except 1,600 put, which saw a marginal decline. This indicates that the stock could head below that level.

Strategy: Traders could consider bear put strategy on Maruti Suzuki. This can be initiated by selling 1,500 put and simultaneously buying 1,600 put. They closed with a premium of Rs 14 and Rs 46.4 respectively. Maximum profit in this strategy is Rs 67.6 and the loss is Rs 32.4 a contract.

Maximum profit occurs if Maruti Suzuki closes at or below Rs 1,500. On the other hand, maximum loss occurs if Maruti closes above Rs 1,600.

Hold this strategy till the expiry or till Maruti hits Rs 1,500. Traders should bear it mind that buying and selling the options should happen simultaneously.

Follow-up: Last week, we advised bear put spread in RCom. The position is in neutral. Traders could consider holding it till the expiry.

Maruti, JPMorgan report

Maruti reported 4QFY13 standalone PAT of Rs.11.5B (+79% y/y), significantly
above our and consensus estimates. The variance was driven by a sharper-thanexpected
expansion in EBITDA margins (+250 bps q/q), given the weakening JPY
(+130bp benefit) as well as improved product mix, given higher sales of diesel
vehicles. We believe that while MSIL (Neutral) should benefit from a weaker JPY,
the demand environment remains uncertain and competition is intensifying,
particularly in the entry-level sedan segment.
 SPIL merger: Maruti merged SPIL with the standalone entity – PAT at SPIL
was Rs.920m for FY13 (vs. Rs1,150m for FY12). PAT was lower y/y due to
increased depreciation charges at the entity.
 Conference call takeaways – demand outlook: Management highlighted that
the demand environment is sedate, with growth over FY14E expected at ~5%.
Management is targeting to sustain market share at current levels of ~40%.
While diesel vehicles currently comprise 58% of industry sales, the mix is
expected to stabilize at 50%, given the recent fall in crude oil. Margins: Over
4Q, hedges were at JPY/$ 90 levels, which led to a benefit of 130bp on
currency. The OEM further benefited by 100bp from improved selling prices –
due to a higher mix of diesel. Thus, discounts came off to Rs.10,500 per vehicle
in the quarter compared to Rs.12,500 levels earlier. (However, discounts on
petrol cars remain elevated.) Over FY14, management has taken forward cover
for 30% of its requirements at JPY/$ 95 levels. Localization plans: Maruti is on
track to increase localization levels – import content came off from 26% to 20%
in the current year (due to a combination of a weaker JPY as well as increased
domestic content). Capex: The OEM will incur an expenditure of Rs.30B in
FY14E (Rs.27B in FY13). The expansion program related to higher diesel
capacity as well as commissioning of Manesar C is on schedule.
 Price Target: We are raising our earnings estimates by ~11% over FY14/15E
to factor in the favorable 4Q results. We are raising our Mar’14 PT to Rs.1,750
as we value the stock at 14.5x forward PE multiple. Key downside risks: A rise
in competitive intensity. Key upside risk: a sooner-than-expected pick-up in
industry growth

Maruti Suzuki - Buy Q4FY13 Result Update ::Centrum

Stellar performance; Maintain Buy
Maruti Suzuki’s (MSIL) 4QFY13 operating results (pre SPIL merger) were significantly better than our expectations with EBITDA margins at 10.6% compared to our estimate of 9.7%. Driven by better than expected operating performance, PAT stood at Rs.11.4bn vs. our est. of Rs.7.8bn. We expect EBITDA margins to significantly improve further from current levels in FY14E largely driven by favorable Fx ( management indicated that it has hedged 30% of its total Yen exposure at 95 Yen/$ compared to 90 Yen/$ seen in 4QFY13) and merger of SPIL. Management also cited some traction in demand in recent months and discounts trending lower from current levels. We continue to remain positive on the stock and maintain Buy rating with revised target price of Rs.1,946.

Operating performance beats estimates: Revenues (pre SPIL merger) stood at Rs.126bn compared to our estimate of Rs.127bn largely in line with our estimates. While domestic realization remained flat QoQ as expected, export realizations registered a drop of 9% QoQ. Driven by better than expected operating performance, PAT stood at Rs.11.4bn compared to our estimate of Rs.7.8bn.

Management interaction: Key highlights: 1.) Sales of diesel vehicles stood at 112k units (36% of domestic volumes) in 4Q compared to 107k in 3QFY13. 2.) While for the domestic PV industry, Diesel penetration stood at 58% for FY13E, for MSIL it was 37%. Management indicated that lower penetration for MSIL vs. Industry left enough headroom for absorbing its incremental diesel capacity 2.) The current annual diesel engine capacity stood at 400k (300k SPIL and 100k sourced from FIAT). The incremental capacity of 150k engines is likely to come on stream by 2HFY14E taking the total capacity to 550k by the end FY14E 3.) Driven by favorable Fx and localization program, overall imports now stand at 19.5% (8% direct and 11% indirect) vs. 26% in FY13 4.) Export revenues stood at Rs.15.3bn (12% of revenues) and export realization for the quarter registered a drop of 9% QoQ 4.) Discount for the quarter, was lower by ~Rs.1,500 at Rs.10,500 compared to Rs.12,000 in 3QFY13 5.) Revenue/EBITA/PAT for SPIL for FY13 stood at Rs.60bn/Rs.7bn/Rs.920mn respectively 6.) Management has incurred overall capex of Rs.27bn for FY13E and has guided for overall capex of Rs.30bn for FY13E.

Maruti Suzuki - “The bright spot!”:LKP

Q4 FY13, a big positive surprise

Q4 FY13 was the first quarter when the company came out with the financials including the impact of the merger with Suzuki Power Train India Ltd (SPIL). Including this impact the topline grew by 13.7% yoy to Rs130 bn, while EBITDA grew by 113% yoy to Rs19.9bn. The synergies of this merger were starkly visible in the margin performance as EBITDA margins expanded robustly to 15.3% in Q4 which was a growth of 720 bps yoy. On standalone basis, the revenues grew by 7.2% yoy, while margins expanded to 10.6%, which has touched double digits first time since last eight quarters. Standalone net profits went up by 79% yoy and 128% qoq to Rs11.43 bn, while the consolidated net profits went up by 94% yoy and 147% qoq.   Volumes jumped by 14% qoq while declined by 4% yoy to 3.43 lakh units during the quarter. Net realizations grew by 19% yoy and 4.5% qoq on improved product mix, and slight lowering of discounts. Standalone RM cost to sales dipped to 77.9% of sales v/s 80.2% qoq and 81.3% yoy. At the same time, consol RM to sales came down drastically to 66.9%, the major contributor of which was yen depreciation. Also, higher emphasis on cost reduction initiatives at its Gurgaon plant and focus on cutting down of import content led to such an above par improvement in margins. Employee costs to sales moved up in the consol numbers on SPIL merger (3% of sales), while standalone employee cost to sales remained stable at 2%. Other expenses also moved down to 11.3% from 11.8% qoq as royalty payments came down in line with Yen, however, consol other expenses to sales moved up to 16.8%. Consol depreciation moved to 6.2% of sales as expected but will move down going forward with the merger impact becoming stronger.

Outlook and Valuation

With almost a year of underperformance, MSIL has been showing remarkable improvement since Q3, while Q4 was a highlight. Volumes have increased on domestic front and exports are showing traction from Africa, Latin America and ASEAN countries. With the success of Ertiga and new launches coming up, such as an SUV, the company is trying to establish itself in the SUV segment as well. On margin front as well, we see a better product mix, depreciating Yen, reducing discounts, SPIL merger and increase in indigenization resulting strong margin performance. Since the Q4 results were way above our expectations, we are raising our FY 14E estimates by 17% and introducing FY 15 estimates and rolling over our target to FY15E numbers. We raise our target from Rs1,728 to Rs2,031, despite recent rally in the stock. Hence, we upgrade out stock from Neutral to BUY with an upside of 21%.

Margin recovery to continue; Maintain Buy Maruti Suzuki :: Centrum

Margin recovery to continue; Maintain Buy
Maruti Suzuki’s (MSIL) 3QFY13 operating results were lower than our
expectations with EBITDA margins at 8% compared to our estimate of 8.8%.
Higher than expected realization growth (up 5.5% QoQ vs. est. 3%) led to
higher revenue growth. However, higher than expected other expenditure (at
11.7% of sales vs. est. 9.4%, largely on account of impact on vendor imports)
led to lower than expected operating performance. Despite 3QFY13 weaker
than our expectations, we continue to be positive on the stock and maintain
Buy rating with a target price of Rs.1,814. We expect EBITDA margins to
improve further. Our recent interaction with dealers revealed renewed
interest for the petrol models in recent months.
Operating performance lower than estimates: Revenues stood at Rs.112bn
compared to our estimate of Rs.110bn. While domestic realization registered a
growth of 3.8% QoQ, exports grew 20% QoQ, leading to blended realization
growth of 5.5% QoQ. Lower EBITDA margins due to the impact on vendor
imports (interaction with management indicated 200bps impact) led to lower
than expected operating performance. Reported PAT stood at Rs.5bn
compared to our estimate of 5.7bn.
Management interaction: Key highlights: 1) Increase in domestic realization
by 4% (in our assessment 1-1.5% due to lower discounts as indicated earlier
and 2.5%-3% on account of better product mix) 2.) Sales of diesel vehicles
stood at 107k units (40% of domestic volumes) in 3Q compared to 70k in 2Q
and 100k in 1Q. 3.) Export revenues stood at Rs.13.2bn (12% of revenues) and
export realization for the quarter moved up by 20% 4.) Discount for the
quarter, was lower by ~Rs.3,000 at Rs.12,000 compared to Rs.15,000 in 2Q. 5.)
Impact on account of vendor imports at 200bps is likely to reverse in 4Q due
to favorable currency movement in 3Q. 6.) Our dealer interaction indicates
strong demand pull for petrol models in recent months.

Maruti Suzuki India Decent quarter; maintain HOLD on fair valuations:: Emkay

n Q3 operating performance ~5% ahead of estimates
n Management outlook on volumes continues to remain very
bearish - expects 6-7% volumes growth in FY14
n Has begun hedging FY14 Yen exposure at favorable rates
n Retain HOLD on fair valuations - downside risk to volumes
offsetting upside risk to margins from a favorable currency
n We retain est and TP of Rs 1700, based on 14xFY15E EPS of
Rs 122 – stock trading at 15.6x/13.1x FY14/FY15 earnings
Decent show in Q3
MSIL reported a decent show in Q3FY13 beating our/consensus EBITDA estimates by
5%/3%. Net revenue at Rs 112 bn (+42% YoY, +35% QoQ) beat estimates by 2% on
better-than-expected realizations (+12.9% YoY, +3.1% QoQ). Export of the Ertiga CKD
kits continued to aid export realizations. EBITDA Margin came in at 8.0%, marginally
ahead, driven by better mix resulting in lower avg. discounts (Rs 12,100/car in Q3 vs Rs
14,750/car in Q2). Lower discounts were a function of resumption in production of the
Swift & Dzire post the labour strike ended. Net profit was in-line with expectations at Rs
5.01 bn (+144% YoY, +120% QoQ).
Volume outlook pessimistic; currency to be the saviour this time
MSIL management has been guiding for an FY14 volume growth of 6-7% - as against
this most street expectation including ours is in the range of 14-17% (Emkay est. at
17%). Our dealer interactions still do not point out to any pick up in demand for cars and
the new diesel policy could risk the diesel driven growth the industry has been seeing in
recent times. We see downside risk to our volume growth estimates.
Nonetheless, currency has moved very favorably for MSIL in the last one quarter
because of which we have already raised our margin estimates in the recent past,
despite lackluster volume growth and continued high discounting. 1% depreciation in the
Yen positively impacts our earnings estimates by ~2.5%. At present Yen-INR stands at
0.59 vs our base case assumption of 0.64. We see the downside risk to our volume
growth estimates more than offset by the currency benefits the company could see.
Maintain HOLD on fair valuations
We maintain our HOLD rating on the stock primarily because we believe that the stock
price adequately discounts the fundamentals and further upgrades are likely only if
currency continues to hover at current levels. We factor in volume of 1.4mn/1.6mn units
in FY14/FY15 implying a growth rate of 17%/16%. We have retained our margin
assumption at 9.5% currently and would review upgrading from forex benefits if the Yen
depreciates further or continue to hover at current level. We retain estimates and TP of
Rs 1700, based on 14xFY15E EPS of Rs 122 – stock trading at 15.6x/13.1x FY14/FY15
earnings

Investment focus - Maruti Suzuki: Buy :: Business Line