30 April 2012
4QFY12 Results Update | Sector: Automobiles
Maruti Suzuki
BSE SENSEX
S&P CNX
17,134
5,191
CMP: INR1,379
TP: INR1,583
Buy
Bloomberg
MSIL IN
Diluted Equity Shares (m) 289.0
52-Week Range (INR)
1,6,12 Rel.Perf.(%)
M.Cap. (INR b)
M.Cap. (USD b)
1,428/906
7/26/17
403.9
7.7
Maruti Suzuki (MSIL) has reported better than expected performance for 4QFY12, with EBITDA margin of 7.3%, (v/
s our estimate of 7%). PAT grew 1.4% YoY to INR6.4b v/s our estimate of INR4.8b, boosted by higher other income.
Volumes grew 5% YoY (50% QoQ) to 360,334 units, led by (a) production ramp-up post the strike at the Manesar
plant, (b) higher diesel engine availability, and (c) good response to new launches. Realizations improved by
~12% YoY (1.4% QoQ) to INR318,770/unit (against our estimate of INR322,728/unit), led by better product mix
and price hike, translating into revenue growth of 17% YoY to INR117b (v/s our estimate of INR117b).
EBITDA margin expanded 210bp QoQ (declined 280bp YoY) to 7.3%, driven by (a) higher realizations, (b) cost
reduction measures, and (c) higher operating leverage, despite impact of 170bp QoQ increase in vendor
compensation. Other income was higher by 70% QoQ, led by capital gains on FMPs. Tax rate was lower at
20.4% (v/s our estimate of 26.3%) due to tax-free income on FMP leading to PAT growth of 1.4% YoY INR6.4b.
MSIL has hedged 40% of its FY13 USD/JPY exposure and 50% of its USD/INR exposure for 1QFY13. It will
continue to follow its strategy to hedge ~50% of its forex exposure (for both JPY/USD and USD/INR) as and
when it gets a favorable rate, and keep the balance 50% unhedged.
MSIL faces three key challenges in the short term: (a) increase diesel engine availability beyond 400,000 units
in FY13, as this is the key volume driver, (b) push petrol vehicle sales without increasing discounts, and (c)
adverse JPY/INR movement significantly impacting margins.
We downgrade our consolidated EPS estimate by 5% for FY13 and FY14 to INR89.1 and INR110.1, respectively. The
downgrade is due to (a) change in JPY/INR assumption to 0.63 from 0.62 earlier, (b) lower than expected realizations,
and (c) higher staff cost. The stock trades at 15.7x FY13E consolidated EPS, and 10.6x FY13E cash EPS. Maintain
Buy
with a price target of INR1,583 (~12x FY13E cash EPS).
Jinesh Gandhi
(Jinesh@MotilalOswal.com) + 91 22 3982 5416
Mansi Varma
(Mansi.Varma@MotilalOswal.com) + 91 22 3982 5418

Maruti Suzuki
Strong volumes drive revenues
Volumes grew 50% QoQ (4.9% YoY), led by 52% QoQ (3% YoY) growth in domestic
volumes and 40% QoQ (26% YoY) growth in export volumes.
The sequential increase in volumes was led by (a) production ramp-up post the
strike at the Manesar plant, (b) higher diesel engine availability, and (c) good
response to the new Swift Dzire.
Strong volume growth resulted in 540bp QoQ improvement (400bp YoY decline)
in market share to 46.1% of the domestic car market (ex-Nano) in 4QFY12.
Discounts in 4QFY12 were higher by INR1,300/unit QoQ (higher by ~INR2,900/unit
YoY) to INR13,493/car, its highest ever level, reflecting weak offtake in petrol car
sales.
Trend in volumes (units)
(‘000 units)
4QFY12 4QFY11 YoY (%) 3QFY12
7.5
-11.8
2.2
41.9
-8.9
12.2
223.0
2.6
65.0
38.9
17.5
11.3
0.1
-44.5
0.0
1.0 105.7
0.3
31.0
25.7
9.0
343.3
4.9
41.2 -310bp
48.0 -380bp
50.1 -400bp
4.6
1.9
27.5
11.5
151.6
63.3
27.2
11.4
0.2
0.1
0.7
0.3
27.7
11.6
239.5
33.2
39.1
40.7
QoQ (%) FY12
43.9
38.8
51.0
67.9
-67.1
189.4
40.3
50.4
480bp
500bp
540bp
FY11 Chg. (%)
A1
6.6
% of total
1.8
MPV
38.2
% of total
10.6
A2
228.9
% of total
63.5
A3
45.6
% of total
12.7
A4
0.1
% of total
0.0
UV
2.0
% of total
0.6
Exports
38.9
% of total
10.8
Total Sales
360.3
Total PV (Incl Exports) MS (%)
38.0
Total Dom. Car MS (%)
44.1
Total Dom. Car (ex-Nano) MS (%) 46.1
23.3
26.5
-12.1
2.1
2.1
144.1 160.7
-10.3
12.7
12.6
703.9 808.6
-12.9
62.1
63.6
128.1 131.3
-2.4
11.3
10.3
0
0
NA
0.0
0.0
7
6
15.2
0.6
0.4
127.4 138.3
-7.9
11.2
10.9
1,133.7 1,271.0
-10.8
36.3
43.1
42.4
49.0
44.1
50.8
Source: Company/MOSL
Trend in domestic car market share (ex-Nano, %)
Source: Company/MOSL
30 April 2012
2

Maruti Suzuki
Trend in realizations (INR '000)
Sequentially higher discounts led by increase in discounts on petrol cars
Source: Company/MOSL
Better product mix and operating leverage boosted margins, despite
adverse Fx impact
EBITDA margin expanded 210bp QoQ (declined 280bp YoY) to 7.3% v/s our estimate
of 7%, driven by (a) higher realizations, led by better mix and price hike, (b)
INR500m MTM reversal on royalty payout (~40bp), and c) higher operating
leverage. These offset the impact of 170bp sequential increase in vendor
compensation on account of high JPY/INR in 3QFY12 and higher discounts.
RM cost (as % of sales) was higher by 50bp QoQ (200bp YoY), led by (a) INR2.8b
sequential increase in vendor compensation on account of adverse JPY/INR
movement in 3QFY12, diluted by improvement in product mix and price hike
taken in January 2012.
Other expenses were lower by 210bp QoQ, led by 90bp reduction in royalty and
120bp benefit from operating leverage. Royalty payout was lower by 40bp on
account of MTM reversal. Selling and distribution cost was down 40bp QoQ (30bp
YoY).
Other income was higher by 70% QoQ, led by capital gains on fixed maturity plans
(FMPs), which accrued during the quarter.
EBITDA grew 112% QoQ (declined 15% YoY) to INR8.6b v/s our estimate of INR8.2b.
Higher other income and lower tax rate at 20.4% (v/s our estimate of 26.3%) on
account of tax-free income on FMPs translated into PAT growth of 1.4% YoY to
INR6.4b v/s our estimate of INR4.8b.
3
30 April 2012

Maruti Suzuki
Trend in EBIDTA
MSIL's EBITDA margins are negatively correlated with JPY/INR
Source: Company/MOSL
Petrol vehicle demand to be key determinant of volume growth, as diesel
capacity is constrained
The management indicated that it would be impossible to increase diesel engine
availability in FY13 beyond 400,000 units (v/s ~150,000 units in FY12), given limited
scope to further debottleneck diesel engine capacity at SPIL and no scope to
increase sourcing from Fiat beyond 100,000 units.
Further, its planned new diesel engine capacity at Gurgaon plant will be ready
only by mid-FY14.
Hence, demand for petrol vehicles would be the only lever to drive volumes in
FY13.
While petrol vehicle volumes declined by ~14% in FY12, MSIL is taking several
initiatives to boost petrol vehicle sales.
Petrol prices would be the key determinant of petrol vehicle sales in FY13.
Our estimates imply petrol vehicle volume growth of 9.3% in FY13, driving about
7.4% of overall volume growth of our ~21.8% volume growth estimate of FY13.
Ertiga – excellent response so far, but unlikely to be a game changer due to
diesel capacity constraint
MSIL’s recently launched UV, Ertiga has received encouraging response, with
bookings of ~22,000 units since its launch on 12 April 2012.
The management indicated that more than 80% of the bookings are for diesel
variants.
30 April 2012
4

Maruti Suzuki
While Eritga is expected to boost volumes, it would be at the expense of other
diesel models like Swift, Dzire, Ritz and SX4, as diesel engine availability for FY13
is restricted to ~400,000 units.
However, Ertiga has brought consumers back to the showroom and has had a
positive rub-off on other model sales.
Further, MSIL plans to export Ertiga, with CKD exports to Indonesia expected to
begin soon. Our estimates only partly capture the export potential of Ertiga.
Forex – partly hedged on JPY/USD, largely unhedged on INR/USD; would
be key determinant of performance
The management indicated that it has already hedged ~40% of its FY13 JPY/USD
exposure (including vendor imports) and would be opportunistically looking to
take it to 50% of exposure. However, it has only partly hedged its 1QFY13 USD/INR
exposure. As a hedging policy, it plans to keep 50% of its JPY/USD exposure
unhedged.
Given that MSIL’s operating performance is highly correlated with JPY/INR, its
FY13 performance is dependent on appreciating INR and depreciating JPY. Its
initiatives to increase localization and reduce dependence on imports are only
expected to fully reflect over the next 2-3 years. Our estimates factor in JPY/INR
of 0.63 v/s average JPY/INR of 0.595 in FY12. For a 1% JPY/INR movement, MSIL’s
EBITDA margin would change by 25-30bp and EPS would change by ~4%.
MSIL’s FY13 Consol EPS sensitivity to INR/JPY & volumes
100
JPY/INR
0.68
0.66
0.65
0.63
0.61
0.59
0.57
50.3
57.4
64.4
71.3
78.1
88.8
95.2
6.0
Monthly run-rate of volumes (‘000 units)
106
109
115
118
123
56.0
63.5
70.9
78.1
85.3
96.5
103.2
12.0
58.9
66.6
74.1
81.5
88.8
100.3
107.2
15.0
65.4
73.5
81.5
89.2
97.0
109.0
116.3
21.8
126
Eff. FY13 vol growth (%)
68.5
73.2
76.1
76.8
81.9
84.9
84.9
90.3
93.5
92.8
98.5
101.9
100.8
106.7
110.3
113.1
119.6
123.4
120.6
127.3
131.3
25.0
30.0
33.0
Source: Company/MOSL
Other takeaways
MSIL’s current vehicle capacity stands at 1.6m units. It is further adding 0.25m
units at Manesar (Line-3) taking total capacity to 1.85m units. It has plans to set up
greenfield capacity in Gujarat, although it has not yet decided on the timeline.
The company incurred a capex of INR27b in FY12. It plans to invest INR30b in FY13.
It has net cash of ~INR80b as of March 2012.
MSIL plans to invest ~INR5b in R&D in FY13, as against ~INR2b in FY12 (part of
capex plans).
Its TrueValue (car exchange) business grew 11%, enabling exchange of 228,000
cars for new Maruti cars.
In FY12, MSIL added ~167 dealership outlets and added ~135 cities, taking its total
outlets to 1,100 covering 801 cities.
30 April 2012
5

Maruti Suzuki
Downgrading estimates by 5%
We downgrade our consolidated EPS estimates by 5% for FY13 and FY14 to INR89.1
and INR110.1, respectively.
The downgrade is due to (a) change in JPY/INR assumption to 0.63 from 0.62 earlier,
(b) lower than expected realizations, and (c) higher staff cost. However, higher
other income and lower taxes have diluted the impact of the above mentioned
negative factors.
Our estimates factor in volume growth of 21.8% to 1.38m (or ~115,000 units/month)
in FY13, followed by 15% growth in FY14 (unchanged).
We estimate EBITDA margin at 8.7% for FY13 (v/s 9.6% earlier) and at 9.3% for FY14
(v/s 10.1% earlier).
Revised forecast (INR B)
Rev
Domestic (‘000 units)
Export (‘000 units)
Total Volumes (‘000 units)
Net Sales
EBITDA (%)
Net Profit
EPS (INR)
Consol EPS (INR)
1,241
140
1,381
435
8.7
24.7
85.7
89.1
FY13E
Old
1,241
140
1,381
436
9.6
25.9
89.5
93.7
Chg (%)
0.0
0.0
0.0
-0.2
-83
-4.3
-4.3
-5.0
Rev
1,427
161
1,588
510
9.3
30.6
106
110.1
FY14E
Old
1,427
161
1,588
510
10.1
32.1
110.9
116.1
Chg (%)
0.0
0.0
0.0
0.0
-83
-4.4
-4.5
-5.2
Source: MOSL
Valuation and view
MSIL has outperformed the Sensex by 27% over the past six months, driven by
normalization of production issues and expectation of interest rate softening.
MSIL’s earnings exhibit very high sensitivity to JPY/INR movement. For every 5%
JPY/INR movement, MSIL’s EBITDA margin changes by ~150bp and EPS by 17-20%.
MSIL faces three key challenges/headwinds in the short term: (a) increase diesel
engine availability beyond 400,000 units in FY13, as this is the key volume driver,
(b) push petrol vehicle sales without increasing discounts, and (c) adverse JPY/
INR movement significantly impacting margins.
The stock trades at 15.7x FY13E consolidated EPS, and 10.6x FY13E cash EPS.
Maintain
Buy
with a price target of INR1,583 (~12x FY13E cash EPS).
30 April 2012
6

Maruti Suzuki
Maruti Suzuki: an investment profile
Company description
Maruti Suzuki is the largest passenger vehicle
manufacturer in India, with 1.13m units. It dominates
the cars segment with ~44% market share (ex-Nano). It
is also emerging as the global export hub of small cars
for Suzuki, with world strategic model A-Star exclusively
produced in India.
Recent developments
Its new LUV, Ertiga, has received encouraging
response with bookings of ~22,000 units since launch
on 12/Apr.
Valuation and view
The stock trades at 15.7x FY13 consol EPS, and 10.6x
FY13 CEPS.
Maintain
Buy
with price target of INR1,583 (12x FY13
CEPS).
Key investment arguments
Volumes momentum to remain intact in long run,
despite short-term headwinds, resulting in 19.1%
CAGR (FY12E-14E) in MSIL's domestic volumes
Volume growth in domestic market driven by focus
on tier-II cities and rural market.
Improving product mix with increasing share of A2,
A3 and UV segment, driven by newer products.
Sector view
Passenger vehicle segment is expected to continue
its growth momentum.
With low car penetration levels in India, the upside
potential for growth is tremendous.
However, increasing competition poses threat in long
term.
Key investments risks
Increasing competition in the key A2 segment.
Adverse forex movement may impact margins
negatively.
Higher royalty and strengthening of commodity
prices could impact margins.
Comparative valuations
P/E (x)
FY13E
FY14E
EPS Gr (%)
FY13E
FY14E
RoE (%)
FY13E
FY14E
EV/EBITDA (x) FY13E
FY14E
Maruti
15.7
12.7
53.1
23.6
14.3
15.3
8.3
6.4
M&M
14.6
12.7
7.8
14.7
19.2
19.1
7.0
5.7
Tata Motors
7.8
7.7
13.6
0.6
33.0
25.9
3.8
3.5
EPS: MOSL forecast v/s consensus (INR)
MOSL
Forecast
89.1
110.1
Consensus
Forecast
87.5
110.1
Variation
(%)
1.78
0.01
FY11
FY12
Target price and recommendation
Current
Price (INR)
1,379
Target
Price (INR)
1,583
Upside
(%)
14.1
Reco.
Buy
Stock performance (1 year)
Ma ruti Suzuki
1,625
1,400
Sens ex - Rebas ed
Shareholding pattern (%)
Promoter
Domestic Inst
Foreign
Others
Mar-12
54.2
15.8
21.5
8.5
Dec-11
54.2
17.4
19.5
9.0
Mar-11
54.2
17.9
19.3
8.6
1,175
950
725
Apr-11
Jul -11
Oct-11
Ja n-12
Apr-12
30 April 2012
7

Maruti Suzuki
Financials and Valuation
30 April 2012
8

Maruti Suzuki
N O T E S
30 April 2012
9

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Maruti Suzuki
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