28 October 2013
2QFY14 Results Update | Sector:
Automobiles
Maruti Suzuki
BSE SENSEX
20,570
Bloomberg
Equity Shares (m)
M.Cap. (INR b) / (USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Financials & Valuation (INR b)
Y/E MAR
Sales
EBITDA
Adj. PAT
Con.adj.EPS
EPS Gr (%)
BV/Sh (INR)
RoE (%)
RoCE (%)
Con.P/E (x)
P/CE (x)
2013
435.9
42.3
23.9
80.2
37.8
615.0
12.9
15.5
18.9
10.7
2014E
439.6
52.4
28.7
96.3
20.1
697.2
13.6
17.4
15.7
9.1
2015E
504.0
59.1
32.6
108.0
12.1
791.2
13.6
17.3
14.0
8.0
S&P CNX
6,101
MSIL IN
302.1
457/7.4
1,773/1,217
6/-15/0
CMP: INR1,513
TP: INR1,702
Buy
Above est with EBITDA margin at 12.6%; upgrade FY14E EPS by 22%
Current quarter’s performance is not comparable YoY due to merger of SPIL in
4QFY13. MSIL’s 2QFY14 performance was above estimates, with EBITDA margins
of 12.6% (up 120bp QoQ, est 9.7%) driven by favorable forex. Led by higher-than-
estimated EBITDA, PAT stood at INR6.7b (est. INR4.8b).
Earnings call highlights
RM cost fell 260bp QoQ led by 100bp favorable forex on vendors’ import
(quarter lag), higher export revenue (INR depreciation) and low cost inventory
of direct imports (timing mismatch, to reverse in 3Q).
Diesel share stood at 30% (v/s 34% in 1Q). Average discounts increased
sequentially by INR4,000 to INR17,500/unit in 2Q.
Festive sales so far have risen by 5-8%; seasonally, 2H expected to be better
by 10%. Rural grew by 24% during 1HFY14, contributing 31% to MSIL sales.
JPY/USD direct and indirect exposure fully hedged for 3Q and partially hedged
for direct exposure for 4Q. Royalty (payable in May-14) remains unhedged.
USD/INR exposure hedged for 3Q.
Import content to reduce 2-2.5% annually from 19.5% in Mar-13. Depending
on component/technology, ~10-20% cost savings can be expected.
Valuation and view
We upgrade FY14E/FY15E EPS by 22%/7% to ~INR96/108 respectively to
factor a) strong 2QFY14 performance, b) 2HFY14 fx hedges and c) benefit of
cost saving initiatives. We assume volume growth of -1.5%/12.8%, EBITDA of
11.9%/11.7% and JPY/INR of 0.617/0.625 in FY14E/FY15E.
The stock trades at 15.7x/14x FY14E/15E consol. EPS and 9.1x/8x FY14E/15E
cash EPS. Maintain
Buy
with a revised target price of INR1,702 (~9x FY15E
CEPS/16x FY15E con. EPS).
Jinesh Gandhi
(Jinesh@MotilalOswal.com); +91 22 3982 5416
Chirag Jain
(Chirag.Jain@MotilalOswal.com); +91 22 3982 5418
Investors are advised to refer through disclosures made at the end of the Research Report.