Maruti Suzuki's 4QFY2012 results showed strong top-line growth of 17.2% yoy driven by an 11.7% increase in net average realization and 4.9% volume growth. EBITDA margin declined 281 bps yoy to 7.3% due to higher discounts and forex losses, though it recovered partially qoq. Reported net profit declined 3% yoy but was boosted by higher other income from investments. Volumes are expected to grow around 15% and 13% in FY2013 and FY2014 respectively, helping margins recover by 250 bps over the next two years.
Maruti Suzuki's 4QFY2012 results showed strong top-line growth of 17.2% yoy driven by an 11.7% increase in net average realization and 4.9% volume growth. EBITDA margin declined 281 bps yoy to 7.3% due to higher discounts and forex losses, though it recovered partially qoq. Reported net profit declined 3% yoy but was boosted by higher other income from investments. Volumes are expected to grow around 15% and 13% in FY2013 and FY2014 respectively, helping margins recover by 250 bps over the next two years.
Maruti Suzuki's 4QFY2012 results showed strong top-line growth of 17.2% yoy driven by an 11.7% increase in net average realization and 4.9% volume growth. EBITDA margin declined 281 bps yoy to 7.3% due to higher discounts and forex losses, though it recovered partially qoq. Reported net profit declined 3% yoy but was boosted by higher other income from investments. Volumes are expected to grow around 15% and 13% in FY2013 and FY2014 respectively, helping margins recover by 250 bps over the next two years.
Maruti Suzuki's 4QFY2012 results showed strong top-line growth of 17.2% yoy driven by an 11.7% increase in net average realization and 4.9% volume growth. EBITDA margin declined 281 bps yoy to 7.3% due to higher discounts and forex losses, though it recovered partially qoq. Reported net profit declined 3% yoy but was boosted by higher other income from investments. Volumes are expected to grow around 15% and 13% in FY2013 and FY2014 respectively, helping margins recover by 250 bps over the next two years.
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4QFY2012 Result Update | Automobile
May 2, 2012
Maruti Suzuki
ACCUMULATE
Performance Highlights
CMP Target Price
Y/E March (` cr)
Investment Period
4QFY12
4QFY11
% chg (yoy)
Angel est.
% diff
11,727
10,005
17.2
11,872
(1.2)
EBITDA
859
1,013
(15.3)
836
2.7
EBITDA margin (%)
7.3
10.1
(281)bp
7.0
28bp
Sector
Reported PAT
640
660
(3.0)
495
29.2
Market Cap (` cr)
Net sales
`1,332 `1,510 12 Months
Stock Info Automobile 38,485
Beta
Source: Company, Angel Research
Maruti Suzukis (MSIL) 4QFY2012 results significantly benefitted from higher other income due to capital gains arising from the maturity of FMP investments. While total volumes improved, driven by restoration of operations at Manesar plant and higher diesel engine availability, EBITDA margin pressures continued on account of higher discounts and adverse foreign exchange movement. We maintain our Accumulate rating on the stock. Higher other income boosts bottom line: MSILs top line registered strong growth of 17.2% yoy (51.7% qoq on revival in volumes) to `11,727cr, driven largely on account of an 11.7% yoy increase in net average realization (due to superior product mix and price hikes). Total volumes for the quarter grew by 4.9% yoy, driven by strong momentum for the newly launched Swift and Dzire. Sequentially, volumes jumped by 50.4%, as production at Manesar plant was restored to normal levels and due to higher availability of diesel engines. EBITDA margin expanded by 210bp qoq (down 281bp yoy) to 7.3%, in-line with our estimates of 7%, driven by higher net average realizations and operating leverage. Further, MTM reversal of `50cr on royalty payout benefitted the companys operating performance. However, `200cr additional outgo towards vendor compensation on account of adverse JPY/INR rates in 3QFY2012 coupled with higher employee expenses led by higher variable pay restricted further margin expansion. Led by higher other income (up 155.2% yoy to `297cr) due to capital gains on FMP investments, the decline in net profit was restricted to 3% yoy.
0.6
52 Week High / Low
1,428/906
Avg. Daily Volume
79,532
Face Value (`)
BSE Sensex
17,302
Nifty
5,239
Reuters Code
MRTI.BO
Bloomberg Code
MSIL@IN
Shareholding Pattern (%)
Promoters
54.2
MF / Banks / Indian Fls
21.6
FII / NRIs / OCBs
21.5
Indian Public / Others
Abs. (%)
2.7
3m
1yr
3yr
Sensex
(0.7)
(8.9)
51.7
Maruti Suzuki
9.6
3.2
63.3
Outlook and valuation: We broadly retain our volume estimates at ~15% and ~13% for MSIL in FY2013E and FY2014E, respectively. We expect margins to improve by ~250bp over the next two years, mainly on account of currency hedging, operating leverage and better product mix. At `1,332, the stock is trading at 13.2x its FY2014E earnings. We maintain our Accumulate rating on the stock with a target price of `1,510.
(% of sales) Purchases of traded goods (% of sales)
2.2
1.5
413
381
74.3 66.9
209
8.3
366
18.7
1,005
2.7
19.9
3.5
3.8
1,280
1,078
10.9
10.8
10,869
8,992
20.9
7,328
48.3
33,074
32,980
0.3
859
1,013
(15.3)
403
112.8
2,513
3,639
(30.9)
OPM (%)
7.3
10.1
7.1
9.9
Interest
21
226.4
18
17.1
55
25
120.8
Depreciation
331
297
11.4
299
10.6
1,138
1,014
12.3
Other Income
297
116
155.2
175
70.0
827
509
62.5
PBT (excl. Extr. Items)
804
827
(2.7)
261
207.7
2,146
3,109
(31.0)
207.7
2,146
3,109
(31.0)
6.0
8.5
Other Expenses (% of sales) Total Expenditure Operating Profit
Extr. Income/(Expense) PBT (incl. Extr. Items) (% of Sales)
4.7
19.9
13.0
5.2
804
827
(2.7)
261
6.9
8.3
3.4
Provision for Taxation
164
167
(% of PBT)
20.4
20.2
Reported PAT
640
660
5.5
6.6
2.7
144.5
144.5
144.5
22.1
22.8
PATM Equity capital (cr) EPS (`)
(1.5)
56
194.8
21.3 (3.0)
206
(3.0)
7.1
211.2
211.2
5.8
511
820
23.8
26.4
(37.7)
1,635
2,289
4.6
6.2
144.5
144.5
56.6
79.2
(28.6)
(28.6)
Source: Company, Angel Research
Exhibit 2: Quarterly volume performance
Volume (units)
4QFY12
4QFY11
yoy chg (%)
3QFY12
qoq chg (%)
FY2012
FY2011
% chg
A: Mini: M800, Alto, A-Star, WagonR
153,966
165,618
(7.0)
102,523
50.2
375,950
466,915
(19.5)
A: Compact: Swift, Estilo, Ritz
81,568
64,914
25.7
53,671
52.0
351,193
368,122
(4.6)
A: Super Compact: Dzire
40,156
29,539
35.9
24,593
63.3
115,649
112,041
3.2
A: Mid-Size: SX4
5,492
9,315
(41.0)
2,596
111.6
12,480
19,231
(35.1)
A: Executive: Kizashi
71
138
216
(67.1)
458
138
Total Passenger cars
281,253
269,524
4.4
183,599
53.2
855,730
966,447
(11.5)
1,991
968
105.7
688
189.4
6,525
5,666
15.2
38,180
41,897
(8.9)
27,516
38.8
144,061
160,626
(10.3)
51.8 1,006,316 1,132,739
(11.2)
B: Utility Vehicles: Gypsy, Grand Vitara
C: Vans: Omni, Eeco Total Domestic
321,424
312,389
2.9
211,803
Total Exports
38,910
30,951
25.7
27,725
Total Volume
360,334
343,340
4.9
239,528
40.3
127,379
138,266
(7.9)
50.4 1,133,695 1,271,005
(10.8)
Source: Company, Angel Research
May 2, 2012
Maruti Suzuki | 4QFY2012 Result Update
Strong top-line growth of 17.2% yoy: MSILs top line registered strong growth of 17.2% yoy (51.7% qoq on revival in volumes) to `11,727cr, driven largely by an 11.7% yoy increase in net average realization. Net average realization improvement was led by higher proportion of diesel sales during the quarter and price increases carried out by the company in November 2011 and January 2012. Sequentially, however, net average realization improved by only 1.4% despite superior product mix, as higher level of discounts (`13,493/unit compared to `12,065/unit in 3QFY2012) impacted overall realization. Total volumes for the quarter grew by 4.9% yoy, driven by strong momentum for the newly launched Swift and Dzire. Sequentially, volumes jumped by 50.4%, as production at Manesar plant was restored to normal levels and due to higher availability of diesel engines.
310,000
10.0
200,000
0.0
150,000
(10.0)
(19.6)
(30.0)
270,000
(40.0)
260,000
18.8
17.2
10,000 3.6
8,000
(%)
(%)
40.0
60.0
30.0 20.0 10.0
6,000
0.0 (14.4)
4,000
(10.0)
(18.6)
40.0
4QFY10
4QFY12
3QFY12
2QFY12
1QFY12
0.0
4QFY11
(30.0)
3QFY11
2QFY11
47.6
48.2
48.0 44.8
41.1
39.1
44.1
20.0 10.0
1QFY11
52.2 46.5
30.0
(20.0)
4QFY10
(2.0)
50.0
2,000
May 2, 2012
0.0
Exhibit 6: Improvement in market share
yoy change (RHS)
26.5
Source: Company, Angel Research
2.0
(0.4)
4QFY12
27.0
(1.3)
3QFY12
26.8
(0.5)
2QFY12
12,000
6.0 4.0
1QFY12
Net sales 31.0
4.8
1.6
4QFY12
3QFY12
2QFY12
1QFY12
4QFY11
3QFY11
2QFY11
1QFY11
4QFY10 14,000
8.0
Source: Company, Angel Research
Exhibit 5: Net sales up strongly by 17.2% yoy
(` cr)
4.0
4QFY10
50,000
Source: Company, Angel Research
10.0
7.5
290,000 280,000
11.7
12.0
300,000
(20.0)
(27.6)
100,000
12.0
4QFY12
4.9
(0.6)
20.0
(%) 14.0
3QFY12
250,000
320,000
yoy growth (RHS)
2QFY12
300,000
30.0
1QFY12
19.5
4QFY11
28.2
4QFY11
27.4
Net average realisation/unit
3QFY11
25.0
(`) 330,000
3QFY11
21.5
(%) 40.0
2QFY11
350,000
yoy growth (RHS)
2QFY11
Total volume
400,000
1QFY11
(units)
Exhibit 4: Net average realization improves 11.7% yoy
1QFY11
Exhibit 3: Volumes up 4.9% yoy
Source: Company, Angel Research
Maruti Suzuki | 4QFY2012 Result Update
Exhibit 7: Quarterly revenue and realization performance
EBITDA margin recovers partially to 7.3%: MSILs EBITDA margin expanded by
210bp qoq (down 281bp yoy) to 7.3%, in-line with our estimates of 7%, driven by higher net average realizations due to superior product mix and price hikes and higher operating leverage. Further, MTM reversal of `50cr on royalty payout benefitted the companys operating performance. However, `200cr additional outgo towards vendor compensation on account of adverse JPY/INR rates in 3QFY2012 coupled with higher employee expenses led by higher variable pay restricted further margin expansion. EBITDA for the quarter declined by 15.3% yoy to `859cr; however, it was sharply by 112.8% on a sequential basis.
60.0
3.3
5.5
5.2
5.1
6.0
5.9
5.0 5.1
4.8
40.0 20.0
13.2
9.6
10.5
9.5
10.1
9.5
6.3
5.2
7.3
Source: Company, Angel Research
4QFY12
3QFY12
2QFY12
1QFY12
4QFY11
3QFY11
2QFY11
1QFY11
4QFY10
0.0
4.0
9.0 6.5 5.7
500
6.0
6.6
8.0
6.4 5.5
400
3.0
300
2.0
200
1.0
100
0.0
7.0 6.0 5.0
3.1
4.0
2.7
3.0 2.0 1.0 0.0
4QFY12
80.0
6.0
(%)
7.8
600
3QFY12
80.4
7.0
2QFY12
79.2
81.3
1QFY12
80.3
81.2
Net profit margin (RHS)
4QFY11
79.2
81.7
Net profit
(` cr) 700
3QFY11
77.9
5.9 79.6
(%)
4QFY10
100.0
Raw material cost/sales
2QFY11
EBITDA margin Royalty expenses/sales (RHS)
(%)
Exhibit 9: Net profit boosted by other income
1QFY11
Exhibit 8: EBITDA margin improves sequentially
Source: Company, Angel Research
High other income boosts bottom line: MSIL posted better-than-expected net profit of `640cr (down 3% yoy), as higher other income benefitted the bottom line. Other income jumped by 155.2% yoy (70% qoq) to `297cr, led by capital gains on fixed maturity plan (FMP) investments, which accrued during the quarter.
May 2, 2012
Maruti Suzuki | 4QFY2012 Result Update
Conference call Key highlights
Management expects the demand scenario in the passenger car space to
remain challenging in FY2013, led by higher ownership cost and fuel prices; however, cut in interest rates is likely to improve consumer sentiments going ahead.
The companys current production capacity of ~1.6mn units (as of FY2012
end) is expected to rise to ~1.8mn units once the Manesar C line starts production.
According to management, petrol car volumes for the industry declined by
14% in FY2012 as against 37% growth registered in diesel car sales.
Rural sales continue to remain strong and now account for ~25% of the companys total domestic volumes.
The company has expanded its network to 1,100 sales outlets in 800 cities and ~3,000 service points in ~1,400 cities.
Exports revenue during 4QFY2012 stood at `1,244cr. While volume growth in
the European market remains subdued, the company is targeting non European markets to provide volume growth.
Rural sales accounted for ~20% of overall sales volumes in FY2012 and it grew by 12% yoy during the year.
Average discounts during 4QFY2012 were ~`13,493/vehicle as compared to
`12,065/vehicle in 3QFY2012.
MSIL has hedged its FY2013E USD/Yen net exposure at favorable rates. According to management, the current waiting period for diesel Swift and Dzire is 4-6 months, while it is only ~4 weeks for the petrol variants. The newly launched Ertiga has received ~22,000 bookings so far, with ~80% being diesel variants.
MSIL incurred `2,700cr towards capex in FY2012 and expects to incur
`3,000cr capex in FY2013E. In addition, the new diesel plant at Gurgaon with a capacity of 300,000 units/year would entail a total capex of `1,700cr and is likely to commence operations in 1HFY2014E (Phase I 150,000 units).
May 2, 2012
Maruti Suzuki | 4QFY2012 Result Update
Investment arguments
Per capita near inflexion point for car demand: In FY2009, car penetration in India was estimated at around 12 vehicles/1,000 people compared to around 21 vehicles/1,000 people in China. Moreover, Indias PPP-based per capita is estimated to approach US$5,000 over the next 4-5 years, which is expected to be the inflexion point for the countrys car demand. Further, MSIL has a sizeable competitive advantage over new foreign entrants due to its widespread distribution network (nearly 3,000 and 1,000 service and sales outlets, respectively), which is not easy to replicate.
Suzuki focusing to make Maruti a small car manufacturing hub: Suzuki Japan is making Maruti a manufacturing hub to cater to the increasing global demand for small cars due to rising fuel prices and stricter emission standards. Thus, we believe there is a huge potential for the company to increase its market share in the export market. Moreover, R&D capabilities, so far largely housed at Suzuki Japan, are progressively moving to MSIL. The company is aiming to achieve full model change capabilities over the next couple of years, which will enable it to launch new models and variants at a much faster pace, which should ideally reduce its royalty payment in the long run (2-3 years).
Outlook and valuation
We broadly retain our volume estimates at ~15% and ~13% for MSIL in FY2013E and FY2014E, respectively. We expect margins to improve by ~250bp over the next two years, mainly on account of currency hedging, operating leverage and better product mix. We continue to remain positive on long-term volume growth in the passenger car industry, driven by economic growth and low penetration levels in the country. At `1,332, the stock is trading at 13.2x its FY2014E earnings. We maintain our Accumulate rating on the stock with a target price of `1,510.
Exhibit 10: Key assumptions
Y/E March (units)
FY09
FY10
FY11
FY12E
FY13E
FY14E
A1: Maruti 800
49,383
33,028
26,485
20,000
18,400
17,480
C: Omni, Versa, Eeco
A2: Alto, WagonR, Zen, Swift, A Star, Ritz A3 : SX4, Dzire
77,948
101,325
160,626
144,061
165,670
185,551
511,396
633,190
808,552
707,143
821,700
932,630
75,928
99,315
131,282
128,129
151,192
173,871
A4: Kizashi Total passenger cars MUV: Gypsy, Vitara Total domestic
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Disclosure of Interest Statement
1. Analyst ownership of the stock
Maruti Suzuki No
2. Angel and its Group companies ownership of the stock
No
3. Angel and its Group companies' Directors ownership of the stock
No
4. Broking relationship with company covered
No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
List of Key Financial Ratios: Formulas and Calculation Examples Defined for Different Types of Profitability Ratios and the Other Most Important Financial Ratios
List of Key Financial Ratios: Formulas and Calculation Examples Defined for Different Types of Profitability Ratios and the Other Most Important Financial Ratios
