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Maruti Suzuki (MSIL) - Qtr. Update - Dtd. - October 30, 2012




Axis Capital Limited


30 Oct 2012





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Maruti’s (MSIL’s) Q2FY13 results were below expectations with net profit at Rs 2.3bn (vs. our est. of Rs 4 bn). Margin at 6.1% was 210 bps lower than our estimate due to higher than expected RMC to sales at 81.9% (est. of 80%). Average Rs/Yen was at 0.66x (vs. our est of 0.62x as management had indicated favorable hedges for Q2). Maintain HOLD with TP of Rs 1,360. At CMP of Rs 1,395, the stock trades at 23.3x FY13E EPS of Rs 60 and 14.6x FY14E EPS of Rs 95.5. Key highlights  Average realization at Rs 0.35m (down 1.6% QoQ) surprised positively despite adverse product mix (lower diesel sales) and higher average discounts (Rs 14,750 vs. 11,646 in Q1). Management attributed this to higher contribution from Ertiga.  Manesar is currently operating at 1,600 units/day. It is expected to reach its peak capacity of 1,800 units/day in Q3FY13.  Company indicated that it will produce 0.4 mn units of diesel vehicles despite strike at its Manesar plant due to continued production of engines at Suzuki Power Train.  Management indicated inventory levels at 2 to 3 weeks (for petrol vehicles). Our recent channel checks indicate inventories are ~4 weeks.  Management stated key demand driver for petrol vehicles (vs. diesel) will be reduction in fuel price disparity and not lower interest rates (as finance penetration is similar for both petrol and diesel vehicles).  Bookings for new Alto currently stand at 30,000 units (September 2012 dispatches at 21,000 units).  Other income included MTM gain on commodity hedges worth Rs 430mn (marginal loss in Q2FY12). Regards, Chirag Shah (Sr VP – Automobiles) Institutional Equity Research Axis Capital Ltd Tel: 9122 4325 1148 Sahil Sheth (Asst VP – Automobiles) Institutional Equity Research Axis Capital Ltd Tel: 9122 4325 1137

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