Maruti Suzuki India Ltd. | Q2FY13 Result Update
IndiaNivesh Securities Pvt Ltd
30 Oct 2012
Available for Immediate Download
Maruti Suzuki India Ltd. | Q2FY13 Result Update Adjusted PAT below expectation, Resuming production from Manesar plant and encouraging start of festive sales are positive for the company | Maruti Suzuki Q2FY13 adjusted PAT was below street expectation. Net revenue showed muted growth, increased by 7% YoY (down 23% QoQ) to Rs. 80.70 bn in line with consensus of Rs.81 bn, dragged by lower volume and muted realization (due to adverse product mix). Volume of the company decreased by 9% YoY and 22% QoQ to 230,276 units impacted by production constraint due to labor issue at its Manesar plant. As company lost out over two months of normal production due to the strike at the Manesar plant, diesel car sales for the quarter fell to 70,000 units as against 1,00,000 units it sold in Q1FY13. While the diesel car production was hit during the quarter due to the strike, on the patrol car front too, the company faced demand pressure due to higher fuel prices and costly loans. To improve the subdued demand for petrol cars, the company enhanced sales promotion measures, which also impacted the profitability. The company offered average discounts of Rs 14, 750 per vehicle during the quarter which is almost Rs 2,000 more than Rs 12,600 it offered in Q2FY12. On Profitability front, reported PAT was above consensus due to higher other income and one- off gains from i) Rs.380 mn toward royalty written back and ii) Rs. 430 mn MTM forex gain. After adjustment of one-off’s, PAT comes at Rs. 1.46 bn (lower than consensus of Rs. 2.13 bn). Margin was under pressure due to weak demand for petrol cars and consequent high discounts, adverse mix, unfavorable forex and recent wage hike. EBITDA margin contracted 19 bps YoY and 117 bps QoQ to 6.1% led by lower realization and impact of Yen and dollar appreciation on direct imports and indirect import. RM cost (as % of sales) was up 24 bps YoY (223 bps QoQ) due to unfavorable currency movement especially on indirect imports (the company makes payment to its vendors with the lag effect of 1 quarter). In addition, as currency was unfavorable in Q2, we assume next quarter it could witness further pressure on EBITDA margin. The company has hiked the prices by 1% in October to offset the margin pressure. However on volume front, with the recently launched Alto 800 getting to a great start with over 30,000 units booking, resuming production from Manesar plant, encouraging start of festive sales and Multi utility vehicle Ertiga’s demand, management is confident to deliver higher volumes in the second half. Valuation: Recovery in the production volume from Manesar plant and encouraging start of festive sales are the key positive for the stock. At CMP of Rs 1395, the stock is trading at PE multiple of 21x FY13E and 15 x FY14E EPS which looks fully priced in. we have neutral rating on the stock.