Result impacted due to material cost, compensation: MSIL's 1QFY18 earnings and margins were below the cons. estimates. Net sales were at Rs. 17,546cr while PAT was at Rs. 2,331cr. Net sales, EBITDA and PAT grew by 17.4% / 5.3% 4.4% on yoy basis and were 0.3%/-6.8%/-7.9% against the consensus estimates. While PAT has grown by 4.4% to Rs. 1,556 in the quarter, there is Rs. 85cr component on one-off write backs. Adjusted for the one off item PAT could have been higher.
EBITDA margins decline by 153bps: EBITDA was at Rs. 2,331cr, up 5.3% yoy however margins came in at 13.3% vs. 14.8% in 1QFY17 which. Staff cost grew by 12.6% yoy due to the salary revision while other expenses were up 13.9% yoy. The margin decline mainly occurred as this quarter soaked in the GST related one time compensation costs (~50bps), higher material costs and higher promotional expenses (~30bps). If adjusted for these items, actual margins would be higher than reported margins by ~80bps.
Outlook and valuation: MSIL continues to report double digit numbers due to the strong performance of utility vehicles. Company expects to launch one model each year which is likely to sustain its growth momentum in the near term. The order book for the new vehicles remains strong and company has indicated of increasing its NEXA outlets to 300 from current 266. We believe that 1QFY18 results are one-off in nature and will not recur. We expect 22%/ 21% CAGR in revenue and PAT over next two years. At CMP, MSIL is trading at P/E of 21.5x of its FY2019E earnings. We value MSIL on 24x of its FY2019E EPS of Rs. 354 with a target price of Rs. 8,501 with Accumulate rating on the stock.
Shares of MARUTI SUZUKI INDIA LTD. was last trading in BSE at Rs.7739 as compared to the previous close of Rs. 7815.7. The total number of shares traded during the day was 22511 in over 2878 trades.
The stock hit an intraday high of Rs. 7828 and intraday low of 7708.1. The net turnover during the day was Rs. 174598258.