Maruti Suzuki - 3QFY2013 Result Review - Angel Broking

Maruti Suzuki (CMP: Rs.1,600/ TP: -/ Upside: -)

Maruti Suzuki (MSIL) reported strong set of results for 3QFY2013. While the top-line (up 35% qoq) was broadly in-line with our estimates; bottom-line was slightly ahead despite higher tax rate (at 26% as against 19% in 2QFY2013), driven by EBITDA margin expansion (up 183bp sequentially to 8%).

For 3QFY2013, net sales grew by a robust 44.9% yoy (22.9% qoq) to Rs.11,200cr which was in-line with our estimates, driven by 25.9% yoy (30.9% qoq) and 15.7% yoy (3.8% qoq) growth in volumes and net average realization respectively. While volume growth came on the back of the low base (volumes in 3QFY2012 and 2QFY2013 were impacted due to labor strike); net average realization improved on account of superior product-mix (higher share of Swift, Dzire and Ertiga and higher proportion of diesel vehicles in the volume-mix), lower discounts (at Rs.12,100/ unit vs. Rs.14,700/ unit in 2QFY2013) and price hikes. The share of diesel vehicle stood at ~40% in 3QFY2013 as against ~33% in 2QFY2013. On the operating front, margins improved 183bp sequentially to 8% primarily due to favorable product-mix, operating leverage benefits and favorable currency movement. The royalty expense for the quarter stood at 5.6% as against 6% in 3QFY2012. Led by strong operating performance and base effect, net profit surged 143.8% yoy (120.4% qoq) to Rs.501cr, slightly ahead of our estimates of Rs.474cr.

Going ahead, we expect the operating performance of MSIL to improve further led by price increases carried out in January 2013 and favorable currency movement. Further, the company has indicated that the benefits of Yen depreciation will materialize from 1QFY2014 which should support margin expansion. However, at the CMP of Rs.1,600, the stock is trading at rich valuations of 16.7x FY2014E earnings. We therefore maintain our Neutral rating on the stock.

Source : Equity Bulls

Keywords