Maruti Suzuki India - Forex gains, product mix aid strong earnings growth - BRICS

(CMP Rs1,673, BUY)

MSIL's Q4 results surprised the Street - as the numbers were skewed due to the merger of Suzuki Powertrain from April 1, 2012 being reflected in the results. Revenue was up 13% yoy, while PAT (standalone) grew 80% yoy. The growth of 19% yoy in realisation was led by a change in sales mix, which was offset by a yoy decline in volume. A significant decline in material cost - due to favourable exchange rates and improving efficiencies - helped margin improve by 310bps yoy.

In view of the expected normalisation in MSIL's earnings and pick up in its volume and overall economy, we upgrade the stock to BUY from ADD and raise target price to Rs1,940 (from Rs1,628), based on PE of 14x FY15E estimates (earlier 15x FY14E).

Source : Equity Bulls

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