Maruti Suzuki - 1QFY14 results - Nirmal Bang Institutional

Maruti Suzuki (MSIL) 1QFY14 earnings at Rs6.3bn were marginally above our estimate on account of higher other income. Margins at 11.4% were in line with our estimate of 11.3%. EBITDA at Rs11.7bn were also broadly in line with our estimate. The financials of the company are not comparable on YoY and QoQ basis as this is the first quarter after Suzuki Powertrain India (SPIL) merger with the company and historical numbers with SPIL numbers are not available. However, management stated that raw material costs to sales were down 3.5% because of the merger, while other expenses and depreciation led the costs to rise 3.1%. On the bottom-line, the impact of SPIL merger was positive to the tune of 0.3%. We have cut our FY14/FY15 volume estimates by 4%/4%, respectively, as volume recovery in FY14 looks bleak. The management has given guidance of 0%-5% domestic sales growth and 0-5% fall in export volume. We have realigned our estimates, reducing our earnings estimates by 18%/13% for FY14/FY15, respectively, to factor in lower volume and margins. We have cut our target multiple on the stock from 14.5x to 14.0x due to subdued demand environment. Consequently, we have downgraded our rating on the stock from Buy to Hold with a revised target price of Rs1,521 (14x FY15E EPS) from Rs1,812 earlier.

Source : Equity Bulls

Keywords