Maruti Suzuki Q1 FY18 Result Update Rating - HOLD - Arihant Capital Markets

- Q1 FY18 Net Revenue stood at Rs 17,132 crores an increase of 16.9% YoY but a decrease of 5% QoQ . Domestic volume increased by 14.3% where as Exports volume increased marginally 0.1% yoy. Thus total volume increased by 13.2% YoY to 3, 94,571 units.

- Q1 FY18 Operating EBITDA was at Rs 2,331 crores, with EBITDA margin at 13.6%. EBITDA margins declined by 10% on YoY basis mainly due to GST transition losses, increased discounts, higher procurement from Gujarat plant and rise in commodity prices.

- Q1 FY18 Reported PAT was at Rs 1,556 crores up by 4.7% on YoY basis, and PAT margin at 9.1%. However, higher volumes leading to higher capacity utilisation and higher other income contributed to increase in profits.

Concall highlights:

- Healthy order book continues for Brezza at 20 weeks, Baleno at 16 weeks and newly launched Dzire at 16 weeks.

- Production from the Gujarat plant stood at 24k units this quarter. With capacity ramping up, the management expects to reach full capacity of phase-1 at 20k units/month by end of 2017. The management expects to produce ~1.5-1.6mn units from Manesar plant as against ~160k units from the Gujarat plant in FY18, implying potential overall production at ~1.75-1.8mn units in FY18e. The second line of Gujarat plant is expected to commence operation from early 2019.

- Exports are likely to be flat at 125,000 units in FY18. Focus geographies are Indonesia, Chile, Bolivia and South Africa etc.

- Share of first time buyers has increased to 50% vs 43% in previous quarters.

- Blended discounts stood at Rs16,600/unit vs Rs15,200 QoQ.

- Indirect imports stand at ~18% of sales, while direct imports stand at ~5% of sales.

- Employee expenses increased due to salary revision.

- Royalty for Dzire is still under discussion and will get finalized in coming months. Royalty for the quarter stood at Rs8.86 bn.

- Expect effective tax rate at 28% for FY18.

- Expect FY18 capex at Rs45bn, towards new product development, R&D and marketing infrastructure.

Valuation: We value the stock at 25x FY19 EPS, and assign a price target of Rs8050 with a "HOLD" 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.

Source : Equity Bulls

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