27 July 2019
1QFY20 Results Update | Sector: Automobiles
Maruti Suzuki
BSE SENSEX
36,050
S&P CNX
11,070
CMP: INR5,806
TP: INR6,950(+20%)
Buy
Motilal Oswal values your support in
the Asiamoney Brokers Poll 2019 for
India Research, Sales and Trading
team. We
request your ballot.
In-line performance; demand outlook uncertain
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
MSIL IN
302
1753.7 / 25.4
9833 / 5685
-6/-16/-41
6369
43.8
2021E
947.6
126.6
84.9
287.9
26.8
1,711
16.4
22.4
20.2
3.4
Financials & Valuations (INR b)
Y/E MARCH
2019
2020E
Sales
860.2
844.3
EBITDA
108.0
97.0
Adj. PAT
73.6
66.7
Cons. Adj. EPS
(INR)
247.7
227.2
EPS Gr. (%)
-7.1
-8.3
BV/Sh. (INR)
1,527
1,598
RoE (%)
16.3
13.8
RoCE (%)
22.1
18.9
P/E (x)
23.4
25.6
P/BV (x)
3.8
3.6
Estimate change
TP change
Rating change
S/A Quarterly Performance
Y/E March
Volumes ('000 units)
Change (%)
Realn (INR '000/car)
Change (%)
Net op. revenues
Change (%)
RM Cost (% of sales)
Staff Cost (% of sales)
Other Cost (% of sales)
EBITDA
EBITDA Margins (%)
Depreciation
EBIT
EBIT Margins (%)
Non-Operating Income
PBT
Effective Tax Rate (%)
Adjusted PAT
Change (%)
In-line EBIT margin:
Net realization increased 7% YoY (+4.6% QoQ) to
~INR489.8k (our estimate: ~INR475k). Net sales were down ~12% YoY (-8%
QoQ) to ~INR197.2b (our estimate: ~INR191.3b) due to ~18% YoY volume
decline. EBIT margin shrank 5pp YoY (-110bp QoQ) to 5.7% (our estimate:
5.9%) owing to higher depreciation, although the impact of operating
deleverage was offset by lower RM cost and favorable FX. Higher other
income and lower tax restricted the PAT decline to ~27% YoY to ~INR14.4b
(our estimate: ~INR13.8b).
Earnings call highlights:
(a) Retails were down ~17% YoY, with the decline
similar in urban as well as rural. Inventory is over one month at dealer level.
(b) Demand environment is uncertain, making it difficult to provide
guidance. Inquiries have dropped, although efforts are being undertaken to
generate footfalls. (c) Average discounts at ~INR16.9k (v/s ~INR15.1k in
4QFY19/1QFY19). (d) Commodity cost benefit, favorable FX and cost
reduction contributed ~40bp in 1QFY20. (e) MSIL is not completely exiting
diesel – it is evaluating the 1.5ltr diesel engine. The focus is on CNG and
hybrids to offset the impact from diesel.
Valuation and view:
We cut our FY20/21 consol. EPS estimate by ~5% to
factor in our forecast of lower volumes and higher depreciation. Valuations
at 25.6x/20.2x FY20/21E consol. EPS are on downcycle earnings, where EPS
CAGR is estimated at just ~4% over FY17-21. While near-term demand
headwinds persist, MSIL is best placed in the entire OEM space to tackle
them, particularly with regard to BS6 transition due to limited price inflation
in ~80% of its portfolio. MSIL is likely to recover the fastest once current
headwinds recede due to its strong product portfolio, increased localization,
reducing FX exposure and capex-light business. Maintain
Buy.
(INR Million)
FY20
2QE
3Q
424.8 464.7
-12.4
8.4
487,369 489,806
6.3
6.7
207,035 227,588
-6.9
15.7
71.5
70.5
4.1
4.2
13.5
12.8
22,505 28,605
10.9
12.6
9,200 9,400
13,305 19,205
6.4
8.4
8,250 8,000
21,055 26,705
26.0
27.5
15,581 19,361
-25.8
30.0
FY19
1,862.4
4.7
461,867
3.0
860,203
7.8
70.0
3.8
13.6
107,993
12.6
30,189
77,804
9.0
25,610
104,656
28.3
73,573
-6.8
FY20E
1,730.4
-7.1
487,936
5.6
844,323
-1.8
71.0
4.2
13.4
97,040
11.5
36,709
60,330
7.1
32,368
90,698
26.5
66,663
-9.4
FY20E
Var
1QE (%)
402.6
0.0
-17.9
475,078
3.1
3.7
191,264
3.1
-14.8
70.5 100BP
4.3
0BP
15.0 -120BP
19,469
5.2
10.2
20BP
8,160
11,309
-0.2
5.9
8,000
19,099
28.0
13,751
4.4
-30.4
1Q
490.5
24.3
457,907
3.0
224,594
28.0
69.0
3.4
12.6
33,511
14.9
7,198
26,313
11.7
2,718
28,824
31.5
19,753
26.9
FY19
2Q
3Q
484.8
428.6
-1.5
-0.6
458,560 458,850
3.7
2.6
222,332 196,683
2.1
2.0
68.7
71.4
3.6
4.5
13.2
14.3
32,313 19,311
14.5
9.8
7,212
7,677
25,101 11,634
11.3
5.9
5,266
9,173
32,110 20,601
30.2
27.7
21,009 14,893
-15.4
-17.2
4Q
458.5
-0.7
468,057
2.1
214,594
1.4
71.9
3.8
13.8
22,634
10.5
8,102
14,532
6.8
8,677
23,121
22.3
17,956
-12.9
1Q
402.6
-17.9
489,819
7.0
197,198
-12.2
71.5
4.4
13.8
20,478
10.4
9,186
11,292
5.7
8,364
19,109
24.9
14,355
-27.3
4Q
438.4
-4.4
484,775
3.6
212,502
-1.0
70.6
4.0
13.5
25,452
12.0
8,923
16,528
7.8
7,754
23,829
27.1
17,366
-3.3
Jinesh Gandhi
(Jinesh@MotilalOswal.com); +91 22 6129 1524
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.