Maruti Suzuki India DOHA BROKERAGE. associate of DOHA BANK. associate of DOHA BANK BUY. Stock data and Key Ratios. On track to witness better times

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1 DBFS EQUITIES RESEARCH INDIA / AUTOS Maruti Suzuki India CMP: Rs Target Price: Rs 1409 On track to witness better times Maruti Suzuki had a tough time in A slowdown in the auto industry, production losses from repeated strikes in its plants, increased competition in the compact car segment and foreign exchange losses from a depreciating rupee against the yen have all impacted the company s earnings during the period. With the production losses behind it and demand for passenger cars showing signs of revival, also considering the loosening of interest rate cycle by RBI, we think Maruti is well positioned and is on track to witness better times. New launches and higher diesel engine availability to drive volumes Italian carmaker Fiat and Japan s Suzuki Motor Corporation have inked an agreement to supply 1 lakh diesel engines to Maruti Suzuki India, which will help the country s largest carmaker to manufacture more engines. This development will bring a relief to Maruti Suzuki India, which has over 1,10,000 customers waiting in the queue to take delivery of its largest selling car, Swift. The company is gearing up to increase production at the Manesar plant to deliver more diesel cars. Analyst Stock Rating Rethish Varma.S research@dbfsindia.com / 314 BUY Stock data and Key Ratios Current Price Rs Target Price Rs 1409 Percentage Appreciation 13.5% Stock Beta week range High/Low Rs /900 Market Cap (Crores) Shares Outstanding(Mln) Average daily volume 774,151 NSE code MARUTI BSE Code Reuters code MRTI.NS Bloomberg code MSIL/F:IN Key Ratio Analysis (%) Cost / Revenue EBITDA/Revenue Emp expe/ Revenue Tax/PBT PAT growth ROCE ROE EPS EPS growth P/E Shareholding Pattern Shareholder Name Promoter & Promoter group Mutual Funds Financial Institutions / Banks Foreign Institutional Investors Non-Institutions % holdings Maruti Suzuki has launched a sub 4-meter version of Swift Dzire in the 1st week of February. Also, it is likely to commercially launch its new 7-seater MPV, Ertiga in 2-3 months. This, coupled with additional diesel engine availability (for next 3 years), would drive volumes and market share gains. Valuations and View Maruti Suzuki is trading at times our FY13E EPS of Rs at Rs and since the labour issues cleared, higher diesel engine availability to ramp up production, launch of new products and interest rates declining going forward,we expect in the long run Maruti Suzuki will improve in its margins and market share and will be a good bet on declines and we therefore initiate a BUY rating on the scrip with a target of Rs For analyst certification and other important disclosures, refer to the Disclosure Section located at the end of this report.

2 INCOME STATEMENT (Rs in Million) Income Cost EBIDTA Interest Depreciation/ Amortization Consolidated Profit before Tax Less : Tax Expense - Current Tax Deferred Tax Consolidated Profit after Tax Profit for the Year 217, ,460 24, ,165 7,710 17,013 4, ,276 12, , ,039 45, ,414 8,788 36,669 11, ,450 26, , ,600 41, ,313 10,601 31,350 8, ,071 23, , ,321 30, ,641 12,862 17,987 5, ,180 12, , ,068 55, ,516 17,722 38,029 6, ,818 32,490 Maruti s own diesel plant at Gurgaon, by second half of FY13 Maruti Suzuki s Chairman Mr R. C. Bhargava said in a press release on January 23 rd 2012, that the company s first own diesel engine plant is expected to be ready by the second half of next fiscal with an initial annual capacity of 1.5 lakh engines. This will help it meet the sudden increased demand for diesel cars which has arisen because of the cheaper price of diesel versus petrol. Q3 FY12 perfomance summary Mauti Suzuki came out with its Q3 FY12 results on January 23rd 2012.Most of the analyst community were expecting the company to report a dismal performance, but company came out with a result that was encouraging, showing signs of recovery. Highlights The company registered Net sales of Rs 76,636 Million,a decline of 17.4 percent over same period in the previous year. Net Profit during the quarter stood at Rs 2,056 Million,a fall of 63.6 percent. During the quarter,the company sold 211,803 units in the domestic market as compared to 299,527 units same period previous year.in exports,the company sold 27,725 units against 31,160 units in the previous year. Unit sales in the quarter were impacted by sluggish market conditions caused by higher fuel prices and interest rates. Additionally, the company lost around 40,000 units in production due to the industrial relations problem at manesar. The depreciation of the Rupee during the quarter adversely impacted the bottom-line through higher cost of imports for the company.

3 SOURCES OF FUNDS SHAREHOLDERS FUNDS Capital Reserves and Surplus LOAN FUNDS Funds DEFERRED TAX Deferred Tax Liabilities Deferred Tax Assets APPLICATION OF FUNDS FIXED ASSETS Capital Work-In-Progress INVESTMENTS CURRENT ASSETS, LOANS AND ADVANCES Inventories Sundry Debtors Cash and Bank Balances Other Current Assets Loans and Advances LESS: CURRENT LIABILITIES AND PROVISIONS Current Liabilities Provisions Net Current Assets Cash flow statements (Rs in Million) Cash flow from Operating Activities: Net Profit before Tax Depreciation Interest Expense Interest Income Operating Profit before Working Capital changes Adjustments for changes in Working Capital : Cash generated from Operating Activities Taxes (Paid) (Net of Tax Deducted at Source) Net Cash from Operating Activities 94,208 95,653 7,588 2, , ,839 42,163 8,674 50,837 32,772 9,213 9,788 19, ,548 56,405 31,620 3,555 35,175 21, ,839 17,013 7, ,891 17,859 17,302-4,672 12, , ,826 9,055 2, , ,342 51,713 3,922 55,635 73,968 12,276 8,494 1, ,952 39,232 30,260 6,233 36,493 2, ,342 36,669 8, ,199 43,529 42,022-10,341 31, , ,088 4,541 2, , ,359 56,718 14,987 71,705 54,392 14,384 9,502 25,281 1,700 14,037 64,904 36,466 5,176 41,642 23, ,359 31,350 10, ,083 40,273 45,014-10,314 34, , ,218 3, , ,465 62,117 24,298 86,415 46,926 16,854 10,630 28,518 3,273 12,352 71,626 43,945 4,557 48,502 23, ,465 17,987 12, ,442 34, , , ,504 2, , ,082 67,923 36, ,316 52,148 19,748 11,891 32,169 4,910 10,869 79,587 52,957 4,012 56,969 22, ,082 38,029 17, ,499 58, ,544 Cash flow from Investing Activities: Purchase of Fixed assets Sale of Fixed Assets Sale of Investments Purchase of Investments Net Cash from Investing Activities Net Cash from Financing Activities -17, , ,338 8,528-5,191-13, , ,754-50, , , ,616-4,476-6,570-33, , ,868-17,996-5,684-41, , ,474-40,019-5,953

4 Company Description Maruti Suzuki India Limited (MSIL, formerly Maruti Udyog Limited), a subsidiary of Suzuki Motor Corporation of Japan, is India s largest passenger car company, accounting for majority of the domestic car market. Company offers 14 brands and over 150 variants ranging from people s car Maruti 800 to the stylish hatchback Ritz. Our range of cars include people movers - Omni and Eeco, international brands - Alto, Alto-K10, A-star, WagonR, Swift and Estilo, off-roader - Gypsy, SUV - Grand Vitara, sedans - SX4 and Swift DZire. Key points that made us to put a BUY Despite company s dismal performance in due to employee problems at its production facility in manesar, we are quite positive on this company in the long run. Volume momentum to remain intact in the long run, with the additional supply agreement reached between Fiat to supply more diesel engines to Maruti Suzuki, the company can actually increase production at its plants thereby bringing relief to the long list of customers in the waiting list. With the commissioning of its own diesel engine plant at Gurgaon by 2nd Half of FY13,the company will be able to ramp up its production and thereby increase its market share. Volume growth in the domestic market driven by focus on tier-ii cities and rural market. Improving product mix with increasing share of A2 & A3 segment, driven by newer products. Investment Risks Company is expected to face huge competition in the domestic market mainly in the A2 segment. Margins will be negatively impacted due to Adverse forex movement and strengthening of commodity prices. The Finance Ministry is considering the imposition of higher excise duty on diesel vehicles in the upcoming Budget likely to be unveiled in March. If this excise duty hike coupled with a de-regulation of diesel prices comes into affect, could have a negative impact on sales. Valuations & Rating Our valuation is based on Discounted Cash Flow method and we expect in the long run the company will be able to improve its margins and market share. We put a BUY rating on the scrip with a target of Rs 1409,that is a percentage appreciation of 13% from the current levels. Analyst Certification I Rethish Varma.S, hereby certify that the views expressed in this research report accurately reflect my personal views about the subject securities and issuers. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or view expressed in this research report.

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