Result Update Maruti Suzuki India Accumulate Growth Story Continues MSIL volume continues to remain strong at 11.3% YOY which totaled to 431,112 units during the quarter. The growth in realisations per unit basis (YoY) is improving due to increased sales of higher value models. Going ahead, rising raw material cost will be worrisome, which MSIL was able to curb till now due to lag period and hedging. Leadership in the market with ~5% of market share and high growth to drive valuations. The volumes increased by 11.3% YoY and decreased sequentially by 12.4% QoQ. The volume growth is driven by domestic sales which grew by 12.37% YoY, YTD domestic sales growth stands at 15%. Petrol segment growth for the company was at 13.8% as against 6.8% growth in diesel segment in. MSIL expects improvement in margins going forward from the benefits of a cut in royalty payout and operating leverage kicking in for the Gujarat plant. MSIL has been strengthening its product portfolio and shall introduce 4 new products in next 12-18 months, with the launch of the new version of Swift in Feb 18. We expect realisations to improve / remain stable from the current level. On a long-term view, a spike in the production capacity and utilisation levels at Gujarat plant, we expect realisations to improve thereby expanding gross spreads. The Compact and Utility Vehicle segments offer better margins. With the rise in their proportion in product mix, MSIL margins will enhance further on a blended basis. CMP ` 9,277 Target / Upside ` 1,18/9% BSE Sensex 36,5 NSE Nifty 11,7 Scrip Details Equity / FV ` 1,51mn/` 5/- Market Cap ` 2,81bn USD 44bn 52-week High/Low ` 5,8/1, Avg. Volume (no) 565,998 NSE Symbol MARUTI Bloomberg Code MSIL IN Shareholding Pattern Dec 17(%) Promoters 56.2 MF/Banks/FIs 11. FIIs 25.8 Public / Others 7. Valuation (x) FY17 FY18E FY19E P/E 38.2 34.4 27.5 EV/EBITDA 27.1 22.4 18.1 ROE 22.2 2.6 21.4 ROCE 29.8 28.9 3.2 Estimates (` mn) FY17 FY18E FY19E Net Sales 68,348 81,299 96,567 EBITDA 13,53 124,791 153,968 PAT 73,377 81,466 11,749 EPS 243. 269.8 336.9 Result (` Mn) Particulars QoQ (%) YoY (%) Net Sales 189,4 214,381 (11.7) 166,236 13.9 Total Raw Mat 133,323 149,78 (11.) 116,738 14.2 Total Operating Cost 162,454 181,341 (1.4) 143,758 13. EBIDTA 3,378 36,341 (16.4) 24,89 22. Interest 263 15 75.3 29 (9.3) Other Income 2,449 5,229 (53.2) 5,919 (58.6) Depreciation 6,89 6,825 1. 6,349 8.5 PBT 25,674 35,29 (26.7) 24,17 6.2 Tax 7,684 1,186 (24.6) 6,725 14.3 Net Profit 17,99 24,843 (27.6) 17,445 3.1 EPS (in `) 59.6 82.3 (27.6) 57.7 3.2 OPM (in %) 15.8 16.7 (5.6) 14.8 6.7 Volumes (in ') 431,112 492,118 (12.4) 387,251 11.3 Realization (` / Unit) 439,329 435,629.8 429,272 2.3 Sr. Analyst: Priyank Chandra Tel: +9122 496 9737 E-mail: priyank@dolatcapital.com Analyst: Kushal Shah Tel: +9122 496 9768 E-mail: kushals@dolatcapital.com January 29, 218
results Revenue increased by 14.3% on a YoY basis to 193bn. On a sequential basis, there was de-growth of 11.4%. Growth in raw material cost was at 14.2% on a YoY basis to 133bn. On a sequential basis, it was a de-growth of 11% There was a growth in employee cost of 11.3 % on a YoY basis and growth of 3% on a sequential basis to 7bn. Other expenditure had a growth of 6.8% on a YoY basis to 22bn. Sequentially there was a de-growth of 1.6%. Operating profit was at 3bn in as compared to 25bn in. This was a growth of 22%. Depreciation increased by 1% on a sequential basis to 7bn. On a YoY basis, depreciation increased by 8.5%. Other income decreased by 58.6% on a YoY basis to 3bn. On a sequential basis, it decreased by 53.2%. Net profit was at 18 bn in as compared to 17bn in, showing a growth of %. Concall KTAs Company outperformed the passenger vehicle Industry with volume growth of 11% as against 6% growth on YoY basis. 9m FY18 domestic sales growth was at 15%. The growth were driven by compact and UV segments. Inquiry growth was at 2% YoY. The realizations have improved on the back of increased sales of higher value models. Petrol segment continues to outgrow Industry growth. Petrol segment growth for the company was at 13.8% as against 6.8% growth in diesel segment in. The revenue from export during the quarter were at ` 1,43 crs. Increase in share of company s higher segment model, cost reduction efforts, slightly lower sales promotion and marketing expense contributed to growth in profits. Net profit growth was adversely impacted due rise commodity price and lower non-operating income in this quarter. Expecting higher adverse impact of rise in commodity price going forward in Q4. Royalty amount for the quarter was at 5.3% of Net Sales. All new models starting from Ignis (Ignis was launched in Jan 17), would be included for revision in royalty fees. Capital expenditure for FY18 expected at ` 4 Crs. Production of the Gujarat plant for this quarter was at 36, units, YTD production at 95, units. Second shift in Gujarat plant have started and are performing at run-rate of 2, Per month which will lead to an annual capacity of 25, units from FY19. January 29, 218 2
Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Currently 15% of sourcing is localized for Gujarat plant, this should eventually increase to 6-7% in 4 years which will lead to a reduction in logistics cost. Other income declined was due to fall in value of investment in GSEC and Govt Bond with the increase in interest rates Rural market growth for Maruti was 19% YoY, whereas overall domestic growth was at 15%, expecting the momentum to continue. Discount levels in the quarter were at ` 17,9 as compared to ` 15,2 in Q2. The discounts are usually higher in Q3. Valuation MSIL will continue to enhance product portfolio across segments ensuring higher realization and higher margins. We expect that royalty payout should decrease considerably from FY19 onwards. With outperformance to the industry and strong return ratios, we believe that valuation should remain high. Recommend Accumulate. 12, P/E Band 1, 8, 6, 4, 2, 31x 24x 17x 1x January 29, 218 3
12,81 14,97 11,83 11,336 14,862 23,98 17,445 17,15 15,564 24,843 17,99 13,783 135,9 147,844 149,295 146,86 175,946 166,236 18,52 171,324 214,381 189,4 21,673 22,454 21,452 23,5 22,157 3,374 24,89 25,473 23,94 36,341 3,378 Net Sales (` in Mn) EBITDA (` in Mn) 25 2 15 1 5 4 35 3 25 2 15 1 5 Net profit (` in Mn) Gross Margin % 3 25 2 15 1 5 35 34 33 32 31 3 29 28 27 OPM % Net Profit Margin (%) 18 17 16 15 14 13 12 14 13 12 11 1 9 8 7 6 January 29, 218 4
6 5 4 3 2 1 Volumes and Realisations Volume (in ') Realisations / Unit (` in ') 46 44 42 4 38 36 34 14 135 13 125 12 115 11 Gross Spread and Gross Margin Gross Profit / Unit (` in ') Gross Profit Margin (%) 36. 34. 32. 3. 28. EBIDTA Spread and EBIDTA Margin 8 7 6 5 4 3 2 1 EBITDA / Unit (` in ') EBITDA Margin % 18. 17. 16. 15. 14. 13. 12. January 29, 218 5
Income Statement (` mn) Particulars Mar'16 Mar'17 Mar'18E Mar'19E Net Sales 575,381 68,348 81,299 96,567 Total Income 589,991 73,146 83,299 98,567 Total Expenditure 486,537 576,818 685,58 86,6 Cost of materials consumed 354,839 426,296 59,253 64,992 Purchase of stock in trade 32,66 44,821 53,543 63,69 Change in Inventory 69 (3,81) Employee Benefits Exp. 19,788 23,31 27,846 33,81 Other Expenses 79,341 86,228 94,866 15,917 Other Income 14,61 22,798 2, 2, EBIDTA (Excl. OI) 88,844 13,53 124,791 153,968 EBIDTA (Incl. OI) 13,454 126,328 144,791 173,968 Interest 815 894 92 944 Depreciation 28,22 26,21 27,49 27,668 PBT & EO Items 74,437 99,413 116,381 145,356 Profit Before Tax 74,437 99,413 116,381 145,356 Tax 2,794 26,36 34,914 43,67 Net Profit 53,643 73,377 81,466 11,749 Balance Sheet (` mn) Particulars Mar'16 Mar'17 Mar'18E Mar'19E Sources of Funds Equity Capital 1,51 1,51 1,51 1,51 Other Reserves 297,332 36,21 429,32 516,918 Net Worth 298,842 361,711 43,812 518,428 Loan Funds 774 4,836 4,5 4,1 Deferred Tax Liability 1,943 4,64 5,14 5,614 Total Capital Employed 31,559 371,187 44,416 528,143 Applications of Funds Gross Block 295,43 329,216 369,216 49,216 Less: Accumulated 17,33 196,324 223,814 251,482 Net Block 125,1 132,892 145,42 157,734 Capital Work in Progress 1,69 12,523 1, 1, Current Assets, Loans & Advances Inventories 31,321 32,622 44,4 52,634 Sundry Debtors 13,222 11,992 22,2 26,317 Cash and Bank Balance 391 131 4,965 22,319 Loans and Advances 35 28 5 1 Other Current Assets 38,231 36,273 32,646 29,381 sub total 83,2 81,46 14,26 13,751 Less: Current Liabilities & Provisions Current Liabilities 113,74 134,37 154,143 172,64 Provisions 4,137 4,79 5,274 5,97 sub total 117,841 138,746 159,417 178,547 Net Current Assets (34,641) (57,7) (55,156) (47,795) Total Assets 31,563 371,19 44,416 528,143 E Estimates Cash Flow (` mn) Particulars Mar'16 Mar'17 Mar'18E Mar'19E Profit before tax 74,437 99,413 116,381 145,356 Depreciation & w.o. 28,22 26,21 27,49 27,668 Net Interest Exp (695) 522 92 944 Direct taxes paid (19,99) (23,173) (34,914) (43,67) Change in Working Capital 14,631 21,94 2,29 9,994 Other (12,631) (21,876) (A) CF from Opt. Activities 84,845 12,847 112,167 14,355 Capex (26,327) (33,723) (37,477) (4,) Free Cash Flow 58,518 69,124 74,69 1,355 Inc./ (Dec.) in Investments (46,715) (58,577) (56,695) (68,34) Other 768 485 469 51 (B) CF from Invt. Activities (72,274) (91,815) (93,73)(17,524) Issue of Equity/ Preference Inc./(Dec.) in Debt (2,353) 2,527 (336) (4) Interest exp net (921) (1,95) (92) (944) Dividend Paid (Incl. Tax) (9,9) (12,725) (12,366) (14,132) (C) CF from Financing (12,364) (11,293) (13,622) (15,476) Net Change in Cash 27 (261) 4,842 17,354 Opening Cash balances 177 384 123 4,965 Closing Cash balances 384 123 4,965 22,319 Important Ratios Particulars Mar'16 Mar'17 Mar'18E Mar'19E (A) Measures of Performance (%) EBIDTA Marg. (excl. O.I.) 15.1 14.7 15. 15.7 Interest / Sales.1.1.1.1 Tax/PBT 27.9 26.2 3. 3. Net Profit Margin 9.1 1.4 9.8 1.4 (B) As Percentage of Net Sales Ex. Duty% of Gros. Sales 11.8 12.1 12.1 12.1 Cost of materials cons. 61.7 62.7 62.8 63. Purch. of stock in trade 5.6 6.6 6.6 6.6 (Inc.)/Dec. in FG, WIP and stock in trade. (.6).. Employee Expense 3.4 3.4 3.4 3.4 Other Expenses 14. 12.8 11.8 11. (C) Measures of Financial Status Interest Coverage (x) 126.9 141.3 157.4 184.3 Avg. Cost Of Debt (%) 63.3 31.9 19.7 22. Debtors Period (days) 8.4 6.4 1. 1. Closing stock (days) 19.9 17.5 2. 2. Inventory Turn. Ratio (x) 18.4 2.9 18.3 18.3 Fixed Assets Turnover (x) 1.9 2.1 2.2 2.3 WC Turnover (x) (16.6) (11.8) (14.7) (2.1) Non-Cash WC (` Mn) (35,32) (57,831) (6,121) (7,115) (D) Measures of Investment EPS (`.) 177.6 243. 269.8 336.9 CEPS (`.) 271. 329.1 36.8 428.5 DPS (`.) 25. 3. 35. 4. Dividend Payout (%) 14.1 12.3 13. 11.9 Profit Ploughback (%) 85.9 87.7 87. 88.1 Book Value (`.) 989.5 1,197.7 1,426.5 1,716.6 RoANW (%) 2. 22.2 2.6 21.4 (E) Valuation Ratios CMP (`.) 9,277 9,277 9,277 9,277 P/E (x) 52.2 38.2 34.4 27.5 Market Cap. (`. bn.) 2,82 2,82 2,82 2,82 MCap/ Sales (x) 4.9 4.1 3.5 2.9 EV (`. bn.) 2,82. 2,86 2,81 2,783 EV/Sales (x) 4.9 4.1 3.5 2.9 EV/EBDITA (x) 31.5 27.1 22.4 18.1 P/BV (x) 9.4 7.7 6.5 5.4 Dividend Yield (%).3.3.4.4 E Estimates January 29, 218 6
DART RATING MATRIX Total Return Expectation (12 Months) Buy > 2% Accumulate 1 to 2% Reduce to 1% Sell < % DART Team Purvag Shah Managing Director purvag@dolatcapital.com +9122 496 9747 Amit Khurana, CFA Head of Equities amit@dolatcapital.com +9122 496 9745 CONTACT DETAILS Equity Sales Designation E-mail Direct Lines Dinesh Bajaj VP - Equity Sales dineshb@dolatcapital.com +9122 496 979 Kartik Sadagopan VP - Equity Sales kartiks@dolatcapital.com +9122 496 9762 Kapil Yadav VP - Equity Sales kapil@dolatcapital.com +9122 496 9735 Yomika Agarwal VP - FII Sales yomika@dolatcapital.com +9122 496 9773 Derivatives Strategist Designation E-mail Bhavin Mehta VP - Derivatives Strategist bhavinm@dolatcapital.com +9122 496 975 Equity Trading Designation E-mail P. Sridhar VP and Head of Sales Trading sridhar@dolatcapital.com +9122 496 9728 Chandrakant Ware AVP - Equity Sales Trading chandrakant@dolatcapital.com +9122 496 977 Derivatives Trading Designation E-mail Shirish Thakkar AVP - Derivatives shirisht@dolatcapital.com +9122 496 972 Hardik Mehta Sales Trader hardikm@dolatcapital.com +9122 496 9748 Dolat Capital Market Private Limited. 2, Rajabahadur Mansion, 1st Floor, Ambalal Doshi Marg, Fort, Mumbai - 4 1
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