Maruti Suzuki, 1Q FY 2014

7/27/2019 Maruti Suzuki, 1Q FY 2014

1/16

Please refer to important disclosures at the end of this report 1

Y/E March (` cr) 1QFY14* 1QFY13 % chg (yoy) 4QFY13* % chg (qoq)Net Sales 10,237 10,778 (5.0) 13,304 (23.1)EBITDA 1,166 786 48.3 2,000 (41.7)

EBITDA Margin (%) 11.4 7.3 410bp 15.0 (364)bp

Adj. PAT 632 424 49.0 1,240 (49.0)Source: Company, Angel Research; Note * not comparable due to SPIL merger

Favorable forex and SPIL merger drives performance: For 1QFY2014, MarutiSuzuki (MSIL) reported strong results on the operating front, which was in-line withour estimates; however, net profit was slightly lower-than-expected due to highertax rate (at 25.3% as against expectation of 21%). The quarterly results are notcomparable on a yoy as well as sequential basis as 1QFY2014 and 4QFY2013results reflect the impact of the consolidation of Suzuki Power Train India (SPIL)operations. The top-line for the quarter declined 5% yoy to `10,237cr and was in-line with our estimate of `10,284cr. The performance was aided by a strong 5.4%yoy growth in net average realization driven by a better product-mix and priceincreases which although were partially offset by higher discounts (up ~15% yoy).Volumes however posted a decline of 10% yoy due to demand slowdown in thedomestic (down 6.8% yoy) as well as export (down 35.4% yoy) markets. On theoperating front, the EBITDA margin stood at 11.4% (significant expansion of410bp yoy), in-line with our estimate, largely led by favorable impact of forexmovement and also supported by the ongoing cost reduction initiatives and re-distribution of expenses owing to the SPIL merger. Net profit surged 49% yoy to`632cr aided by strong operating performance and also due to higher otherincome (up 81.9% yoy). However, a higher tax-rate and increase in depreciationexpense (up 41.3% yoy) due to SPIL merger restricted bottom-line growth.

Outlook and valuation:While rural sales for the company continue to grow at arobust pace (up ~19% yoy), urban sales witnessed a high single digit declineduring 1QFY2014. The Management stated that the demand for diesel vehiclestoo has turned weak and expects average discounts to inch upwards in2QFY2014. We revise our FY2014 volume estimates downwards to ~2% from~7% earlier to factor in the weak demand environment that the industry iscurrently facing. Nonetheless, we retain our EBITDA margin estimates and expectan expansion of 150bp in FY2014, driven by favorable currency movement,easing of commodity cost pressures, ongoing cost reduction initiatives and also onaccount of the SPIL merger. We increase our tax-rate assumptions to 24% from21% earlier as guided by the Management. Consequently, we revise downwards

our earnings estimates by 11.3%/9.5% for FY2014/15 respectively. We expectMSIL to register a strong earnings CAGR of ~18% over FY2013-15. We maintainour Buy rating on the stock with a target price of `1,648.Key financials (post SPIL merger)Y/E March (` cr) FY2012 FY2013E FY2014E FY2015ENet Sales 35,587 43,588 45,862 52,647% chg (2.8) 22.5 5.2 14.8

Net Profit 1,635 2,392 2,856 3,318% chg (28.6) 46.3 19.4 16.2

EBITDA (%) 7.1 9.7 11.2 11.1

EPS (`) 54.1 79.2 94.6 109.8P/E (x) 25.4 17.4 14.5 12.5

P/BV (x) 2.7 2.2 2.0 1.7

RoE (%) 11.3 14.2 14.4 14.6

RoCE (%) 8.7 12.6 13.8 14.4

EV/Sales (x) 0.8 0.8 0.7 0.6

EV/EBITDA (x) 11.4 8.3 6.5 5.6Source: Company, Angel Research; Note: CMP as of July 26, 2013

BUYCMP `1,375

Target Price `1,648

Investment Period 12 Months

Stock Info

Sector

Bloomberg Code

Shareholding Pattern (%)

Promoters

MF / Banks / Indian Fls

FII / NRIs / OCBs

Indian Public / Others

Abs. (%) 3m 1yr 3yr

Sensex 2.4 18.7 9.6

Maruti Suzuki (17.8) 24.1 15.4

Automobile

Avg. Daily Volume

Market Cap (`cr)

Beta

52 Week High / Low

41,538

0.8

1,773/1,082

74,732

Net Debt (`cr) (5,744)

Face Value (`)

BSE Sensex

Nifty

Reuters Code

MSIL@IN

5

19,748

5,886

MRTI.BO

56.2

19.5

22.1

2.2

Yaresh Kothari022-3935 7800 Ext: 6844

[email protected]

Maruti SuzukiPerformance Highlights

1QFY2014 Result Update | Automobile

July 27, 2013


2/16

Maruti Suzuki | 1QFY2014 Result Update

July 27, 2013 2

Exhibit 1:Quarterly financial performanceY/E March (` cr) 1QFY14* 1QFY13 % chg (yoy) 4QFY13* % chg (qoq) FY2013* FY2012 % chg (yoy)Net Sales 10,237 10,778 (5.0) 13,304 (23.1) 43,588 35,587 22.5Raw-material cost 6,802 7,930 (14.2) 8,289 (17.9) 30,554 26,533 15.2(% of Sales) 66.4 73.6 62.3 70.1 74.6

Staff cost 295 238 23.9 387 (23.8) 1,070 801 33.5

(% of Sales) 2.9 2.2 2.9 2.5 2.3

Purchase of traded goods 564 460 22.5 440 28.1 1,961 1,533 28.0

(% of Sales) 5.5 4.3 3.3 4.5 4.3

Other Expenses 1,410 1,363 3.5 2,187 (35.5) 5,774 4,207 37.2

(% of Sales) 13.8 12.6 16.4 13.2 11.8

Total Expenditure 9,071 9,992 (9.2) 11,304 (19.8) 39,358 33,074 19.0Operating Profit 1,166 786 48.3 2,000 (41.7) 4,230 2,513 68.3OPM (%) 11.4 7.3 15.0 9.7 7.1

Interest 44 33 33.4 73 (39.1) 190 55 243.8

Depreciation 480 340 41.3 816 (41.1) 1,861 1,138 63.5

Other Income 204 112 81.9 399 (48.8) 812 827 (1.8)

PBT (excl. Extr. Items) 846 526 61.0 1,510 (44.0) 2,991 2,146 39.4Extr. Income/(Expense) - - - - - - -

PBT (incl. Extr. Items) 846 526 61.0 1,510 (44.0) 2,991 2,146 39.4(% of Sales) 8.3 4.9 11.4 6.9 6.0

Provision for Taxation 214 102 110.7 270 (20.7) 599 511 17.2

(% of PBT) 25.3 19.4 17.9 20.0 23.8

Reported PAT 632 424 49.0 1,240 (49.0) 2,392 1,635 46.3Adj PAT 632 424 49.0 1,240 (49.0) 2,392 1,635 46.3

Adj. PATM 6.2 3.9 9.3 5.5 4.6

Equity capital (cr) 151.0 144.5 151.0 151.0 144.5

Reported EPS (`) 20.9 14.7 42.6 41.0 (49.0) 79.2 56.6 39.9Source: Company, Angel Research; Note * not comparable due to SPIL merger

Exhibit 2:1QFY2014 Actual vs Angel estimatesY/E March (` cr) Actual Estimates Variation (%)Net Sales 10,237 10,284 (0.4)EBITDA 1,166 1,169 (0.2)

EBITDA margin (%) 11.4 11.4 2bp

Adj. PAT 632 663 (4.7)Source: Company, Angel Research


3/16


July 27, 2013 3

Exhibit 3:Quarterly volume performanceVolume (units) 1QFY14 1QFY13 % chg (yoy) 4QFY13 % chg (qoq) FY2013 FY2012 % chg (yoy)A: Mini:M800, Alto, A-Star, WagonR 97,668 94,813 3.0 132,837 (26.5) 429,569 491,389 (12.6)

A: Compact:Swift, Estilo, Ritz 59,678 72,986 (18.2) 73,895 (19.2) 255,302 235,754 8.3A: Super Compact: Dzire 49,259 46,958 4.9 55,454 (11.2) 169,571 110,132 54.0

A: Mid-Size:SX4 1,418 1,447 (2.0) 2,130 (33.4) 6,707 17,997 (62.7)

A: Executive: Kizashi 0 21 - 2 (100.0) 188 458 -

Total Passenger cars 208,023 216,225 (3.8) 264,318 (21.3) 861,337 855,730 0.7B: Utility Vehicles: Gypsy, Grand Vitara 14,622 18,965 (22.9) 18,540 (21.1) 79,192 6,525 1,113.7

C: Vans: Omni, Eeco 22,701 28,074 (19.1) 26,013 (12.7) 110,517 144,061 (23.3)

Total Domestic 245,346 263,264 (6.8) 308,871 (20.6) 1,051,046 1,006,316 4.4Total Exports 21,088 32,632 (35.4) 34,838 (39.5) 120,388 127,379 (5.5)Total Volume 266,434 295,896 (10.0) 343,709 (22.5) 1,171,434 1,133,695 3.3

Source: Company, Angel Research

Top-line growth on expected line: The top-line for the quarter declined 5% yoy to`10,237cr and was in-line with our estimate of `10,284cr. The top-line

performance was aided by a strong growth of 5.4% yoy in net average realization,

driven by better product-mix and price increases which although were

partially offset by higher discounts. Average discounts for the quarter stood at

`13,426/ unit up from `11,646 in 1QFY2013 and `10,597/ unit in 4QFY2013.

Volumes however posted a decline of 10% yoy due to slowdown in demand in the

domestic (down 6.8% yoy) as well as export (down 35.4% yoy) markets. The sale of

diesel cars as a proportion of total sales stood at 34% as against 36.3% in

4QFY2013. The export revenue for the quarter stood at `907cr registering a

decline of 17.5% yoy following a 35.4% yoy decline in export volumes.

Nonetheless, export realization continued its strong momentum and registered a

robust growth of 27.6% yoy on the back of better product-mix and better

realization on the forex front.

Exhibit 4:Volumes continue to remain sluggish


Exhibit 5:Strong growth in net average realization


281

,526

252

,307

239

,528

360

,334

295

,896

230

,376

301

,453

343

,709

266

,434

(0.6)

(19.6) (27.6)

4.9 5.1

(8.7)

25.9

(4.6)

(10.0)

(40.0)

(30.0)

(20.0)

(10.0)

0.0

10.0

20.0

30.0

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

(%)(units) Total volume yoy growth (RHS)

293

,279

294

,714

314

,247

318

,770

355

,843

350

,302

363

,471

379

,864

375

,144

3.2 3.4

12.0 11.7

21.3

18.9

15.7

19.2

5.4

0.0

5.0

10.0

15.0

20.0

25.0

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

(%)(`) Net average realisation/unit yoy growth (RHS)


4/16


July 27, 2013 4

Exhibit 6:Net sales in-line with estimates


Exhibit 7:Domestic passenger car market share trend

Source: Company, SIAM, Angel Research

Exhibit 8:Quarterly revenue and realization performance3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13* 1QFY14*

Domestic revenue (` cr) 6,589 10,242 9,429 6,612 9,637 11,526 9,088Change yoy (%) (21.9) 14.7 27.6 1.0 46.3 12.5 (3.6)

Domestic realization (`) 311,096 318,656 358,165 314,921 358,310 373,175 370,420

Change yoy (%) 10.4 11.5 21.5 7.0 15.2 17.1 3.4

Export revenue (` cr) 938 1,244 1,100 824 1,320 1,530 907Change yoy (%) 11.8 43.0 26.9 (7.3) 40.7 23.0 (17.5)

Export realization (`) 338,323 319,712 337,092 403,486 406,204 439,176 430,102

Change yoy (%) 25.7 13.7 19.9 35.7 20.1 37.4 27.6

Source: Company, Angel Research; Note * not comparable due to SPIL merger

Favorable currency impact and SPIL merger boost margins: On the operatingfront, EBITDA margins stood at 11.4% (significant expansion of 410bp yoy), in-line

with our estimates, largely led by favorable impact of forex movement and also

supported by the ongoing cost reduction initiatives and re-distribution of expenses

owing to the SPIL merger. For 1QFY2014, the reported raw-material expense as a

percentage of sales stood at 71.9% as against 77.8% in 1QFY2013; it benefitted

from the SPIL merger to the tune of 3.5%. The Management stated that the

companys average Yen/USD rate was ~94 during the quarter. Going ahead,

52% of the balance Yen/USD (direct - 80% hedged and indirect - 30% hedged)

exposure for FY2014 has been hedged at close to the current market rate.However, USD/INR exposure remains unhedged which along with higher level of

discounts could pose a risk to margins. The operating profit for the quarter surged

48.3% yoy to `1,166cr.

8,4

54

7,6

74

7,7

32

11

,727

10

,778

8,3

05

11

,200

13

,304

10

,237

2.7

(16.1) (18.6)

17.227.5

8.2

44.9

13.4

(5.0)

(30.0)

(20.0)

(10.0)

0.0

10.0

20.0

30.0

40.0

50.0

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

(%)(`cr) Net sales yoy change (RHS)

44.740.9 38.7

43.6 44.6

37.1

47.3

51.547.9

0.0

10.0

20.0

30.0

40.0

50.0

60.0

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

(%)


5/16


July 27, 2013 5

Exhibit 9:EBITDA margins in double digits at 11.4%


Exhibit 10:Net profit surges 49% yoy


Net profit surges 49% yoy: Net profit surged 49% yoy to `632cr, aided by a strongoperating performance and also due to higher other income (up 81.9% yoy).

However, higher tax-rate and increase in depreciation expense (up 41.3% yoy) due

to SPIL merger restricted bottom-line growth.

9.6 5.7 5.2 7.3 7.3 6.1 8.015.0 11.4

79.981.0

79.181.3

77.881.9

80.265.6

71.9

4.8

6.0 6.0

5.1

6.25.4 5.6

5.2

6.1

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

0.0

20.0

40.0

60.0

80.0

100.0

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

(%)(%) EBITDA margin Raw material cost/sales

Royalty e xpenses/sales (RHS)

549

240

206 6

40

424

227

501

1,2

40

632

6.5

3.12.7

5.5

3.9

2.7

4.5

9.3

6.2

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.08.0

9.0

10.0

0

200

400

600

800

1,000

1,200

1,400

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

(%)(`cr) Net profit Net profit margin (RHS)


6/16


July 27, 2013 6

Conference call Key highlights

According to the Management, the current demand for passenger vehiclesremains muted and is not witnessing any material uptick. The retail sales for

the company in the month of April, May and June stood at 67,000, 80,000

and 90,000 respectively. Going ahead, the company intends to start building

up inventory ahead of the festive season.

The Management has guided for a 0-5% volume growth for FY2014 in thedomestic markets. However, it expects volumes to decline by 0-5% in the

export markets.

Rural sales now account for ~30% of overall volumes for MSIL and grewrobustly by 19% yoy during the quarter. Urban sales however, declined in high

single digits. MSIL expects the momentum in rural sales to continue in

2HFY2014 on the back of good monsoons.

Export demand has deteriorated sharply due to slowdown in Europe andspecific issues in some countries.

The average discounts for MSIL stood at `13,426/vehicle during the quarter asagainst `10,600/vehicle in 4QFY2013 and `11,646 in 1QFY2013. Going

ahead, MSIL expects average discounts to inch upwards as discounts are now

being offered even on diesel models.

Average JPY realization for 1QFY2014 stood at `94/USD and is expected tobe around `98/USD during 2QFY2014. The company has hedged around

52% of USD/JPY exposure for the remaining 9MFY2014. This largely coversthe companys direct imports and 2QFY2014 imports for the vendors.

The royalty expenses as a percentage of sales stood at 6.1% as against 6.2%in 1QFY2013 and 4.8% in 4QFY2013.

The import content for MSIL has come down to 19.6% (excluding royalty) from26% in FY2012 on account of Yen depreciation and the ongoing localization

initiatives. The Management expects to improve localization by 8-10% over the

next 2-3 years.

MSILs third plant at Manesar is expected to commission from September2013. The new diesel engine capacity is also expected to come on streamaround the same time.

According to the Management, tax rate going forward, is expected to remainin the range of 24-25%.

The capital expenditure planned for FY2014 stands at `4,000cr. However, thiscan be scaled down or postponed depending upon the demand scenario.


7/16


July 27, 2013 7

Investment arguments

Per capita car penetration near inflexion point: In FY2009, car penetration inIndia was estimated at around 12 vehicles/1,000 people compared to around

21 vehicles/1,000 people in China. Moreover, Indias PPP-based per capita is

estimated to approach US$5,000 over the next four to five years, which is

expected to be the inflexion point for the countrys car demand. Further, MSIL

has a sizeable competitive advantage over new foreign entrants due to its

widespread distribution network (nearly 3,000 and 1,000 service and sales

outlets, respectively), which is not easy to replicate.

Suzuki focusing to make Maruti a a small car manufacturing hub: SuzukiJapan is focusing to make MSIL a global small car manufacturing hub to cater

to the increasing global demand for small cars due to rising fuel prices and

stricter emission standards. Thus, we believe there is a huge potential for the

company to increase its market share in the export market. Moreover, R&D

capabilities, so far largely housed at Suzuki Japan, are progressively moving

to MSIL. The company is aiming to achieve full model change capabilities over

the next couple of years, which will enable it to launch new models and

variants at a much faster pace. This is expected to reduce its royalty payment

in the medium-term (2-3 years).

Merger with SPIL to be positive in the long run: MSIL has merged its associatecompany, SPIL with itself. SPIL, a 70:30 JV between Suzuki Motor Corporation

(SMC), Japan, and MSIL, manufactures and supplies diesel engines and

transmission components for vehicles. SPIL currently supplies ~90% of its

production to MSIL. We believe the merger of SPIL with MSIL is positive for

MSIL given that MSIL itself is setting up a new diesel engine facility (capacity of

300,000 units by FY2014) in Gurgaon. Further, with increasing trend of

dieselization, the integration of SPIL will result in better control over diesel

engine sourcing, flexibility in production planning, and managing fluctuations

in market demand. Additionally, single management control of diesel engine

operations will result in better sourcing, localization and cost-reduction.


8/16


July 27, 2013 8

Outlook and valuation

While rural sales for the company continue to grow at a robust pace (up ~19%

yoy), urban sales have witnessed a high single digit decline during 1QFY2014. The

Management indicated that the demand for diesel vehicles too has turned weak

and expects average discounts to inch upwards in 2QFY2014. We revise our

FY2014 volume estimates downwards to ~2% from ~7% earlier to factor in the

weak demand environment that the industry is currently facing. As a result, our

top-line estimates are revised slightly downwards. Nevertheless, we expect a revival

in demand in FY2015 after three years of weak performance that the industry has

witnessed. We expect MSIL volumes to grow by ~11% in FY2015. We retain our

EBITDA margin estimates for FY2014/15 and expect an expansion of 150bp in

FY2014, driven by favorable currency movement, easing of commodity cost

pressures, ongoing cost reduction initiatives and also on account of the SPIL

merger. We also revise upwards our income tax-rate assumptions to 24% from21% earlier as guided by the Management. Consequently, our earnings estimates

are revised down by 11.3%/9.5% for FY2014/15 respectively.

Exhibit 11:Change in estimatesY/E March Earlier Estimates Revised Estimates % chg

FY2014E FY2015E FY2014E FY2015E FY2014E FY2015ENet Sales (` cr) 47,923 55,002 45,862 52,647 (4.3) (4.3)OPM (%) 11.2 10.9 11.2 11.1 3bp 18bp

EPS (`) 106.6 121.4 94.6 109.8 (11.3) (9.5)Source: Company, Angel Research

We continue to remain positive on the long-term volume growth potential of the

domestic passenger car industry, driven by economic growth and low penetration

levels in the country. We expect MSIL to be the primary beneficiary of this and

expect the company to register a strong earnings CAGR of ~18% over FY2013-15.

Our revised EPS estimates for MSIL (including the impact of SPIL merger) for

FY2014/15 stand at `94.6/`109.8 respectively. At `1,375, MSIL is trading

attractively at 12.5x FY2015E earnings (including the impact of SPIL merger). Wemaintain our Buy rating on the stock with a target price of `1,648 (`1,822 earlier),valuing the stock at 15x FY2015 earnings.


9/16


July 27, 2013 9

Exhibit 12:Volume assumptionsY/E March FY2010 FY2011 FY2012 FY2013 FY2014E FY2015EA: Mini: M800, A-Star, Alto, WagonR 33,028 573,238 491,389 429,569 451,047 505,173

A: Compact: Swift, Estilo, Ritz 633,190 261,799 235,754 255,302 245,090 269,599A: Super Compact: Dzire 99,315 107,955 110,132 169,571 178,050 199,415

A: Midsize: SX4 - 23,317 17,997 6,707 7,042 7,747

A: Executive: Kizashi - 138 458 188 188 207

Total passenger cars 765,533 966,447 855,730 861,337 881,417 982,141B: UV - Gypsy, Vitara, Ertiga 3,932 5,666 6,525 79,192 83,944 94,017

C: Vans - Omni, Versa, Eeco 101,325 160,626 144,061 110,517 116,043 127,647

Total passenger vehicles - domestic 870,790 1,132,739 1,006,316 1,051,046 1,081,404 1,203,805Total passenger vehicles - exports 147,575 138,266 127,379 120,388 113,767 127,419

Total sales (domestic + exports) 1,018,365 1,271,005 1,133,695 1,171,434 1,195,170 1,331,223% chg 28.6 24.8 (10.8) 3.3 2.0 11.4


Exhibit 13:Angel vs consensus forecastAngel estimates Consensus Variation (%)

FY14E FY15E FY14E FY15E FY14E FY15ETotal op. income (` cr) 45,862 52,647 46,861 54,227 (2.1) (2.9)EPS (`) 94.6 109.8 102.6 124.1 (7.8) (11.5)

Source: Bloomberg, Angel Research

Exhibit 14:One-year forward P/E band


Exhibit 15:One-year forward P/E chart


0

500

1,000

1,500

2,000

2,500

Apr-

04

F

eb

-05

D

ec-0

5

Oc

t-06

A

ug-0

7

Jun-0

8

Apr-

09

F

eb

-10

D

ec-1

0

N

ov-1

1

S

ep-1

2

Ju

l-13

(`) Share price (`) 5x 10x 15x 20x

0

5

10

15

20

25

30

A

pr-

04

F

eb

-05

D

ec-0

5

O

ct-06

A

ug-0

7

J

un-0

8

A

pr-

09

F

eb

-10

D

ec-1

0

N

ov-1

1

S

ep-1

2

Ju

l-13

(x) Absolute P/E Five-yr average P/E


10/16


July 27, 2013 10

Exhibit 16:One-year forward EV/EBITDA band


Exhibit 17:Premium/Discount to Sensex P/E


Exhibit 18:Automobile - Recommendation summaryCompany Reco. CMP(`) Tgt. price(`) Upside(%)

P/E (x) EV/EBITDA (x) RoE (%) FY13E-15E EPSFY14E FY15E FY14E FY15E FY14E FY15E CAGR (%)

Ashok Leyland Buy 15 22 54.3 37.9 7.8 6.0 3.7 2.3 11.0 74.4

Bajaj Auto Neutral 2,027 2,102 3.7 17.0 14.5 11.9 9.8 38.9 36.5 15.4

Hero MotoCorp Accumulate 1,865 2,048 9.8 16.8 12.7 8.6 7.4 40.1 42.1 17.5

Maruti Suzuki Buy 1,375 1,648 19.8 14.5 12.5 6.5 5.6 14.4 14.6 17.8Mah. & Mah. Buy 894 1,103 23.4 14.1 12.6 7.5 6.2 23.2 21.8 13.8

Tata Motors Buy 290 347 19.8 8.0 7.0 3.9 3.3 24.6 23.2 13.8

TVS Motor Accumulate 31 35 11.0 6.3 5.4 2.1 1.5 18.1 18.5 15.3


0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Apr-

04

Fe

b-0

5

Dec-0

5

Oc

t-06

Aug-0

7

Jun-0

8

Apr-

09

Fe

b-1

0

Dec-1

0

Nov-1

1

Sep-1

2

Ju

l-13

(`cr) EV (` cr) 6x 8x 10x 12x

(60)

(40)

(20)

0

20

40

60

Apr-

04

Fe

b-0

5

Dec-0

5

Oc

t-06

Aug-0

7

Jun-0

8

Apr-

09

Fe

b-1

0

Dec-1

0

Nov-1

1

Sep-1

2

Ju

l-13

(%) Absolute premium Five-yr average premium


11/16


July 27, 2013 11

Company background

Maruti Suzuki (MSIL), a subsidiary of Suzuki Motor Corporation, Japan (which

holds a 54.2% stake), is the largest passenger car (PC) company in India,

accounting for ~45% of the domestic passenger car market. MSIL derives ~75%of its overall sales from the small car segment and has a dominant position in the

segment with a market share of ~50%, led by popular models likeAlto, Wagon R

and Swift. The company operates from two facilities in India (Gurgaon and

Manesar) and is in the process of expanding its manufacturing capacity to 1.9mn

units (currently 1.65mn units) by FY2014. Also, MSIL has steadily increased its

presence internationally and exports now account for ~11% of its overall sales

volume.


12/16


July 27, 2013 12

Profit and loss statement (post SPIL merger)

Y/E March (` cr) FY2010 FY2011 FY2012 FY2013 FY2014E FY2015ETotal operating income 29,623 36,618 35,587 43,588 45,862 52,647% chg 42.1 23.6 (2.8) 22.5 5.2 14.8Total expenditure 25,672 32,980 33,074 39,358 40,713 46,791Net raw material costs 22,170 28,364 28,108 32,515 33,773 38,844

Other mfg costs 526 365 411 570 628 696

Employee expenses 538 704 844 1,070 1,166 1,341

Other 2,439 3,547 3,711 5,204 5,146 5,910

EBITDA 3,951 3,639 2,513 4,230 5,149 5,855% chg 115.7 (7.9) (30.9) 68.3 21.7 13.7

(% of total op. income) 13.3 9.9 7.1 9.7 11.2 11.1

Depreciation & amortization 825 1,014 1,138 1,861 2,106 2,264

EBIT 3,126 2,625 1,375 2,368 3,044 3,592% chg 177.7 (16.0) (47.6) 72.3 28.5 18.0


Interest and other charges 34 25 55 190 179 191

Other income 500 509 827 812 894 965

Recurring PBT 3,593 3,109 2,146 2,991 3,758 4,366% chg 114.4 (13.5) (31.0) 39.4 25.7 16.2

Extraordinary income/ (exp.) - - - -- - -

PBT 3,593 3,109 2,146 2,991 3,758 4,366Tax 1,095 820 511 599 902 1,048

(% of PBT) 30.5 26.4 23.8 20.0 24.0 24.0

PAT (reported) 2,498 2,289 1,635 2,392 2,856 3,318ADJ. PAT 2,498 2,289 1,635 2,392 2,856 3,318% chg 104.9 (8.4) (28.6) 46.3 19.4 16.2


Basic EPS (`) 82.7 75.8 54.1 79.2 94.6 109.8Adj. EPS (`) 82.7 75.8 54.1 79.2 94.6 109.8% chg 104.9 (8.4) (28.6) 46.3 19.4 16.2


13/16


14/16


July 27, 2013 14

Cash flow statement (post SPIL merger)

Y/E March (` cr) FY2010 FY2011 FY2012 FY2013E FY2014E FY2015EProfit before tax 3,593 3,109 2,146 2,991 3,758 4,366

Depreciation 825 1,014 1,138 1,861 2,106 2,264Change in working capital 133 150 (104) (360) 572 (1,051)

Direct taxes paid (1,028) (989) (251) (599) (902) (1,048)

Others (491) (464) (700) (305) - -

Cash Flow from Operations 3,032 2,819 2,229 3,588 5,534 4,531(Inc.)/Dec. in fixed assets (1,459) (2,143) (2,633) (5,470) (3,500) (3,500)

(Inc.)/Dec. in investments (3,879) 2,127 (782) (931) (906) (1,033)

Others 410 359 496 - - -

Cash Flow from Investing (4,928) 343 (2,918) (6,401) (4,406) (4,533)Issue of equity - - - 1,280 - -

Inc./(Dec.) in loans 188 (512) 911 152 200 -

Dividend paid (Incl. Tax) (101) (173) (217) (281) (281) (281)

Others (32) (67) (78) - - -

Cash Flow from Financing 55 (752) 617 1,152 (81) (281)Inc./(Dec.) in cash (1,841) 2,410 (72) (1,661) 1,048 (282)

Opening Cash balances 1,939 98 2,509 2,436 775 1,823Closing Cash balances 98 2,509 2,436 775 1,823 1,540


15/16


July 27, 2013 15

Key ratios

Y/E March FY2010 FY2011 FY2012 FY2013E FY2014E FY2015EValuation Ratio (x)P/E (on FDEPS) 16.6 18.1 25.4 17.4 14.5 12.5P/CEPS 12.5 12.6 15.0 9.8 8.4 7.4

P/BV 3.5 3.0 2.7 2.2 2.0 1.7

Dividend yield (%) 0.4 0.5 0.5 0.6 0.6 0.6

EV/Sales 1.0 0.8 0.8 0.8 0.7 0.6

EV/EBITDA 7.2 8.3 11.4 8.3 6.5 5.6

EV / Total Assets 2.2 2.1 1.7 1.7 1.4 1.2

Per Share Data (`)EPS (Basic) 82.7 75.8 54.1 79.2 94.6 109.8

EPS (fully diluted) 82.7 75.8 54.1 79.2 94.6 109.8

Cash EPS 110.0 109.3 91.8 140.8 164.3 184.8

DPS 6.0 7.5 7.5 8.0 8.0 8.0

Book Value 391.8 459.1 502.8 615.0 700.3 800.8

Dupont AnalysisEBIT margin 10.6 7.2 3.9 5.4 6.6 6.8

Tax retention ratio 69.5 73.6 76.2 80.0 76.0 76.0

Asset turnover (x) 2.8 3.0 2.7 2.5 2.2 2.3

ROIC (Post-tax) 20.7 15.6 7.9 11.0 11.1 11.7

Cost of Debt (Post Tax) 3.1 3.3 5.4 11.6 9.1 9.1

Leverage (x) (0.5) (0.5) (0.5) (0.3) (0.4) (0.4)

Operating ROE 11.1 9.1 6.7 11.2 10.3 10.7

Returns (%)ROCE (Pre-tax) 27.2 19.2 8.7 12.6 13.8 14.4

Angel ROIC (Pre-tax) 61.8 41.3 17.7 17.5 15.4 16.0

ROE 23.6 17.8 11.3 14.2 14.4 14.6

Turnover ratios (x)Asset Turnover (Gross Block) 3.1 3.3 2.7 2.5 2.1 2.1

Inventory / Sales (days) 13 13 16 15 15 16

Receivables (days) 11 8 9 10 10 10

Payables (days) 35 29 37 36 36 36

WC cycle (ex-cash) (days) 2 (3) (11) (10) (11) (8)

Solvency ratios (x)Net debt to equity (0.5) (0.5) (0.5) (0.3) (0.4) (0.4)

Net debt to EBITDA (1.6) (2.0) (2.9) (1.5) (1.6) (1.5)

Interest Coverage (EBIT / Int.) 93.3 105.0 24.9 12.5 17.0 18.8


16/16

Documents

Maruti Suzuki, 1Q FY 2014