- Net sales rise 8.2% yoy in spite of a 8.7% yoy fall in volumes as realizations surged 18.9%
- Realizations were higher owing to 1) better product mix with commencement of Ertiga sales, 2) Higher proportion of diesel vehicles in the portfolio and 3) higher export realizations owing to rupee depreciation
- OPM at 6.1% was better than expectations; OPM was up 38bps yoy mainly on account of lower selling and distribution expenses and impact of favorable currency movement on royalty
- Other income declined 9% yoy, which was offset by 943bps yoy fall in effective tax rate
- Maintain BUY with a 9-month target price to Rs1,550
|(Rs m)||Q2 FY13||Q2 FY12||% yoy||Q1 FY13||% qoq|
|OPM (%)||6.1||5.7||38bps||7.3||(117) bps|
|Effective tax rate (%)||18.7||28.1||(943) bps||19.4||(65) bps|
|PAT margin (%)||2.7||3.1||(39) bps||3.9||(119) bps|
|Ann. EPS (Rs)||31.5||33.3||(5.4)||58.7||(46.3)|
Net sales rise 8.2% yoy on the back of strong growth in realizations
During Q2 FY13, Maruti Suzuki India Ltd (MSIL) reported net sales growth of 8.2% yoy driven by 18.9% yoy jump in realizations. Volumes were lower by 8.7% yoy and 22.1% on a sequential basis. Domestic volumes were lower by 5.6% on yoy basis, while export volumes declined sharply by 31.7% yoy. At the industry level, volume growth has been led by the diesel variants as the price differential between cost per km of petrol variant and diesel variant (even after diesel price hike) continues to remain high. MSIL was not able to leverage on this trend owing to lockout at its Manesar plant. Nevertheless, it sold ~70,000 diesel variants in Q2 FY13. Better realizations were on the back of price hikes implemented during the year and also owing to a favorable product mix (higher proportion of diesel variants and inclusion of Ertiga). Export realizations were also higher by 36% yoy on the back of rupee depreciation and export of Ertiga CKD kits (not included in export volumes).
Total volume breakup marketwise
|Q2 FY13||Q2 FY12||yoy (%)||Q2 FY13||Q2 FY12|
OPM better than expectation owing to marked reduction in overheads
During Q2 FY13, OPM for MSIL rose by 38bps yoy but declined 117bps yoy. Margins at 6.1% were better than our expectations. On a yoy basis, while operating profit per vehicle was higher by 26.4%, gross profit per vehicle was higher by 12.2%, indicating that the rise in OPM was on account of lower overheads. Lower other expenditure was driven by impact of strength in rupee towards the end of quarter on royalty payments (60bps as a percentage of sales) and decline in selling and distribution expenses. On a sequential basis, operating profit per vehicle and gross profit per vehicle declined by 16.9% and 8.9% respectively. Higher raw material costs along with increase in employee costs owing to wage settlement and one time expenses related to Manesar event led to fall in profitability on sequential basis.
Higher depreciation and lower other income impacts bottomline performance
As compared to a 15.4% yoy increase in operating profit, PAT declined by 5.4% yoy to Rs2,274mn (higher than our expectations). This was owing to 30% yoy jump in depreciation due to capitalization of Plant-B at Manesar plant and 9% yoy fall in other income as the cash balances were lower. This impact was offset by 943bps yoy fall in effective tax rate to 19.4% due to higher R&D expenses and tax benefits of FMPs. For FY13, the company has guided for a tax rate of 19%.
|Q2 FY13||Q2 FY12||bps yoy||Q1 FY13||bps qoq|
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