Maruti Suzuki (Q4 FY13)

Net sales in the quarter grew by 9.1% driven by 17.3% yoy improvement in realizations even as the volumes remained weak (-4.6% yoy).

January 01, 1970 5:30 IST | India Infoline News Service
CMP Rs1,673, Target Rs1,862, Upside 11.3%
  • Net sales rise 9.1% yoy as 17% yoy surge in realizations was offset by a 4.6% yoy decline in volumes

  • Realizations were higher owing to 1) better product mix with robust sales of Ertiga, Dzire and Swift, 2) Higher proportion of diesel vehicles in the portfolio and 3) higher export realizations owing to rupee depreciation

  • OPM at 10.4% was better than expectations; OPM was up 309bps yoy and 246bps qoq mainly on account of the currency benefits (steep depreciation of Yen against the US Dollar)

  • Other income jumped 40% yoy, which was offset by 450bps yoy rise in effective tax rate

  • Maintain BUY with a revised 9-month target price to Rs1,862 

Result table
(Rs m) Q4 FY13 Q4 FY12 % yoy Q3 FY13 % qoq
Volumes 343,709 360,334 (4.6) 301,453 14.0
Realisation (Rs/unit) 413,952 352,845 17.3 410,070 0.9
Net sales 127,928 117,270 9.1 112,003 14.2
Material costs (97,894) (93,328) 4.9 (87,842) 11.4
Personnel costs (2,513) (2,458) 2.3 (2,311) 8.8
Other overheads (14,200) (12,899) 10.1 (12,938) 9.8
Operating profit 13,321 8,585 55.2 8,913 49.5
OPM (%) 10.4 7.3 309bps 8.0 246bps
Depreciation (3,393) (3,306) 2.6 (3,583) (5.3)
Interest (251) (208) 20.9 (459) (45.3)
Other income 4,147 2,969 39.7 1,886 119.9
PBT 13,823 8,040 71.9 6,756 104.6
Tax (2,344) (1,642) 42.8 (1,743) 34.4
Effective tax rate (%) 17.0 20.4   25.8  
Reported PAT 11,480 6,398 79.4 5,013 129.0
PAT margin (%) 9.0 5.5 352bps 4.5 450bps
Ann. EPS (Rs) 158.8 88.6   79.3 69.4   128.8
Source: Company, India Infoline Research

Better realizations & healthier product mix... Topline records a growth of 9.1% yoy

Net sales in the quarter grew by 9.1% driven by 17.3% yoy improvement in realizations even as the volumes remained weak (-4.6% yoy). 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). On the discounting levels in the quarter, management indicated that discounts were ~20% lower qoq on back of higher absolute number of diesel vehicles sold. Weak demand in the entry car category impacted MSIL which saw its total volumes decline by 4.6%. While domestic volumes de-grew by 4% yoy, exports slumped by 10% yoy on back of weakness in Europe (its major export market). Going ahead, we expect the fragile macro situation to continue to weigh on the auto industry in the H1 FY14. We build in a modest 5% volume growth in FY14 for MSIL.

Total volume breakup marketwise

Volumes Contribution (%)
  Q4 FY13 Q4 FY12 yoy (%) Q4 FY13 Q4 FY12
Domestic 308,871 321,424 (3.9) 89.9 89.2
Exports 34,838 38,910 (10.5) 10.1 10.8
Total 343,709 360,334 (4.6) 100.0 100.0
Source: Company, India Infoline Research

OPM surprises positively… further benefits await in next quarter

During Q4 FY13, OPM for MSIL came in 10.4% and improved 309bps yoy 246bps qoq. Management attributed the improvement in margins to benefits of localization and depreciated yen. We note, the localization plan is on track and the total import exposure has come down to 19.6% vis-à-vis ~26% in Q4 FY12. Currency benefits and actual localization have played equal part (300bps each) in the sharp reduction in import exposure. Management aims to further cut the exposure by ~8% in the next three years and informs that at current levels of yen, localization will yield ~10-15% benefits. While on the direct import front (~8% exposure), MSIL benefited with the 12% qoq depreciation of JPY against rupee, management guided for further benefits on indirect imports (~11% exposure) which come in with a quarter’s lag. We note, for the next year MSIL has hedged ~30% of its total exposure at rates of 90 JPY/USD.

Stellar operating performance enables PAT to log in 80% yoy growth

While volumes de-grew 4.6% yoy, strong operational performance in the quarter led to robust profits growth. Operating profit recorded an impressive surge of 55.2% yoy. Other income at Rs4,147mn came in higher by 39.7% yoy and further boosted PAT growth. PAT at Rs11,480mn (highest for any quarter) saw a rise of 79.4% yoy. Going ahead, management expects the localization efforts to continue to drive benefits at the operational level.

Cost analysis

Q4 FY13 Q4 FY12 bps yoy Q3 FY13 bps qoq
Material costs + Purchases 76.5 79.6 (306) 78.4 (190)
Personnel Costs 2.0 2.1 (13) 2.1 (10)
Other overheads 11.1 11.0 10 11.6 (45)
Total costs 89.6 92.7 (309) 92.0 (246)

Source: Company, India Infoline Research

Maintain BUY

While macro headwinds will continue to keep the demand growth in FY14 fairly muted, MSIL is set to benefit at operational level from the localization drive and the weakening JPY. Additionally post SPIL merger, we expect increased synergies and foresee the company being able to manage diesel-petrol mix in a more reactive fashion. While we build in moderate volume growth in our assumptions we upwardly revise the operational estimates on back localization and currency benefits. We maintain BUY on the stock with 9-12 month target price of Rs1,862.

Financial summary

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