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Maruti Suzuki |
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Business Posted On Tuesday, July 27, 2010 | Angel Broking
Maruti Suzuki recorded poor performance for 1QFY2011. Top-line came in marginally below our estimate largely owing to lower export realization, while bottom-line was substantially impacted by the extensive contraction in OPM.
Higher royalty charges and increase in input costs hit the company's operating performance.
Poor performance; 1QFY2011 results substantially below estimates: For 1QFY2011, Maruti registered 27% yoy growth in net sales to Rs8,232cr (Rs6,493cr), below our expectation. Volumes for the quarter increased 25% yoy, while realisation grew by a mere 2% for the quarter. EBITDA margins too came in substantially lower than our expectations owing to higher raw material costs (increased by 150bp yoy) and substantial increase in royalty (up 230bp yoy) to 5.9% of net sales (includes one-time arrears of FY2010 amounting to 0.8% of net sales). Net profit declined to Rs465cr, a dip of 20% yoy and below our expectations. Lower export realisation, substantial contraction in EBITDA margins, higher depreciation and lower-than-expected other operating income led to the significant fall in net profit yoy and qoq.
Outlook and Valuation: We revise our estimates downwards to account for higher royalty payment. We continue to maintain our volume growth estimate for the company at 13% CAGR aided by ~14% growth in domestic volumes over FY2010-12E. At the CMP, the stock is trading at 12.8x FY2012E earnings. We downgrade the stock to Accumulate from Buy earlier, owing to lower earnings CAGR of 3.7% over FY2010-12E vis-as-vis the Sensex CAGR of 17.9%. At our Target Price of Rs1,338, Maruti would trade at 14.4x FY2012E (15% discount to our Sensex target multiple).
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Friday, September 03, 2010