MOSL: MARUTI SUZUKI (Buy) -Above est.-Lower RM cost drives near all-time high margins
​Maruti Suzuki: Above est.; Lower RM cost drives near all-time high margins
(MSIL IN, Mkt Cap USD37.7b, CMP INR8115, TP INR9466, 17% Upside, Buy)
- EBITDA margin near all-time high at 16.9%: Net sales grew 21.8% YoY to INR217.7b (est. of INR219.9b), driven by 17.6% growth in volumes and 3.6% increase in realizations to INR442k (est. of INR446.9k). EBITDA margin expanded 360bp QoQ (-10bp YoY) to 16.9% (est. of 15.1%), supported by lower discounts, a better mix, stable commodity cost and operating leverage. EBIT margin expanded 440bp QoQ (+30bp YoY) to 13.8% (est. of 11.9%). Lower other income and a higher tax rate restricted PAT growth to 3.3% YoY (+60% QoQ) to ~INR24.8b (est. of INR23.3b).
- Earnings call highlights: a) MSIL's festival season sales grew in double-digit. Inventory levels would be ~2 weeks by end-October 2017 (normal inventory of 3-4 weeks). b) Rural volumes have grown 21.5% in 1HFY18. c) Impact of commodity price inflation would reflect in 2HFY18. On a YoY basis, commodity prices are higher by 200bp (% of sales) in 2QFY18. d) With higher GST on hybrid, there is a shift toward non-hybrid variants. e) Gujarat plant contributed ~7% of volumes (~34k) in 2QFY18 (v/s ~6% in 1QFY18 or 24k). 2nd line at Gujarat plant will commission by early-CY19. f) Guides for producible capacity of 1.7m units for FY18.
Maruti Suzuki India is engaged in manufacturing, purchasing, and selling motor vehicles, components, and spare parts in India, Europe, Africa, Asia, Oceania, and Latin America. Co. offers 14 brands and approximately 150 variants of passenger cars, multi utility vehicles, and multi-purpose vehicles under the Alto 800, Alto K10, Wagon R, Celerio, StingRay, Ritz, Swift, DZire, SX4, Ertiga, Omni, Eeco, Gypsy, and Grand Vitara brands. Co. is involved in the facilitation of pre-owned car sales, fleet management, and car financing. In addition, it provides motor insurance products, accessories, auto card, and driving school services.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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