MOSL: MARUTI SUZUKI (Buy)-Miss on higher discounts; demand outlook improving
Maruti Suzuki: Miss on higher discounts; demand outlook improving
(MSIL IN, Mkt Cap USD29.6b, CMP INR6997, TP INR8000, 14% Upside, Buy)
Performance bottoms out; Buy into weakness
- MSIL’s 3QFY20 results are a reflection of the company’s efforts to revive demand through discounts during the festive season and ahead of year change/BS6 transition. We believe MSIL’s operating performance has bottomed out and recovery is expected from 1QFY21.
- Our FY20/FY21 EPS estimates remain unchanged and we would buy into any weakness post such weak results. Maintain Buy
Record-high discounts dilute benefit of operating leverage
- MSIL's 3QFY20 revenues/EBITDA/PAT grew 5%/9%/5% YoY to ~INR207b/INR21b/INR15.6b respectively. 9MFY20 revenue/EBITDA/PAT declined 11%/32%/22% respectively.
- Domestic PV market share recovered 130bp YoY (+240bp QoQ) to 52%.
- Net realization increased 3% YoY (-6% QoQ) to ~INR473k (v/s est. ~INR499k). QoQ decline was due to higher discounts and adverse mix. Discounts inched up to ~INR33k/unit (v/s ~INR24k in 3QFY19 v/s INR25.8k in 2QFY20).
- Gross margin declined ~150bp QoQ due to (a) higher sourcing from Gujarat (accounting impact), (b) higher discounts (~190bp QoQ), (c) lower production (v/s wholesales; ~100bp QoQ impact), and (d) ~60bp benefit of lower cost.
- EBIT margins improved 10bp YoY (+200bp QoQ) to 6% (v/s est. ~6.2%). EBIT grew ~7% YoY (+83% QoQ) to ~INR12.4b (v/s est. ~INR13.6b).
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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