MOSL: MARUTI SUZUKI (Buy)-Multiple headwinds hurt margins, expect recovery from 4Q
Maruti Suzuki: Multiple headwinds hurt margins, expect recovery from 4Q
(MSIL IN, Mkt Cap USD27.6b, CMP INR6516, TP INR7777, 19% Upside, Buy)
- Margins at five-year low: Adj. revenue grew 2% YoY to INR196.7b (in-line) in 3QFY19, led by a 2.6% YoY increase in realizations to INR458.9k (our estimate: ~INR454.8k). Volumes, however, declined 0.6% YoY. EBITDA margin shrank 480bp QoQ (-600bp YoY) to 9.8% (our estimate: 13.1%) due to higher discounts (-120bp QoQ), commodity (-100bp QoQ), FX (-50bp QoQ), op. leverage (-150bp QoQ) and one-time staff cost (-25bp QoQ). However, higher other income restricted adj. PAT decline to 17% YoY (at INR14.9b v/s our estimate: INR16.9b). For 9MFY19, revenue grew 9.8% YoY, while EBITDA/PAT declined 5.9%/4.7% YoY.
- Earnings call highlights: (a) Domestic PV industry to grow 4.5% in FY19; MSIL to outperform; 9MFY19 MSIL retails grew ~5% YoY, led by ~13% YoY growth in retail. (b) Record average discounts at INR24.3/unit (v/s INR18.8k in 2QFY19 and INR17.9k in 3QFY18). (c) Inventory down to~15 days (normal inventory of 4-5 weeks). (d) Ertiga has got ~55k bookings (waiting of ~28 weeks), while WagonR has over 14k bookings so far. (e) Currently, six models on INR royalty (~45% of 3QFY19 volumes); expect INR-based royalty for all models by 2022. (f) Price increase of 0.7% from Jan-19. (g) Growth still subdued in Jan-19, though inquiry levels are good. (h) Gujarat plant localization to reach desired level in 12 months (to support margins).
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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