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MOSL: Morning India (27/July/18): 1. Maruti Suzuki; 2. Hindalco; 3. ITC; 4. Bharti Airtel; 5. Yes Bank; 6. Bharti Infra.; 7. Biocon; 8. Dr Reddy's Labs; 9. Container Corpn; 10. Petronet LNG

MOrning India (27/July/18): 1. Maruti Suzuki; 2. Hindalco; 3. ITC; 4. Bharti Airtel; 5. Yes Bank; 6. Bharti Infra.; 7. Biocon; 8. Dr Reddy's Labs; 9. Container Corpn; 10. Petronet LNG

 

Today’s top research idea

Maruti Suzuki: Lower other income puts brakes on PAT

• 1QFY19 revenue grew 28% YoY to INR224.6b (in-line), led by an increase of 24% in volumes and 3% in realizations (to INR458k v/s est. of INR459k).
• Retails in rural markets grew 15% in 1QFY19, and continue outperforming urban markets. Demand outlook remains strong, with double-digit growth likely in FY19.
• Higher discounts (+30bp QoQ), higher commodity cost and FX impact led to gross margin contraction of ~110bp QoQ to ~31%.
• EBITDA margin of 14.9% (est. of 15.2%) expanded 70bp QoQ (+160bp YoY) due to the benefit of operating leverage. Lower other income and higher tax restricted adj. PAT growth to 27% YoY to ~INR19.7b (est. of INR23b).
• We cut FY19/20E consol. EPS by 5-8% to factor in weakness in INR, higher commodity prices and lower other income. Maintain Buy with a TP of INR10,805 (~25x Mar-20 EPS).

Piping hot news

Hindalco’s US arm buys Aleris for $2.58 billion

• Billionaire Kumar Mangalam Birla’s Hindalco Industries Ltd has agreed to buy US aluminium sheet maker Aleris Corp. at an enterprise value of $2.58 billion to create the world’s second-largest aluminium maker. The acquisition will help Hindalco expand sales in the lucrative automotive and aerospace segments, and is the Indian aluminium maker’s second major overseas acquisition after the purchase of Novelis for $6 billion in 2007. On completion of the purchase of Ohio-based Aleris, Hindalco’s consolidated revenue will rise to about $21 billion.