Maruti Suzuki India Ltd.
Result Update: Q1 FY 12
C.M.P:
Target Price:
Date:
Rs. 1058.00
Rs. 1216.00
Sep. 14th 2011
BUY
SYNOPSIS
Stock Data:
Automobile
5.00
1599.90/1045.00
57000.00
532500
305677.36
Sector:
Face Value Rs.
52 wk. High/Low (Rs.)
Volume (2 wk. Avg.)
BSE Code
Market Cap (Rs in mn)
Share Holding Pattern
Maruti Suzuki India Limited (MSIL), a
subsidiary of Suzuki Motor Corp. of
Japan, is India's largest passenger car
company, accounting for over 50 per
cent of the domestic car market.
During the quarter ended, the robust
growth of Net Profit is increased by
18.02% Rs. 5492.30 million.
Maruti Suzuki India Limited and
investors have invested over Rs. 550
Crore to make the new Swift more
vibrant and sportier.
Suzuki Motor plans to set up new
passenger car factory for Rs 6,235 crore
($1.3 billion) in Gujarat.
1 Year Comparative Graph
Maruti Suzuki India Limited sold a
total of 75,300 vehicles in July 2011
where 91442 vehicles in August 2011.
Maruti Suzuki
Net Sales and PAT of the company are
expected to grow at a CAGR of 14% and
5% over 2010 to 2013E respectively.
BSE SENSEX
Years
Net sales
EBITDA
Net Profit
EPS
P/E
FY 11
370400.90
41466.60
22886.40
79.21
13.36
FY 12E
407440.99
45958.09
25900.22
89.64
11.80
FY 13E
444110.68
50719.30
28803.11
99.69
10.61
1
Peer Group Comparison
Name of the company
CMP(Rs.)
Market Cap.
(Rs.mn.)
EPS(Rs.)
P/E(x)
P/Bv(x)
Dividend (%)
Maruti Suzuki
1058.00
305677.36
79.21
13.36
2.20
150.00
Mahindra & Mahindra
787.50
48424.20
44.05
17.90
4.70
230.00
SML Isuzu
380.00
549.92
28.58
13.30
2.58
80.00
Force Motors
696.90
915.68
34.94
19.89
2.68
30.00
Investment Highlights
Q1 FY12 Results Update
Maruti Suzuki India Ltd. has reported net profit of Rs 5492.30 million for the
quarter ended on June 30, 2011 as against Rs. 4653.6 million in the same quarter
last year, an increase of 18.02%. It has reported net sales of Rs 85293.00 million for
the quarter ended on June 30, 2011 as against Rs 82315.30 million in the same
quarter last year, a rise of 3.62%. Total income grew by 4.53% to Rs 87093.70
million from Rs.83317.30 million in the same quarter last year. During the quarter,
it reported earnings of Rs 19.01 a share.
Quarterly Results - Standalone (Rs in mn)
As At
June-11
June-10
%change
Net sales
85293.00
82315.30
3.62%
5492.30
4653.60
18.02%
19.01
16.11
18.02%
PAT
Basic EPS
2
Break up of Expenditure
Maruti Suzuki unveils the next generation all New Swift
Maruti Suzuki India Limited, India's largest car manufacturer unveiled its much
awaited sportier and stylish car, the all new 'Swift' which offers best in class
acceleration, high power to weight ratio and much improved fuel efficiency with over
140 new features. The Company has introduced the VVT engine technology and DDiS
engine powers in all petrol and diesel variants respectively of the new Swift.
Maruti Suzuki and its suppliers have invested over Rs. 550 Crore to make the new
Swift more vibrant and sportier. It entered the Indian car market and became a
segment reference point by selling over 600,000 units in 6 years making it by far the
highest selling car in the premium compact segment.
Suzuki picks Gujarat for new Rs 6,235 cr plant
Suzuki Motor plans to set up new passenger car factory for Rs 6,235 crore ($1.3
billion) in Gujarat. It wanted to end its alliance with Volkswagen, a tie-up that had
been expected to help Europe's biggest carmaker expand on the Indian subcontinent.
It will announce the location of the plant by the end of October.
3
Sales in July and August
Car market leader Maruti Suzuki India Limited sold a total of 75,300 vehicles in July
2011 where 91442 vehicles in August in 2011. This includes 8,796 and 104791 units
for export in July and August respectively.
Company Profile
Maruti Suzuki India Limited (MSIL), formerly known as Maruti Udyog Limited, a
subsidiary of Suzuki Motor Corporation of Japan, is India's largest passenger car
company, accounting for over 50 per cent of the domestic car market. Maruti Udyog
Limited was incorporated in 1981 under the provisions of Indian Companies Act 1956
and the government of India selected Suzuki Motor Corporation as the joint venture
partner for the company. In 1982 a JV was signed between Government of India and
Suzuki Motor Corporation.
The company has two manufacturing facilities located at Gurgaon and Manesar, south
of New Delhi, India. Both the facilities have a combined capability to produce over a
1.2 million vehicles annually. The company plans to expand its manufacturing
capacity to 1.75 million by 2013.
The Manesar facility has been made to suit Suzuki Motor Corporation (SMC) and
Maruti Suzuki India Limited's (MSIL) global ambitions. At present this plant rolls out
World Strategic Models: Swift, A-star & SX4 and DZire. The plant has several in-built
systems and mechanisms.
Suzuki Powertrain India Limited, the diesel engine plant at Manesar is SMC's &
Maruti's first and perhaps the only plant designed to produce world class diesel engine
and transmissions for cars. The plant is under a joint venture company, called Suzuki
Powertrain India Limited (SPIL) in which SMC holds 70 per cent equity the rest is held
by MSIL. This facility has an initial capacity to manufacture 100,000 diesel engines a
year. This has been scaled up to 300,000 engines per annum by 2010.
4
MSIL’s parent company, Suzuki Motor Corporation has been a global leader in mini
and compact cars for three decades. Suzuki's technical superiority lies in its ability to
pack power and performance into a compact, lightweight engine that is clean and fuel
efficient. Product quality, safety and cost consciousness are embedded into their
manufacturing process, which they have inherited from their parent company.
Maruti Suzuki exports entry-level models across the globe to over 100 countries and
the focus has been to identify new markets. Some important markets include Latin
America, Africa and South East Asia.
Product range includes
It offers cars from entry level Maruti 800 & Alto to stylish hatchback Ritz, A star,
Swift, Wagon R, Estillo and sedans DZire, SX4 and Sports Utility vehicle Grand Vitara.
•
Maruti 800
•
Alto
•
Alto K10
•
Omni
•
Gypsy
•
Zen Estilo
•
Wagon R
•
Versa
•
A-star
•
Ritz
•
SX4
•
Swift
•
Dzire
•
Eeco
•
Grand Vitara
5
Financial Results
12 Months Ended Profit & Loss Account (Standalone)
Value(Rs.in.mn)
FY10
FY11
FY12E
FY13E
Description
12m
12m
12m
12m
Net Sales
296230.10
370400.90
407440.99
444110.68
Other Income
4967.60
4823.10
6028.88
6752.34
Total Income
301197.70
375224.00
413469.87
450863.02
Expenditure
-256687.20
-333757.40
-367511.77
-400143.72
Operating Profit
44510.50
41466.60
45958.09
50719.30
Interest
-335.00
-244.10
-200.16
-204.17
Gross profit
44175.50
41222.50
45757.93
50515.13
Depreciation
-8250.20
-10135.00
-10945.80
-11930.92
Profit Before Tax
35925.30
31087.50
34812.13
38584.21
Tax
-10949.10
-8201.10
-8911.91
-9781.10
Profit After Tax
24976.20
22886.40
25900.22
28803.11
Equity capital
1444.60
1444.60
1444.60
1444.60
Reserves
116906.00
137230.20
163130.42
191933.54
Face value
5.00
5.00
5.00
5.00
EPS
86.45
79.21
89.64
99.69
6
Quarterly Ended Profit & Loss Account (Standalone)
Value(Rs.in.mn)
31-Dec-10
31-Mar-11
31-Jun-11
30-Sep-11E
Description
3m
3m
3m
3m
Net sales
94944.50
100921.80
85293.00
92116.44
Other income
1282.70
1198.70
1800.70
1908.74
Total Income
96227.20
102120.50
87093.70
94025.18
Expenditure
-85926.60
-90824.60
-77149.00
-82996.91
Operating profit
10300.60
11295.90
9944.70
11028.27
Interest
-3.60
-63.50
-57.50
-55.78
Gross profit
10297.00
11232.40
9887.20
10972.49
Depreciation
-2369.40
-2966.70
-2424.70
-2521.69
Profit Before Tax
7927.60
8265.70
7462.50
8450.81
Tax
-2275.90
-1667.10
-1970.20
-2281.72
Profit After Tax
5651.70
6598.60
5492.30
6169.09
Equity capital
1444.60
1444.60
1444.60
1444.60
Face value
5.00
5.00
5.00
5.00
EPS
19.56
22.84
19.01
21.35
7
Key Ratios
Particulars
FY10
FY11
FY12E
FY13E
EBITDA Margin (%)
15.03%
11.20%
11.28%
11.42%
PBT Margin (%)
12.13%
8.39%
8.54%
8.69%
PAT Margin (%)
8.43%
6.18%
6.36%
6.49%
P/E Ratio (x)
12.24
13.36
11.80
10.61
ROE (%)
21.10%
16.50%
15.74%
14.89%
ROCE (%)
41.69%
36.40%
33.91%
31.84%
Debt Equity Ratio
0.07
0.02
0.02
0.02
EV/EBITDA (x)
6.87
7.37
6.65
6.03
409.63
479.98
569.62
669.31
2.58
2.20
1.86
1.58
Book Value (Rs.)
P/BV
Charts:
Net Sales & PAT
8
P/E Ratio(x)
Debt Equity Ratio
9
EV/EBITDA
P/BV
10
Outlook and Conclusion
At the current market price of Rs.1058.00, the stock is trading at 11.80 x
FY12E and 10.61 x FY13E respectively.
Earning per share (EPS) of the company for the earnings for FY12E and FY13E
is seen at Rs.89.64 and Rs.99.69 respectively.
Net Sales and PAT of the company are expected to grow at a CAGR of 14% and
5% over 2010 to 2013E respectively.
On the basis of EV/EBITDA, the stock trades at 6.65 x for FY12E and 6.03 x for
FY13E.
Price to Book Value of the stock is expected to be at 1.86 x and 1.58 x
respectively for FY12E and FY13E.
We expect that the company will keep its growth story in the coming quarters
also. We recommend ‘BUY’ in this particular scrip with a target price of
Rs.1216.00 for Medium to Long term investment.
Industry Overview
The Indian automobile industry, the seventh largest in the world, has demonstrated a
phenomenal growth. The industry has grown significantly over the last ten years,
during which industry volumes have increased by 3.2 times, from a level of 4.7 million
numbers to 14.9 million numbers, according to Vishnu Mathur, Director General,
Society of Indian Automobile Manufacturers (SIAM).
The industry, by virtue of its deep connects with several key segments of the economy,
occupies a prominent place in the country’s growth canvas. It exhibits a strong
multiplier effect and has the ability to be the key driver of economic growth. A robust
transportation system plays a key role in a country's rapid economic and industrial
development, and the well-developed Indian automotive industry justifies this catalytic
role by producing a wide variety of vehicles, which include passenger cars, light,
medium and heavy commercial vehicles, multi-utility vehicles such as jeeps, scooters,
motorcycles, mopeds, three wheelers, tractors etc.
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Auto Industry in India – Growth Drivers
The automobile sector in India has been experiencing significant growth in the last few
years on the back of factors that include:
•
Favorable demographic distribution with rising working population and middle
class Urbanisation
•
Rising affluence of the average consumer as per capita income rises - According
to McKinsey, the middle class in India will grow from 50 million to 550 million
by 2025. With a tremendous growth in wealth as the economy grows, there will
be significant increases in spending on discretionary items and consumer
durables
•
Increasing disposable incomes in rural agri-sector
•
Overall GDP growth, with a rise in industrial and agricultural output
•
Introduction of ultra-low-cost cars
•
Increasing maturity of Indian original equipment manufacturers (OEMs)
•
Availability of a variety of vehicle models meeting diverse needs and preferences
– robust production
•
Greater affordability of vehicles
•
Easy finance schemes
•
Favorable government policies
Indian Automobile market – Key statistics
India's automobile industry, currently estimated to have a turnover of US$ 73 billion,
accounts for 6 per cent of its GDP, and is expected to hit a turnover of US$ 145 billion
by 2016.
The automobile industry currently contributes 22 per cent to the manufacturing GDP
and 21 per cent of the total excise collection in the country, according to Mr Praful
Patel, Minister, Heavy Industries and Public Enterprises. In 2010-11, the total
turnover and export of the automotive Industry in India reached a new high of US$ 73
billion and US$ 11 billion respectively. The cumulative announced investments
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reached US$ 30 billion during this period. He also said that the forecasted size of the
Indian Passenger Vehicle Segment is nearly 9 million units and that of 2 wheelers,
close to 30 million units – by 2020.
India achieved the position of the top growing passenger car market in the world
during the January-June period in 2011, overtaking the US, which grew at 14.40 per
cent, according to SIAM. In passenger vehicles, India was the fastest growing market
at 18.20 per cent during the six month period.
India's automobile industry is expected to grow by 11 to 13 per cent in the fiscal year
ending March 2012, according to Pawan Goenka, President, SIAM. The industry body
said that Indian automakers sold 143,370 cars in June 2011.
The four-wheel passenger vehicle market has grown impressively at the hands of the
new middle class, and there is huge opportunity, as market penetration remains low.
Domestic market share for 2010-11
India’s automobile industry is growing fast, but two wheelers remain a dominant
category. More than 78 percent of motor vehicles on the road are two-wheelers, their
popularity driven by low price, high fuel mileage, and an ability to drive efficiently
through dense traffic. The share of different types of vehicles during 2010-11 was
passenger vehicles (16.25), commercial vehicles (4.36), three wheelers (3.39), and two
wheelers (76.00).
Recent Investments/ Trends
The auto industry has made huge investments in the country. As per 2008-09, the
total investment of auto industry in India was Rs 60,952 crore (US$ 13.89 billion).
Another Rs 78,000 crore (US$ 17.78 billion) of new investments have been announced
by the auto industry out of which some have already been made and the rest will come
up over the next 2-3 years. The industry, therefore, is keeping pace with the growing
demand for vehicles in all segments.
The Karnataka government has cleared investment proposals amounting to more than
Rs 8,662 crore (US$ 19.74 billion), which include the plans of Honda Motorcycle India
13
plans for a manufacturing unit in the State. Mr Murugesh Nirani, Karnataka
Industries Minister, has said that Honda Motorcycles and Scooter India would be
investing Rs 1,350 crore (US$ 307.7 million) in Narsapur Industrial area of Kolar
district of the State.
Demand for two-wheelers from six of the eight domestic mobike manufacturers rose
16 per cent in June to more than 880,000 units, compared to 761,000 units in June
2010.
Australia is looking at possibilities of building better relations between its world-class
firms and rapidly growing Indian automotive industries with an objective to create new
export opportunities.
Pune-based Force Motors has signed an agreement with Daimler AG, under which
Daimler will supply technology for the development of a multi-purpose vehicle (MPV)
by Force Motors
Swedish automobile manufacturer Volvo Cars Corp is looking at introducing corporate
editions of its luxury sedans S60 and S80 to shore up volumes in the Indian
automobile market.
French car maker PSA Peugeot Citroen has selected a site near Sriperumbudur, to the
west of Chennai, in Tamil Nadu for setting up its car plant. The company is planning
to invest Rs 4,000 crore (US$ 911.72 million) in an integrated automobile project.
Toyota has launched its first made-for-India small car, the Etios, Liva, in the intensely
competitive hatchback segment. The car, priced between Rs 399,000 and 599,000
(US$9,094 and 13,653), will compete with Maruti Suzuki Swift, Hyundai i20,
Volkswagen Polo and Ford Figo.
Auto industry in India – Government Initiatives
With the gradual liberalization of the automobile sector since 1991, the number of
manufacturing units in India has grown progressively.
14
Currently, 100 per cent Foreign Direct Investment (FDI) is permissible under
automatic route in this sector including passenger car segment. The import of
technology/technological upgradation on the royalty payment of 5 per cent without
any duration limit and lump sum payment of US$ 2 million is also allowed under
automatic route in this sector.
The automobile industry is delicensed, and import of components is freely allowed.
With an objective of accelerating and sustaining growth in the automotive sector and
to steer,co-ordinate and synergise the efforts of all stakeholders, the Automotive
Mission Plan (AMP) 2006-2016 was prepared. The plan aims at making India global
automotive hub.The AMP 2006-2016 aims at doubling the contribution of automotive
sector in GDP by taking the turnover to US$ 145 billion and providing additional
employment to 25 million people by 2016.
In the long term, the government has expressed plans to follow a two pronged strategy
for spurring automotive Research &Development (R&D). The first is aimed at
addressing the existing infrastructure gap in the field domain of automotive testing
and homologation through the Department’s flagship National Automotive Testing and
R&D Infrastructure Project(NATRiP), which is being implemented at a cost of Rs 2,288
crores (US$ 521.5 million), and is expected to be completed by the end of 2012. The
second part of the strategy is aimed at leveraging the investments being made in
NATRiP facilities for collaborative R&D with the industry, especially for the small and
medium enterprises (SMEs) in the auto component space.
Further, with the recent announcement of the launch of the National Mission for
Electric Mobility and the setting up of the National Council and Board for Electric
Mobility, Mr Patel emphasized on the commitment of the government for early
adoption of electric vehicles, including hybrid vehicles, and the manufacturing of these
vehicles and their components.
The government is considering setting up two automotive manufacturing hubs spread
over 10,000 acres each in central and eastern India. The new hubs, aimed at
consolidating India's position as an important destination for low-cost automotive
15
production, will be in addition to the three existing zones — Haryana, Maharashtra
and Tamil Nadu.
Auto Industry in India – Road Ahead
The automotive industry is at the core of India’s manufacturing economy - India is all
set to become one of the world’s most attractive automotive markets for both
manufacturers and consumers. The resulting benefits to society, such as economic
growth, increased jobs, and stability for families employed by the automotive industry,
are significant.
The long-term potential for growth of the auto industry is very favorable, on account of
low vehicle penetration in the country. As income levels rise and easy finance is
available, the industry will continue to see a healthy growth rate. SIAM estimates that
the growth of the auto industry in FY12 will be in the region of 12-15 per cent.
______________
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Disclaimer:
This document prepared by our research analysts does not constitute an offer or solicitation
for the purchase or sale of any financial instrument or as an official confirmation of any
transaction. The information contained herein is from publicly available data or other
sources believed to be reliable but do not represent that it is accurate or complete and it
should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s
affiliates shall not be in any way responsible for any loss or damage that may arise to any
person from any inadvertent error in the information contained in this report. This document
is provide for assistance only and is not intended to be and must not alone be taken as the
basis for an investment decision.
16
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