Quick Comment
June 11, 2014
Rating matrix
Rating
Target
Target Period
Potential Upside
:
:
:
:
Maruti Suzuki India (MARUTI)
Hold
| 2375
12 months
-4%
| 2464
More safeguards for minority shareholders…
What’s Changed?
Target
EPS FY15E
EPS FY16E
Rating
Changed from | 1823 to | 2375
Changed from | 110.8 to | 111.5
Changed from | 130.2 to | 148.4
Unchanged
Key Financials
| Crore
Net Sales
EBITDA
Net Profit
EPS (|)
FY13
42,613
4,229.6
2,392.1
79.2
FY14E
42,645
5,095.9
2,783.1
92.1
FY15E
47,424
6,127.1
3,367.0
111.5
FY16E
53,721
7,533.3
4,482.5
148.4
FY13
31.1
30.0
16.5
4.0
12.9
11.9
FY14E
26.7
25.8
13.1
3.5
13.3
13.3
FY15E
22.1
21.3
10.8
3.1
14.1
14.4
FY16E
16.6
16.0
8.3
2.7
16.2
16.5
Valuation summary
P/E (x)
Target P/E (x)
EV/EBITDA (x)
P/BV (x)
RoNW (%)
RoCE (%)
Stock data
Particular
Market Capitalization (| Crore)
Total Debt (FY14P) (| Crore)
Cash and Investments (FY14P) (| Crore)
EV (| Crore)
52 week H/L (|)
Equity capital (| crore)
Face value (|)
Amount
| 74432.5 Crore
| 1685.2 Crore
| 9442 Crore
| 66675.7 Crore
2505 / 1215
| 151 Crore
|5
Analyst’s name
Nishant Vass
nishant.vass@icicisecurities.com
Venil Shah
venil.shah@icicisecurities.com
Maruti Suzuki India (MSIL) has outlined the agreement details with Suzuki
Motor Corporation (SMC) for the new Gujarat plant, with SMC’s 100%
subsidiary, Suzuki Gujarat (SG), undertaking the project. As indicated
earlier, MSIL would voluntarily seek minority shareholders’ approval for
this arrangement. The additional clarifications by MSIL on the proposed
expansion of the Gujarat plant further safeguards minority shareholders’
interest. The key highlights of the meeting were as follows:
The entire capex for the Gujarat subsidiary in the initial phase would
be ~| 18,500 crore. It would be funded by depreciation and equity
brought in by Suzuki Motor Corporation
SG would operate on a “no profit, no loss basis” and would have
annual price revisions for products. Any profit would be adjusted for
the selling price of products
MSIL could potentially save ~| 10,500 crore assuming post tax
returns on investments of ~8.25% for the 15 year contract period
According to legal experts, there would be no significant tax
differences between MSIL and SMC
In the event of the termination of the contract, MSIL would have the
right to assets at the book value
Our take on the same
We feel MSIL’s management has done well to alleviate some concerns of
minority shareholders related to the arrangement. We believe this would
reduce the overhang on the stock. Hence, multiples would not face any
specific discount due to the same. Along with the same, MSIL remains an
attractive play on the discretionary purchase recovery among consumers.
It has new products lined up (Celerio, Ciaz, XA alpha) to capture the same.
On competitive intensity, we feel MSIL has handled it in an admirable
manner. We feel it can possibly maintain the same, going ahead. We have
upped our volume estimates (~5%) to ~1.4 million units in FY16E. We
feel with strong cash generation, MSIL could increase dividend payouts in
the coming years as investments remain modest. We upgrade our target
multiple to 16x. Thus, we arrive at a target price of | 2375. However, post
the recent rally, we maintain HOLD rating.
ANALYST CERTIFICATION
We /I, Nishant Vass MBA Venil Shah MBA research analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our
personal views about any and all of the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or
view(s) in this report. Analysts aren't registered as research analysts by FINRA and might not be an associated person of the ICICI Securities Inc.
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