Maruti Suzuki India Ltd. share price target

4 February 2019 that demand in 2HCY18 was impacted by a confluence of factors like higher fuel prices, higher interest rates, insurance cost increase and the lack of major new product launches. A comparison with other consumer discretionary items like paints and adhesives where volumes have been sustainably strong suggests that the recent weakness in passenger vehicle (PV) demand was largely a function of financing issues. In our view, correction in fuel prices, resolution of liquidity issues and upcoming new product launches are likely to drive a recovery in PV demand over the next few months. reasons for MSILs weak volumes in 2HCY18 was the lack of new product launches in CY18 and the benefit of the strong Baleno and Brezza order book already being realized in 1HCY18. We believe that the operating performance has bottomed out in 3QFY19, and expect a gradual recovery from 4QFY19 and a revival in the EBITDA margin to 14% level by 2HFY20.

Near Term Challenges Remains - Maintain SELL: MSIL stock has declined by ~ 34% over the last 12 months on account ofvolumes slackness followed by reporting single digit EBITDA margin duringQ3FY19 (lowest in last 24 quarters).

Flat Volume sales on domestic front and substantial volume decline in exports Domestic volume growth stood at 1.3% on a YoY basis at 405,597 units in Q3FY19 as against 400,586 units in Q3FY18. Exports stood at 23,046 units in Q3FY19 as against 30,526 units in Q3FY18, a decline of 24.5% YoY. Overall volumes (domestic + exports)...

The results of this quarter have to be viewed in the context of particularly weak market conditions. While SIAM had forecasted a passenger vehicle domestic market growth of 8~10% for the year, Industry could grow by 4.4% in the first 3 quarters of the year and declined in the third quarter by 0.8%. The Company grew by 7.2% in the first three quarters and by 0.4% in the third quarter in unit wholesales. In addition, the Company helped dealers retail about 90,000 vehicles in excess of wholesale to keep dealer inventories lean as the festive season sales growth was below expectation. Passenger vehicle exports from India also declined by 8.5% owing to weakness in global...

MSIL Q3FY19 results were below our and consensus estimates at operating level. EBITDA margin significantly declined to 9.8% vs our and consensus estimates of 14% and 13.7% respectively. Margins were majorly impacted on account of higher commodity prices, foreign exchange fluctuations, higher discounts and higher operating cost. Adj. PAT for the quarter stood at Rs14.8bn, significantly below our and consensus estimates of Rs17.6bn and Rs17.3bn respectively. Key Highlights and Investment Rationale Operationally weak quarter: Net Revenues declined 0.1% YoY/12.2% QoQ Rs189.2bn...

ICICI Securities Ltd | Retail Equity Research Maruti Suzuki (MSIL) reported a dismal Q3FY19 performance Total operating income in Q3FY19 was at | 19,668 crore, up 2.0% YoY. ASP for the quarter came in at | 4.42 lakh/unit, up 0.5% YoY. However, discounting was aggressive at | 24,300/unit, up 30% QoQ Volumes for Q3FY19 were at 428,643 units, down 0.6% YoY. Of this, domestic volumes grew 1.3% YoY to 405,597 units while exports were down 25.0% YoY to 23,046 units. MSIL had to push extra...

The current slowdown in demand has led to higher discounting and restricted the company's ability to fully pass on the adverse commodity impact through the required price hike, thus negatively impacting margins. With the new Ertiga & WagonR receiving good response and dealer inventory levels down to ~15 days in Jan'19, we expect discounts (which were at all-time high of ~Rs24K/vehicle in Q3FY19) to come off sequentially. Further, given the...

We maintain BUY with a reduced one year TP of Rs 7,400 (based on 22x Dec'20 EPS). Marutis 3QFY19 results (PAT of Rs.14.9B, -17% YoY) disappointed as EBITDA margins came in at 9.8% (which was significantly below estimates). The OEM offered higher discounts towards the year end to normalize channel inventory, post a weak festive season. Thus, discounts increased to Rs.24.3K in 3Q (from Rs.18.7K QoQ,). Margins were also impacted by a combination of adverse factors including higher Commodity prices (80bps QoQ) and FX impact(30bps), one time gratuity provision of Rs.480m and higher marketing spends.

25 January 2019 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 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 while EBITDA/PAT declined 5.9%/4.7% YoY. (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.

Our dealer checks indicate that Maruti Suzuki (MSIL) was able to lower inventory to normal levels after a weak festive season via higher discounting. With feeble consumer sentiment, near-term demand may be subdued, leading us to lower volume estimates. While we expect MSIL to retain its dominance in PVs led by a robust product slate and launches, we cut overall volume estimates by 4-6% and EPS by 5-8% for FY19-FY21 given the weak demand...