Maruti Suzuki India Ltd. share price target

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...

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Maruti Suzuki India Limited (MSIL), a subsidiary of Suzuki Motor Corporation, is India's largest passenger car company, accounting for over 50% of the domestic car market. MSIL's Q2FY19 revenue growth at 3.1% YoY was lower than our estimates mainly due to tepid festive sales volume (down 1.5% YoY). The company managed to restrict EBITDA margin decline to 160 bps YoY in Q2FY19 on account of higher other operating income (one-off income related to Suzuki) and cost saving initiatives....

From its recent peak of USD85/bbl, the crude oil price has corrected by ~17%. Domestic PV industry - and also Maruti Suzuki(MSIL) - is highly influenced by the crude cycle, not just in terms of demand but also profitability. This was the first inflationary period under the fuel price deregulation era, which resulted in near real-time transmission of higher crude prices (up 62% from lows of Jun-17) to fuel prices (price of petrol up by 25%and of diesel by 38%), denting auto consumer sentiment

Maruti Suzuki (MSIL) reported better than expected set of numbers considering muted volume growth and higher cost pressures during the quarter. The sales growth (3.1% yoy) was largely led by better product mix and higher other operating income during the quarter. However, EBITDA and PAT de-grew by 6.7% and 9.8% on account of dismal operational performance, higher interest cost and muted growth in other income.

For 2QFY2019, Maruti Suzuki India (MSIL) posted slightly better numbers, in-line with expectation on EBITDA margin front (after adjusting for one time engineering service fee received from Suzuki of `2bn) as well as on the bottom-line front. MSIL reported ~3% yoy top-line growth to `22,433cr on the back of price hike (up ~4.5% yoy). The c..