Dear All,
Forwarding you the Result Update on Maruti Suzuki for 4QFY2011 with an Accumulate recommendation and a Target Price of `1,506 (12 months).
For 4QFY2011, Maruti Suzuki (Maruti) reported better-than-expected results, led by volume growth, gratuity provision write-backs and lower tax rate. We revise our volume estimates marginally downwards to account for the impact of rising interest rates and product prices. Thus, we recommend Accumulate on the stock.
Operating performance better than estimates: For 4QFY2011, Maruti reported 19.8% yoy and 6.3% qoq growth in net sales to `10,092cr (`8,425cr), slightly better than our estimates, aided by a 19.5% yoy and 3.8% qoq jump in volumes and a marginal increase in average net realisation. Maruti benefitted from
better-than-expected performance on the operating front. EBITDA margin declined by 318bp yoy to 10% due to higher raw-material expenses (up 129bp yoy) and other expenditure (up 173bp yoy). However, the company’s margin benefitted due to the change in accounting policy related to vendor tooling (reduced raw-material expenses) and write-back on gratuity provisions (lower employee costs). Adjusting for these items, operating margin would come at 9.5%. Net profit came in at `660cr, recording a marginal increase of 0.5% yoy, boosted largely because of benefits on R&D spends, resulting in lower tax rate.
Outlook and valuation: We expect Maruti to register a 12.1% CAGR in volumes, leading to a 15.7% increase in revenue over FY2011–13E. We estimate the company’s bottom line to grow at a 12.6% CAGR during the same period.
At `1,327, Maruti is trading at 14.7x and 13.2x FY2012E and FY2013E earnings, respectively. We recommend Accumulate on the stock with a target price of `1,506, at which level it would trade at 15x FY2013E earnings.
Kindly click on the following link to view the Report.
If you have any further queries, feel free to call us on 022 39357600, Extn: 6864 / 6865 or mail us at advisory@angelbroking.com
With best regards,
Fundamental Advisory Desk
Angel Broking
Akruti Star,6th Floor, Road No.7,MIDC, Andheri (E),Mumbai – 93.
Call : (91) (022) 39357600 Ext. 6864,6865
Website : www.angelbroking.com
Disclaimer: Ours is an advisory role. The final decision and consequences based on our information is solely yours. Moreover, in keeping with regulatory guidelines, we do not guarantee any returns on investments. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.
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