Reduce Maruti Suzuki India; target of Rs 6335: ICICI Direct

ICICI Direct's research report on Maruti Suzuki India

Maruti Suzuki (MSIL) posted steady Q2FY21 results. Total operating income was at Rs 18,475 crore, up 10.4% YoY (volumes up 16.2% YoY to 3.9 lakh units with domestic volumes up 18.6%, exports down 13%). ASPs surprised negatively, coming in at Rs 4.5 lakh/unit, down 5.6% YoY – pointing to some element of down-trading. EBITDA margins at 10.3% were up 80 bps YoY. Savings were realised on raw material costs front but the same was negated, to an extent, through higher other expenses. Consequent PAT was at Rs 1,372 crore, up 1% YoY. PAT was supported by lower depreciation charge and lower effective tax rate (~22%).

Outlook

We introduce FY23E numbers and build sales, PAT CAGR of 2.6% & 7.2%, respectively, in FY20-23E. Margins uptick is seen being sedate, with our estimates building in ~11.2% by FY23E on the back of better operating leverage and focus on costs. Our previous concerns over volume visibility have been allayed, to an extent but the stock remains richly valued, in our view. We value MSIL at Rs 6,335 i.e. 30x P/E on average of FY22E, FY23E EPS.

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