Maruti Suzuki Friday reported a more than doubling of its third quarter net profit year-on-year to Rs 501 crore and a 45 percent rise in quarterly revenues to around Rs 11,000 crore. The stock is trading at Rs 1627 early Monday, up 1.7 percent over its previous close.
Shares of Maruti Suzuki India were up over a percent in an otherwise lacklustre trade. India’s largest auto manufacturer Friday reported a more than doubling of its third quarter net profit year-on-year to Rs 501 crore and a 45 percent rise in quarterly revenues to around Rs 11,000 crore. The stock touched an intraday high of Rs 1,634.00, up 1.7 percent over its previous close.
Here is a snapshot of what various brokerages are saying about the stock’s prospects after the quarterly performance:
After a sluggish volume CAGR of only 3% for passenger vehicles in FY11-13, we expect a revival in volumes in FY14 (forecast), aided by an improving economy, stable petrol prices, and falling interest rates. We estimate MSIL’s margins to improve to double digits in FY14F. This should lead to strong earnings CAGR of around 40 percent for the next two years.
Maruti's Q3 results surprised positively with higher-than-expected gross and EBITDA margin expansion. We expect margins to improve further over 4Q and FY14 as the benefits of the weaker Yen and recent price hike come through.
Improving margins, gradually recovering demand, stabilizing market share, accelerating exports growth and new SUV launches over FY14-15 make a powerful investment thesis.
We believe this (Q3) strong growth was due in part to the low base of 2QFY13. Longer-term, we remain negative on MSIL's return on capital and valuation profile given significant increases in technology costs over last few years, partly driven by a structural increase in competition in the Indian car market.
The company should witness currency led margin improvement, though it is likely to come only from 1Q as it is hedged for 4Q FY14. We expect gross margins to improve by over 150 basis points from 3Q levels and believe EBITDA margins too should improve to 9.5% if currency remains at current levels. However, with discretionary spend across segments starting to slow down, we believe Maruti will disappoint the street on FY14 volumes.
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