May 04, 2012, 02.55 PM | Source:

Buy Maruti Suzuki; target Rs 1591: is bullish on Maruti Suzuki India (MSIL) and has recommended buy rating on the stock with a target price of Rs 1591, in its April 30, 2012 research report. is bullish on Maruti Suzuki India (MSIL) and has recommended buy rating on the stock with a target price of Rs 1591, in its April 30, 2012 research report.

"Maruti Suzuki India’s (MSIL) reported its Q4FY12 numbers, which were slightly above our expectations primarily on account of one-off’s. The top line came in at Rs 11727 crore (I-direct estimate: Rs 11317 crore) reflecting a 16.2% YoY increase and a 48.8% QoQ jump. The average realisations (ASP) jumped 11% YoY in domestic market to Rs 297,836 and rose 17% YoY to Rs 319,000 in export markets. However, discounts jumped sequentially to ~Rs 13,490 (up 12% QoQ) on account of increased discounts on petrol variants to attract customers. On the volume front, the company reported a 4.9% YoY rise and 50.4% QoQ jump to ~3.6 lakh units. The EBITDA margins witnessed sequential improvement of 203bps to 7.3% despite vendor compensation of ~Rs 200 crore for currency fluctuation paid with a quarter lag. The PAT came in at ~640 crore (down ~2% YoY) and was boosted by other income of ~296 crore pertaining to capital gain arising from maturity of FMP investment and mark to market reversal of Rs 50 crore on the royalty front."

"The quarter witnessed higher ASP’s owing to higher diesel mix (~23% of sales) and with diesel engine capacity expanding to ~4 lakh units in FY13E ( 3 lakh units from Suzuki Powertrain and 1 lakh units sourced from FIAT) from current levels of 2.5 lakh units the ASP’s are expected to remain firm. The capex incurred for FY12 was Rs 2700 crore and is guided to be ~Rs 3000 crore in FY13E with R&D spend expected to rise to Rs 500 crore. The profitability was enhanced by currency reversal of ~50 crore on royalty and higher other income due to maturity of FMP investment. The vendor compensation of ~Rs 200 crore remained a drag. On the export front, the focus remains on non-European geographies."

"We believe the stock has bottomed out in terms of profitability in previous quarter and expect interest rate cut to improve consumer sentiment. At the CMP of 1397, the stock is trading at 13.2x FY14E EPS. We value the stock at 15x FY14E EPS to arrive at target price of Rs 1591 reflecting a potential upside of 15%. We change our rating from HOLD to BUY," says research report.

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