May 04, 2012, 03.02 PM | Source: Moneycontrol.com
Dolat Capital is bearish on Maruti Suzuki India and has recommended sell rating on the stock with a target price of Rs 1161 in its April 30, 2012 research report.
, Dolat Capital |
"Maruti Suzuki India’s revenue was Rs 117.2bn, up 16% YoY In 4QFY12, while domestic sales were 3% higher than in 4QFY11, exports were up 26% YoY. The other operating income was up from Rs 16.6bn in 4QFY11 to Rs 20.2bn in this quarter. Maruti reported EBITDA at Rs 8585mn, down 15% YoY. However, if we adjust for higher other operating income, the margins are almost at 6.9% Raw material cost continues to be higher. It was 40bps higher than 3QFY12 at 79.6% of sales. Staff cost was also reported higher than our expectation by 20bps. The other expenses were lower than expectation by 200bps compared to previous quarter at 10.9% of sales. The company reported other income at Rs 2969mn. Maruti reported tax provision of ~20% for 4QFY12 on tax benefits gained from higher R&D expenses. The impact of the above two effects on the PAT is almost Rs 1853mn converting into an EPS of Rs 6.4. The company reported an EPS of Rs 22.1 vs our expectation of 15.5."
"The management has asserted that macro headwinds continue to impact demand and they expect the industry to grow 7-10% in FY13. We have assumed a volume growth of 16% for the company in FY13. Higher input prices continue to hit margins. Management implemented a price hike in April 2011, but mentioned that, currently, the hike is not sufficient to cover the entire rise in commodity prices. Also, its wage negotiations are due in April-May for the next three years of agreement. We have assumed staff costs to be ~2.2% of net sales (same as reported in 4QFY12). With higher production, we expect margins to improve to 8.6%. The company has reported 7.3% in 4QFY12. Based on such optimism, our EPS estimate for FY13 stands at Rs 77.3 and for FY14 Rs 89.3. The stock currently trades at 18xFY13 and 15.6xFY14. We believe valuations are streched and continue to recommend to book profits. Maintain Sell with a target price of Rs 1161," says Dolat Capital research report.
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