Maruti Suzuki : Sales grew by 14% to 1.44 lakh vs 1.26 lakh. Demand for Baleno, Brezza and Dzire continued to supply
The improvement in outlook for Maruti Suzuki, which sells one in two cars in India, is expected to augur well for the fortunes of some of its suppliers. The earnings of two such companies -- Bharat Seats and Jay Bharat Maruti caught our attention.
Bharat Seats is a joint venture between Suzuki Motor Corporation, Maruti Suzuki India (MSIL), and the Relan Group. The company manufactures complete seating systems and interior components for automotive and surface transport, and generates over 90 percent of its revenue from MSIL.
Driving on Maruti's performance, Bharat Seats reported 12.9 percent (YoY) growth in net operating revenues in Q4FY18 with 81.4 percent (YoY) growth in the EBITDA. A fall in the raw material prices helped EBITDA margin expand 266 basis points (bps) YoY. Profit after tax almost doubled in the quarter under review.
On a full year basis, the company posted a healthy growth of 15.5 percent in net sales, 75 percent in EBITDA and 131.9 percent in PAT. EBITDA margin expanded 226 bps, due to fall in material cost as a percentage of net sales.
Another major component supplier to MSIL is Jay Bharat Maruti. MSIL holds 29.3 percent equity stake in Jay Bharat, which is engaged in the manufacturing of sheet metal components and assemblies, and design and development of dies and moulds, automotive machines and equipment. Jay Bharat is a tier- 1 supplier to MSIL from which it generates most of its revenues.
Jay Bharat posted muted topline growth in Q4Fy18. However, EBITDA grew 14.7 percent year-on-year (YoY) on falling material costs. EBITDA margin expanded 134.6 bps. Material costs as a percentage of net sales contracted 478 bps but was partially offset by a rise in the operating and employee costs. Profit-after-tax (PAT), however, declined 12.6 percent on increase in the effective tax rate to 34 percent from 17 percent.
For the full year, the company posted a healthy 13.3 percent growth in net sales. EBITDA and PAT grew 16.9 percent and 9.5 percent, respectively.
The shares of Bharat Seats are trading at 20.4/18.6 times FY19/FY20 projected earnings, while those of Jay Bharat Maruti are trading at 16.3/14.8 times FY19/FY20 projected earnings.
With MSIL expected to continue to lead the passenger vehicle segment, the outlook on both Bharat Seats and Jay Bharat remains positive. Both the companies are expected to maintain their share of business from Maruti while also benefiting from its expansion in Gujarat and new launches/ refreshers.
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