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On Wed, Apr 27, 2016 at 12:11 PM, Mehak Choksi <mehakchoksi@gmail.com> wrote:
> Stock Update
>
> Maruti Suzuki India
> Reco: Buy
> PT: Rs4,700
> CMP: Rs3,869
>
> Margins surprise positively; maintain Buy with revised PT of Rs4,700
>
>
>
> Key points
>
> MSIL springs margin surprise in Q4FY2016: Maruti Suzuki India Ltd (MSIL)
> surprised the Street by reporting a strong operating performance in
> Q4FY2016. Contrary to the Street's expectations of sequentially similar
> margins, due to the effect of the appreciation of yen and subdued volumes,
> MSIL surprised positively by reporting 100-basis point (BPS) expansion in
> the margins, sequentially. The operating profit margin (OPM) was 60-80BPS
> above the consensus estimates. With discount reduction on the back of strong
> demand for new products coupled with cost control measures, the company
> posted better-than-anticipated margins.
> MSIL to continue outgrowing industry growth in FY2017: MSIL is aiming to
> outpace the industry growth in FY2017 on the back of strong demand for the
> recent launches (Baleno and Vitara Brezza which have strong order backlogs),
> launches in the new segment (Ignis in the compact utility vehicle space) and
> further expansion of the distribution network particularly in rural areas.
> MSIL would also be a beneficiary of the consumer shift towards the petrol
> segment (MSIL's 70% volumes are petrol driven as against the industry
> average of 55%).
> Increasing estimates; maintain Buy: MSIL has demonstrated a robust margin
> performance despite challenging passenger vehicle industry and currency
> woes. We expect MSIL to outpace the passenger vehicle industry in FY2017 on
> the back of sustained strong demand for recent launches and strong product
> pipeline. Also, MSIL's yen exposure is likely to reduce given the increased
> localisation initiatives and royalty on future models which would be
> denominated in Indian Rupee. Also, we expect the discounting/vehicle to
> tread down given the increased proportion of new launches (recent launches
> have order backlog of about five to six months) and new launches in the
> upcoming festive season which would have no discounting. Further, MSIL has
> guided for a lower tax rate going ahead (tax rate estimated at 26-27% as
> against the current rate of 30%) due to higher other income recognition
> under the new IFRS rules. We have marginally raised our estimates by about
> 6% for both FY2017 and FY2018, given the robust operating performance. We
> have maintained our Buy rating on the stock with a revised price target of
> Rs4,700.
>
>
>
>
>
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