Motilal Oswal

Maruti Suzuki (Buy)

CMP: ₹6,508.55

Target: ₹7,777

Maruti Suzuki’s (MSIL) adjusted revenue grew 2 per cent y-o-y to ₹19,670 crore (in-line) in 3QFY19, led by a 2.6 per cent y-o-y increase in realisations to ₹4,58,900 (our estimate: about ₹4,54,800). Volumes, however, declined 0.6 per cent y-o-y. EBITDA margin shrank 480 bps q-o-q (-600 bps y-o-y) to 9.8 per cent (our estimate: 13.1 per cent) due to higher discounts (-120 bps q-o-q), commodity (-100 bps q-o-q), FX (-50 bps q-o-q), operating leverage (-150 bps q-o-q) and one-time staff cost (-25 bps q-o-q). However, higher other income restricted adjusted PAT decline to 17 per cent y-o-y (at ₹1,490 crore versus our estimate: ₹1,690 crore). For 9MFY19, revenue grew 9.8 per cent y-o-y, while EBITDA/PAT declined 5.9 per cent/4.7 per cent y-o-y.

Key takeaways a) Domestic PV industry to grow 4.5 per cent in FY19; MSIL to outperform; 9MFY19 MSIL retails grew about 5 per cent y-o-y, led by about 13 per cent y-o-y growth in retail; b) Record average discounts at ₹24.3/unit (versus ₹18,800 in 2QFY19 and ₹17,900 in 3QFY18); c) Inventory down to about 15 days (normal inventory of 4-5 weeks); d) Ertiga has got about 55,000 bookings (waiting of about 28 weeks), while WagonR has over 14k bookings so far.

Valuation view: We cut our FY20/21 consolidated EPS estimate by 9-10 per cent as we reduce our volume and margin estimate by 110-120 bps.

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