MARUTI
About Company:
Maruti Suzuki India Limited referred to as Maruti, is a subsidiary company of Japanese automaker Suzuki Motor Corporation. It has a market share of 44.9% of the Indian passenger car market. It was the first company in India to mass-produce and sell more than a million cars. It is largely credited for having brought in an automobile revolution to India. It is the market leader in India, and on 17 September 2007, Maruti Udyog Limited was renamed as Maruti Suzuki India Limited. The company’s headquarters are on Nelson Mandella Road, New Delh and Manufacturing Plants at Gugon & Manesar in India.
Sales &Services:
Maruti 800 ,Omni, Gypsy, WagonR, Alto, Swift,Estilo, SX4, Swift DZire, A-star,Ritz Eeco, Alto, K10, Maruti Ertiga, Maruti XA Alpha, Maruti Alto 800.
Maruti Suzuki has 933 dealerships across 666 towns and cities in all states and union territories of India. It has 2,946 service stations (inclusive of dealer workshops and Maruti Authorised Service Stations) in 1,395 towns and cities throughout India. It has 30 Express Service Stations on 30 National Highways across 1,314 cities in India.
Other Projects:
In 2002 Maruti Suzuki provides vehicle insurance to its customers with the help of the National Insurance Company, Bajaj Allianz, New India Assurance and Royal Sundaram. The service was set up the company with the inception of two subsidiaries Maruti Insurance Distributors Services Pvt. Ltd and Maruti Insurance Brokers Pvt. Limited.
To promote its bottom line growth, Maruti Suzuki launched Maruti Finance in January 2002. Prior to the start of this service Maruti Suzuki had started two joint ventures Citicorp Maruti and Maruti Countrywide with Citi Group and GE Countrywide respectively to assist its client in securing loan. Maruti Suzuki tied up with ABN Amro Bank, HDFC Bank, ICICI Limited, Kotak Mahindra, Standard Chartered Bank, and Sundaram to start this venture including its strategic partners in car finance. Again the company entered into a strategic partnership with SBI in March 2003. Since March 2003, Maruti has sold over 12,000 vehicles through SBI-Maruti Finance. SBI-Maruti Finance is currently available in 166 cities across India.
Financial Back Ground:
In Q2FY13 net revenues stood at Rs 83bn (+6% YoY, -23% QoQ) driven by better than anticipated improvement in average realizations (+16% YoY, -1% QoQ) while overall volumes declined -8.7% YoY/-22.1% QoQ. EBITDA Margins for the quarter came in-line with our estimate at 6.1% ( -20 bps YoY, – 120 bps QoQ). RM to sales at 79.6% increased +100 bps YoY/+180 bps QoQ impacted by adverse product mix (lower diesel share), higher overall discounts and adverse forex. This was offset by lower other expense to sales at 11.4% (-110 bps YoY/ -120 bps QoQ) which benefitted from lower royalty payment and operating expenses. Net Profit declined 5.4% YoY/ 46.3% QoQ to Rs 2.2 bn but was ~18% above.
FY14. We expect Maruti Suzuki to benefit from both capacity expansion in diesel cars and demand revival in petrol cars this should help clock a 17% volume growth in FY14. We build in 300 bps margin expansion in FY14 over Q2 levels driven by lower discount/car, richer product mix, operating leverage benefits and slight benefit from currency.
Estimates for FY13/FY14 upwards by 3%/8% driven largely by benefits of a richer product mix even as we largely hold on to volume growth expectation of 7%/17% in FY13/14. We believe that the current stock price fully discounts a favorable macro environment for the company in FY14 and see limited upside potential. Key risk to our investment argument remains a sharp improvement in the macro environment and favorable currency.
We Bet the Stock Grab at 1460 for stock target price 1580. Keep stop loss 1400 In time Period 5-6 Months. Long Term Target 1700.