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Maruti: Cashes in on the opportunity
Apr 26, 2010

Maruti Suzuki Ltd has announced its FY10 results. The company has reported a 42% YoY and 105% YoY growth in sales and net profits respectively. Here is our analysis of the results

Performance summary
  • Topline grows by 31% YoY during the quarter, backed by 22% YoY growth in volumes.
  • Operating profits for the quarter surge 147% YoY as margins expand by 6.2%.
  • Benign depreciation further boosts bottomline, allowing it to grow by 170% YoY during the quarter.
  • Full year bottomline grows 105% on the back of a 42% growth in topline
  • Announces a dividend of Rs 6 per share for the full year, yield at current price equals 0.4%.


(Rs m) 4QFY09 4QFY10 Change FY09 FY10 Change
Units sold 236,638 287,422 21.5% 792,167 1,018,365 28.6%
Net sales 64,329 84,246 31.0% 208,525    296,230 42.1%
Expenditure 59,836 73,135 22.2% 190,205    256,687 35.0%
Operating profit (EBDITA)   4,493 11,111 147.3% 18,321 39,543 115.8%
EBDITA margin (%) 7.0% 13.2%   8.8% 13.3%  
Other income   1,054       790 -25.1%   6,013 4,968 -17.4%
Interest (net) 89 129 44.9% 510 335 -34.3%
Depreciation   1,971   2,230 13.1%   7,065 8,250 16.8%
Profit before tax   3,487   9,542 173.6% 16,759 35,925 114.4%
Tax   1,056   2,976 181.8%   4,571 10,949 139.5%
Profit after tax/(loss)   2,431   6,566 170.0% 12,187 24,976 104.9%
Net profit margin (%) 3.8% 7.8%   5.8% 8.4%  
No. of shares (m)   288.9   288.9     288.9 288.9  
Diluted earnings per share (Rs)           86.4  
Price to earnings ratio (x)           15.4  

What has driven performance in FY10?
  • FY10 turned out to be one of the best years in history for India’s largest car manufacturer. Thanks to a lot of tailwinds like low interest rate environment, low base effect, government incentives and buoyant economic environment, the company crossed the 1 m cars sold in a single fiscal year milestone and recorded a strong 29% growth in volumes. While domestic sales grew by 21%, exports more than doubled. Growth in domestic sales was driven by the A2 and A3 segments, where growth came in at 24% and 31% respectively. However, with competition intensifying, especially in the A2 space, maintaining similar growth rates could become difficult for the company.

  • On the exports front, what helped numbers was the demand from Europe wherein a few governments came out with policies that favored sale of small and fuel efficient cars. With Maruti already having a presence in these markets, such a policy did wonders for the company’s export sales.

  • It is not just greater volumes that boosted the company’s topline. It also managed to improve its product mix as a result of which topline in value terms came in significantly higher than in volume terms.

    sales break up

    Domestic Models 4QFY09 4QFY10 % change FY09 FY10 % change
    A1 M-800 12,076    8,434 -30.2%  49,383 33,028 -33.1%
    C Omni, Versa 21,421   32,466 51.6%  77,948 101,325 30.0%
    A2 Alto, Wagon -R 152,645 173,683 13.8%      511,396 633,190 23.8%
    A3 SX4, Dzire 23,228   29,702 27.9%  75,928 99,315 30.8%
    Total passenger cars   209,370 244,285 16.7%      714,655 866,858 21.3%
    MUV Gypsy   2,115    1,097 -48.1% 7,489   3,932 -47.5%
    Total domestic   211,485 245,382 16.0%      722,144 870,790 20.6%
    Exports   25,153   42,040 67.1%  70,023 147,575 110.8%
    Grand total   236,638 287,422 21.5%      792,167    1,018,365 28.6%

  • On the costs front, all the major cost heads came down as percentage of sales. This helped boost operating margins by a sizeable 4.5%. While lower prices of commodities as compared to last year helped control rise in raw material expenses, growth in other expenditure was restricted by significantly lower forex losses. However, going forward, margin pressure should start creeping in as key inputs like steel and aluminium start becoming costly again.

    cost break up

    (Rsm) 4QFY09 4QFY10 Change FY09 FY10 Change
    Raw materials 49,006 61,405 25.3% 155,171    215,084 38.6%
    % sales 76.2% 72.9%   74.4% 72.6%  
    Staff cost   1,331   1,534 15.2%   4,711 5,456 15.8%
    % sales 2.1% 1.8%   2.3% 1.8%  
    Other expenditure   9,499 10,196 7.3% 30,322 36,147 19.2%
    % sales 14.8% 12.1%   14.5% 12.2%  

  • While interest cost has fallen as compared to previous year and increase in depreciation has also not been too much, lower other income and higher tax outgo has meant that growth in bottomline has come in at a slightly lower rate than operating profits. However, at 105% YoY, the profit growth has still been pretty impressive.

What to expect?
At the current price of Rs 1,330, the stock trades at a multiple of 9.5 times our estimated FY12 cash flow per share. The company’s performance has been in line with our expectations, especially on the bottomline front. We are of the opinion that the year FY10 was perhaps an aberration and hence going forward, the growth should come back to its long term average. Taking this and the ongoing competition in the small car space into consideration, we believe the stock is fully priced right now and chances of a major upside, if any, are very limited.

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