X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Maruti: No dents for now! - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Oct 27, 2004

    Maruti: No dents for now!

    Performance Summary
    Maruti, India’s largest passenger car manufacturer, has put up a robust 2QFY05 performance. During the quarter, while the topline has grown by 25% YoY, the growth in bottomline is significantly higher at 48% YoY. Improvement in operating margins and savings on the interest front were some of the other highlights. For the half yearly period, the corresponding figures stood at 24% and 45% respectively.

    (Rs m) 2QFY04 2QFY05 Change 1HFY04 1HFY05 Change
    Net sales 21,642 27,117 25.3% 42,052 52,266 24.3%
    Expenditure 19,436 23,848 22.7% 37,887 46,057 21.6%
    Operating profit (EBDITA) 2,206 3,268 48.1% 4,165 6,210 49.1%
    EBDITA margin (%) 10.2% 12.1%   9.9% 11.9%  
    Other income 1,125 781 -30.5% 1,813 1,796 -0.9%
    Interest (net) 106 95 -10.4% 216 186 -13.9%
    Depreciation 1,493 1,201 -19.5% 2,307 2,394 3.8%
    Profit before tax 1,732 2,754 59.0% 3,455 5,426 57.1%
    Extraordinary item - -   - -  
    Tax 493 918 86.4% 1,012 1,881 85.8%
    Profit after tax/(loss) 1,240 1,836 48.1% 2,443 3,545 45.1%
    Net profit margin (%) 5.7% 6.8%   5.8% 6.8%  
    No. of shares (m) 288.9 288.9   288.9 288.9  
    Diluted earnings per share (Rs)* 17.2  25.4   16.9  24.5  
    Price to earnings ratio (x)   14.1     14.6  
    (* annualised)            

    Background
    Maruti Suzuki, incorporated in 1981, is the country's largest passenger car manufacturer with a market share of 60% in FY04 in the domestic market. While Suzuki, Japan holds a 54.2% equity stake in the company, the government of India has brought down its equity stake to 20.8% through two phases of disinvestment. After remaining a near monopoly till 1992, the entry of other multinationals and the emergence of domestic competition have resulted in the company losing market share. However, the company has been able to steady its share in the Indian passenger car segment through aggressive capacity expansion and new product introductions.

    What has driven performance in 2QFY05?
    A2 segment leads the pack: Continuity of benign interest rate regime and steady rise in the income levels has enabled the company to post a strong 20% growth in volumes during the quarter. However, unlike previous quarters, the growth was largely powered by offerings in the higher segment viz, the A2 and A3 segments. While the former grew by 74% YoY, the growth in the latter more than doubled, thanks mainly to the price re-positioning strategy adopted by the company. However, this seemed to have little effect on realisations, as the growth in value terms came in a little higher than growth in volumes, indicating a better product mix. Market share of the company climbed to 55%, an improvement of 100 basis points over corresponding quarter last year.

    Cars - Performance snapshot
    Segment Models 2QFY04 2QFY05 % change 1HFY04 1HFY05 % change
    A1 M800 41,921 27,997 -33.2% 82695 59871 -27.6%
    C Omni, Versa 14,255 16,142 13.2% 28134 30897 9.8%
    A2 Alto, Wagon-R, Zen 37,766 65,684 73.9% 70651 124885 76.8%
    A3 Baleno, Esteem 3,716 7,748 108.5% 6848 11823 72.6%
    Total passenger cars   97,658 117,571 20.4% 188,328 227,476 20.8%

    Lower employee cost benefits: In a quarter where most of the auto companies have struggled to keep margins under check owing to spiraling input costs, the company has actually done the reverse. It has to be remembered that the company, over the past couple of years, has reduced its manpower by more than 2,000. The employee cost has been slashed by close to 40% in the quarter under review.

    Cost break-up…
    (Rs m) 2QFY04 2QFY05 %Change 1HFY04 1HFY05 %Change
    Raw materials 16,271 20,194 24.1% 32,013 39664 23.9%
    % sales 75.2% 74.5%   76.1% 75.9%  
    Staff cost 646 400 -38.0% 1,235 861 -30.3%
    % sales 3.0% 1.5%   2.9% 1.6%  
    Other expenses 2,520 3,254 29.2% 4,639 5532 19.3%
    % sales 11.6% 12.0%   11.0% 10.6%  

    The lower interest cushion: Despite higher tax component to the tune of 86%, the growth in net profits have been significantly higher than the topline growth of 25%. Apart from improvement in operating margins, what have also enabled the company to post a higher bottomline growth is the 10% reduction in interest expense and a lower depreciation charge.

    What to expect?
    At Rs 358, the stock trades at a P/E multiple of 14.6 times annualised 1HFY05 earnings. With the car demand in the country expected to grow at a fair clip in the medium to long term, the company is expected to be the largest beneficiary of the same owing to its offerings in the small car segment and the biggest distribution network. Having said that, any wrong step taken by the parent, Suzuki, might limit the company’s growth prospects. This may have a impact on valuation as well. Caution needs to be exercised to that extent.

     

     

    Equitymaster requests your view! Post a comment on "Maruti: No dents for now!". Click here!

      
     

    More Views on News

    Maruti Suzuki Ltd: Bumpy First Quarter. GST dents Margins! (Quarterly Results Update - Detailed)

    Aug 2, 2017

    GST realted cost impacts Margins, Management expects good year ahead.

    Maruti Suzuki Ltd: Finishes Year on a Strong Note. What Next? (Quarterly Results Update - Detailed)

    Jun 13, 2017

    Maruti Suzuki Ltd ends FY17 on strong note. Management expects robust FY18.

    Are Firms like Maruti & ONGC Sitting Ducks Against Disruption? (The 5 Minute Wrapup)

    May 23, 2017

    Are blue chips like Maruti and ONGC safe from the forces of disruption?

    Tata Motors Ltd: Another Disappointing Quarter, Management fails to Perform! (Quarterly Results Update - Detailed)

    Aug 14, 2017

    Tata Motors Ltd disappoints again for both India and JLR business. Management commentary indicates a slow year ahead.

    Hero Motocorp Ltd: Riding on the Scooters Growth, Maintains Margins! (Quarterly Results Update - Detailed)

    Aug 1, 2017

    Good Recovery in the Scooters market, expects pick up in exports too.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    MARUTI SUZUKI SHARE PRICE


    Aug 18, 2017 (Close)

    TRACK MARUTI SUZUKI

    • Track your investment in MARUTI SUZUKI with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks

    MARUTI SUZUKI - HYUNDAI COMPARISON

    Compare Company With Charts

    COMPARE MARUTI SUZUKI WITH

    MARKET STATS