Emkay Global Financial’s report on Maruti Suzuki India
Q2FY22 EBITDA declined by 56% yoy to Rs8.5bn (est.: Rs11.4bn), 25% below estimates due to a lag in the pass-through of commodity inflation and higher marketing spends. Revenue grew by 10% yoy to Rs205bn, above our estimate of Rs192bn, due to the increased share of spare-part revenues. The order book is strong at over 200,000 units. Led by a sales upcycle and new products, we expect a 19% CAGR in volumes over FY22-24E. In the next 2-3 years, major launches could include new Brezza, Jimny UV, above 4m UV and new MPV, among others. We reduce FY22E/23E/24E EPS by 9%/3%/3% to Rs142.9/Rs293.7/Rs395 due to cost pressures and lower other income. We build in a strong revenue/earnings CAGR of 23%/66% over FY22-24E. Consequently, ROIC (post tax) should increase from 19% in FY22E to 67% in FY24E.
We remain positive on MSIL due to expectations of a cyclical upturn, which generally lasts for at least three years. Reaffirm Buy with a revised TP of Rs8,750, based on 27x core P/E on Dec’23E EPS (earlier 28x Sep’23E EPS), backed by a DCF model and net cash of Rs1,445/share.
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