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Strong results, outlook positive

Maruti Suzuki India Ltd (MSIL) is an automobile manufacturer in which Japanese car and motorcycle manufacturer Suzuki Motor Corporation (SMC) holds 56.2% ownership. MSIL is one of the largest passenger car companies in India and accounts for more than 50% of the domestic car market. • MSIL’s standalone revenue in Q3FY24, improved by 14.4% YoY to Rs 31,860cr, backed by strong volume growth in utility vehicles (UV). • EBITDA was up by 37.9% YoY to Rs. 3,908cr and EBITDA margin expanded 209bps YoY to 12.3% due to reduction in commodity prices, better realisations and improved capacity utilisation. • The company reported robust results in Q3FY24. Strong market position combined with softening of raw material costs, focus on cost optimization, and improved operational efficiency is expected to aid margins in future. Therefore, we reiterate our BUY rating on the stock with a rolled forward target price of Rs. 11,809 based on 24x FY26E adjusted EPS.

Topline driven by UV volume growth

MSIL’s revenue in Q3FY24 increased 14.4% YoY to Rs. 31,860cr owing to improved sales volume and better realisations in the market. Domestic sales rose 6.3% YoY to 429,422 units and contributed 86% of the total volume. Such growth was backed by strong growth in utility vehicles (up 59.6% YoY). Vans grew (24.8% YoY). The small car segment continued to remain muted and passenger vehicles sales volume fell 16.0% YoY. Aided by a strong SUV lineup, the company’s market share in SUV segment improved to ~21%. Highest ever annual sales at over 269,000 units for CY23. In Q3FY24, Highest ever quarterly export sales were reported by company at 71,785 units (up 15.8% YoY). MSIL maintained its position as the largest exporter of passenger vehicle from India

Muted prices continue to aid margins

EBITDA rose 37.9% to Rs. 3,908cr primarily due to fall in commodity prices, refined capacity utilisation and better realisations. Further, focus on cost optimization and improving operational efficiency helped margins growth. EBITDA margin also increased by 209bps YoY to 12.3%. The company reported profit after tax with a growth of 33.1% YoY to Rs. 3,130cr.

Key concall highlights

• MSIL concluded Suzuki Motor, Gujarat by receiving votes of over 98% shareholders in favour of the proposition.

• The highest ever quarterly sales of CNG vehicles at over 127,000 units were witnessed in Q3FY24.

• MSIL for the first time recorded a landmark annual sale of 2 million units in calendar year 2023. Further, the company recorded the highest ever volume, sales and net profit on a 9-month basis.

Valuation

MSIL recorded the highest ever sales, volume and profit on a 9-month basis in the quarter ended December 2023 backed by robust volume growth. With the company focusing on improving operational efficiency and on cost optimization, margins are expected to improve in the near future. Improvement in market share, strong market holding, and dampened input prices are expected to boost performance in the near term. We, therefore, reiterate our BUY rating on the stock with a rolled forward target price of Rs. 11,809 based on 24x FY26E adjusted EPS.

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