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Steady top-line growth, margin improves.

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.

• In Q2FY24, MSIL’s standalone revenue grew a significant 24.5% YoY to Rs 35,535cr, driven by a sharp rise in utility vehicles (UV) volume.

• EBITDA also surged 72.8% to Rs. 4,784cr and EBITDA margin widened 380bps YoY to 13.5% on account of a reduction in commodity prices, improvement in cost management, better capacity utlisation and realisation.

• Softening commodity prices and cost efficiencies, coupled with the upcoming festival season, should drive demand for vehicles and boost the company’s growth in the near term. Hence, we reiterate our BUY rating on the stock with a revised target price of Rs. 11,427 based on 25x FY25E adjusted EPS.

Uptick in UV volume drove sales

MSIL’s revenue in Q2FY24 increased 24.5% YoY to Rs. 35,535cr owing to a surge in sales volume and higher selling prices. The average selling price grew 15% YoY. Domestic sales rose 6.3% YoY to 482,731 units, because of a massive 117.5% YoY jump in UV volume to 180,066 units. Passenger vehicles also witnessed an ~8% YoY growth, exceeding the industry’s growth of around 5%. The company’s market share in the SUV segment rose to an impressive 23.3% (vs. ~ 20% in Q1FY24) thanks to its strong product lineup. Export sales volume grew 9.7% YoY to 69,324 units. Passenger vehicles and SUV models — especially the Grand Vitara and Fronx — were the key to exports growth. After eight quarters, the company has controlled its production volume loss with sufficient supply of semiconductors.

Softening of input prices led to margin expansion

EBITDA rose 72.8% to Rs. 4,784cr on account of lower commodity prices, improvement in cost management, better capacity utlisation and realisation. EBITDA margin also expanded 380bps YoY to 13.5%. In addition, the reported profit after tax also surged 80.3% YoY (+49.6% QoQ) to Rs. 3,717cr, with higher non-operating income in the quarter.

Key concall highlights

• MSIL is integrating Suzuki Motor Gujarat (SMG), the Gujarat plant, enabling the company to operate in multiple locations and manufacture vehicles with powertrain technology.

• The company has started exporting Jimny 5-Door to Latin America, the Middle East and Africa. Additionally, it aims to triple its total export volume to 750,000- 800,000 units by FY2030-31.

• MSIL’s order book in the quarter stood

Valuation

MSIL registered strong quarterly earnings, with improved sales volume and margins. The company’s efforts to optimise costs, improve capacity utilisation and take advantage of softening commodity prices should support future earnings potential. Additionally, with the semiconductor supplies easing and a surge expected in demand for vehicles during the upcoming festival season, the company’s sales and margin should get a boost in the near term. We, therefore, reiterate our BUY rating on the stock with a revised target price of Rs. 11,427 based on 25x FY25E adjusted EPS.

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