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MSIL delivered better than expected performance on all fronts. Company delivered a 0.2% YoY growth on the top line front to Rs. 355.9 billion (vs CEBPL's estimated Rs.351.6bn) led by a 2.1% YoY increase in the average selling price (ASP) and a 1.9% YoY decrease in volume. YoY margin decline is attributed to higher RM cost. The operating margin declined on a yearly basis to 11.9% (vs CEBPL's est of 13.0%), showing a decline of 104bps YoY and - 80bps QoQ, resulting in EBITDA declining by 7.7% to Rs.44.2 billion (vs CEBPL’s est of Rs.47.8 billion). EBIDTA/vehicle declined by 5.9% to Rs.81,555/vehicle. The profit after tax (PAT) came at Rs.30.7 billion (- 17.9% YoY) (vs est. Rs.38.7bn). PAT lower than estimations due to higher tax on account of one-time deferred tax provision.

* Working on new models with higher safety features: MSIL has been synonymous with fuel-efficient, budget-friendly family cars for years, often achieving this by keeping safety features minimal and curb weight low. However, over the last two to three years, customer preferences have shifted towards vehicles with more features and stricter safety standards. With the introduction of Bharat NCAP norms, MSIL is poised to manufacture cars that exceed these safety requirements. This commitment to safety is expected to bolster MSIL's market share in the coming years. In addition, MSIL is ramping up production capacity at its Kharkhoda plant, with the first phase—250,000 units. The completion is on track and the company expects to commission it within the end of this financial year. This expansion will enable MSIL to manage various powertrain technologies, including electric vehicles, hybrids, CNG, and ethanol, all under one roof. The move will unlock operational and scale efficiencies, solidifying MSIL's position as a leader across the powertrain spectrum in the passenger car segment.

* Promising outlook for export led by higher SUV share: The company has commenced export of its made-in-India Fronx SUV to Japan. Fronx will be the first SUV from Maruti Suzuki to be launched in Japan. In exports, the company continued to maintain a healthy growth in sales volume. The company commanded nearly 40% share of India's total passenger vehicle exports in Q2FY25. To support future volume, the company is looking to expand the overall capacity to 4mn/p.a. unit by 2030-31 (Domestic and Export market). Driven by strong demand in the export market, the expansion of the network, the inclusion of new products, and geographic expansion the company to deliver healthy export volume growth in the coming years, with the company aiming to achieve sales around 300k units in FY25.

* View and Valuation: We remain positive on long term growth story led by: 1) a large distribution network (3,925 sales outlets, 5000 service touch-points); 2) largest low emission product portfolio offering; 3) new/refresh launches in the Hybrid/ SUV and EV segment; 4) capacity expansion to (4mn units by 2030-31), 5) growing export volume (addition of newer model from UV segment) and increasing Nexa distribution network in rural market. We value the stock based on Sep-FY27E EPS to arrive at a TP of Rs. 12,215 with the BUY rating (24x Sep-FY27E).

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