Buy Maruti Suzuki India Ltd For Target Rs 16,200 By Emkay Global Financial Services Ltd
MSIL reported a steady Q4, with revenue up 28% YoY led by 12% YoY volume growth and ASPs up 4% QoQ. EBITDAM was down by 60bps QoQ at 11.7% vs 12.4% in Q3FY26 (adjusted for a one-off Rs5.9bn/120bps labor core impact) due to 70bps gross margin (GM) contraction. PAT missed estimates due to lower-than-expected other income (MTM loss: Rs7.5bn). MSIL targets 10% FY27 domestic PV volume growth (vs 5-7% for the industry, per SIAM) aided by strong underlying demand and consumer sentiment despite the West Asia war (reflected in the 190k unit orderbook, 130k of which is from small cars), low channel inventory (12 days, as of FY26-end), and faster ramp up of 2 new plants (250kpa units each) given strong demand (with limited margin impact in the ramp-up phase). Commodity pressure is seen sustaining (80bps EBITM hit in Q4), but multiple mitigation measures are underway; per the mgmt, there is further headroom for improvement in ASPs from Q4FY26, led by higher-end models/rising EV mix. MSIL targets gaining PV market share led by a healthy pipeline (7 new SUVs, multiple EVs by FY30). FY27E/28E EPS is unchanged; maintain BUY with TP of Rs16,200 at 28x FY28E core PER. We favor 2W/CV OEMs over PVs, on a similar demand trajectory, albeit better pricing flexibility, amid commodity pressures.
In-line operational performance; PAT miss due to lower other income
Revenue rose 28% YoY to Rs524.5bn on 12% YoY volume growth and ASPs up 4% QoQ. EBITDA rose 27% YoY to Rs61.6bn. EBITDAM was down by 60bps QoQ at 11.7% (vs 12.4% in Q3, adjusted for a Rs5.9bn one-off from labor code hit). Adj PAT was down 7% YoY at Rs35.9bn, 12%/4% below street (Rs40.9bn)/our (Rs37.9bn) estimate on lowerthan-expected other income (Rs7.5bn hit from MTM impact on hardening bond yields).
Earnings call KTAs
1) Underlying demand is strong, reflected in MSIL’s pending orderbook of 190k units as of Mar-26 (130k units of small cars) and low channel inventory at 12 days.
2) MSIL targets 10% FY27 domestic PV volume growth vs SIAM's industry estimate of 5-6%.
3) While cost pressures continue, multiple mitigation levers are in place and impact should normalize, subject to improving macros.
4) Positive EBIT drivers: lower employee cost (100bps), lower discounts (50bps), forex (30bps), favorable fixed cost (50bps). Adverse EBIT drivers: commodity (80bps), new model expenses (60bps), higher other expenses including CSR/R&D seasonality (20bps). MTM bond yield impact of Rs7.5bn in Q4FY26 (46bps).
5) Some startup costs expected from the 2 new plants, but strong demand and economies of scale should absorb the impact. 5) Discounts fell 0.5% in Q4FY26. Per the mgmt, there is further headroom for rise in ASPs from Q4FY26 via upper-segment models/growing EV mix.
6) Amid a volatile global situation, MSIL aims to sustain the FY26 exports volume of 448k units (up 35% YoY) as it monitors the situation.
7) MSIL is focusing is on improving PV market share, led by a healthy pipeline including 7 additional SUVs by FY30 and multiple EV launches.
8) FY27 capex guidance: Rs140bn
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