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Financial Performance:
Maruti Suzuki India Ltd. reported a mixed set of numbers for Q1 FY24. Revenue (slight beat) grew by 22% YoY led by higher sales volumes (up 6% YoY) and higher average selling price (up 15% YoY) on the back of a richer product mix SUV (~25% of total sales mix in Q1 FY24 versus 17% in Q1 FY23).
On a sequential basis, revenue grew 1%, led by higher ASP (up ~3.5% QoQ) and was only partly offset by lower sales volume (down 3%). Ebitda (missed estimates) grew by 56% YoY but declined 11% QoQ due to a richer product mix, favorable forex impact offset by retention/retiral benefits to employees and higher other expenses.
Gross margins were up 180 bps/50 bps YoY/QoQ and beat our estimate by 30 bps. However, higher other expenses and employee costs led to a lower Ebitda margin at 9.2% versus our estimate of 9.9% (7.2%/10.5% in Q1 FY22/Q4 FY23).
Profit after tax (up 145% YoY but down 5% QoQ) beat our estimate by ~10% due to higher other income and lower interest expense.
Outlook:
Maruti Suzuki has completely refreshed its portfolio with the recent addition of Invicto (the only vehicle with Rs 20 lakh plus price point) to Jimny and Fronx launched earlier in Q4 FY23. The higher share of premium multi purpose vehicle/SUVs in the sales mix will drive the revenue/Ebitda/profit after tax growth in FY23- 26E.
Valuation and Recommendation:
Strong order book, higher share of premium SUVs, and compressed natural gas vehicles in the sales mix to improve the company’s ASP in FY24/25.
Furthermore, improved chip supplies and stable commodity prices to drive revenue/Ebitda/profit after tax compound annual growth rate of 14%/16%/16% from FY23-26E.
We maintain our ‘Buy’ rating on the stock and value it at 27 times price/earning of its June-25E earnings per share (roll forward from FY25 EPS).
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