Maruti Suzuki Q1 Results Review - Strong Traction For New Launches To Continue: Prabhudas Lilladher

Prabhudas Lilladher Report

Maruti Suzuki India Ltd.’s Q1 FY24 revenues were marginally higher than our (1%) and consensus estimates (2%), however, higher employee costs and other other expenses led to a miss on Ebitda margins (10% versus Bloomberg estimate: 10.2%; our estimate: 10.5%) (which could not be offset by higher gross margin).

Ebitda margins expanded by 280 basis points YoY, but was lower QoQ on lower volumes, higher employee and operating expenses.

Chip shortage impacted 28,000 units and Maruti Suzuki noted that situation is largely normalised now.

Going ahead, Maruti Suzuki hopes to outgrow passenger vehicle industry’s growth led by its SUV portfolio, increased traction from compressed natural gas models and servicing stronger orderbook.

We expect Maruti Suzuki to partially re-coup lost market share through faster growth than the industry in utility vehicle and multi utility vehicle segment (for Maruti Suzuki we build its UV and MUV mix to increase to ~30% in FY24 versus ~21% in FY23).

Maruti Suzuki is well placed to strongly benefit from-

1. market share gains and ASP increase coming from higher mix of the new UV portfolio,

2. 260 bps increase (over FY23-25E) in Ebitda margins on the back of commodity cost softening, cost control, operating leverage and higher UV share and

3. rural revival.

We marginally change our earnings per share estimates for FY24E by -1.5%, given largely inline numbers and reiterate ‘Buy’ with an unchanged target price of Rs 11,100 at 25 times March-25E EPS.

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