maruti suzuki india limited absolute : long · 2017-09-05 · maruti suzuki india limited (msil) is...

August 31, 2017 Analyst: Ashutosh Tiwari (+91-8128694112/[email protected]) of 30

Before reading this report, you must refer to the disclaimer on the last page.

Maruti Suzuki India Limited Absolute : LONG

Relative : Overweight

Initiating Note Regular Coverage 13% ATR in 16 Months

From Cost Leader to Product Leader!! - Initiate with LONG Auto

© 2017 Equirus All rights reserved

Rating Information

Price (Rs) 7,700

Target Price (Rs) 8,993

Target Date 31st Dec'18

Target Set On 31st Aug'17

Implied yrs of growth (DCF) 20

Fair Value (DCF) 8,641

Fair Value (DDM) 3,014

Ind Benchmark -

Model Portfolio Position NA

Stock Information

Market Cap (Rs Mn) 2,326,107

Free Float (%) 43.79 %

52 Wk H/L (Rs) 7920/4765.3

Avg Daily Volume (1yr) 602,410

Avg Daily Value (Rs Mn) 3,721

Equity Cap (Rs Mn) 1,510

Face Value (Rs) 5

Bloomberg Code MSIL IN

Ownership Recent 3M 12M

Promoters 56.2 % 0.0 % 0.0 %

DII 11.8 % 0.0 % -1.8 %

FII 25.0 % 0.0 % 1.4 %

Public 7.0 % 0.0 % 0.4 %

Price % 1M 3M 12M

Absolute -0.6 % 6.8 % 52.4 %

Vs Industry 2.5 % 8.7 % 44.7 %

Tata Motors -15.3 % -20.9 % -30.0 %

M&M -4.2 % -5.1 % -6.4 %

Standalone Quarterly EPS forecast

Rs/Share 1Q 2Q 3Q 4Q

EPS (17A) 49.2 79.4 57.7 56.6

EPS (18E) 51.5 63.6 65.3 69.9

4Ws now command high aspirational value among India‟s rising middle class. This

along with low 4W penetration in the country should keep industry growth close to

double digits over the next five years. Maruti Suzuki India Limited (MSIL) is best

placed in this scenario due to its large sales network, lower service cost and higher

resale value. Through NEXA, ARENA and revamped True Value formats, the company

intends to enhance customer experience and provide best-in-class services. We

expect MSIL‟s volumes to grow at an 11% CAGR over FY17-FY20 driven by its

successful new models. Driven by structural growth drivers, we expect the stock to

trade at premium valuations. We forecast 16% EPS CAGR over FY17-FY20E. Initiate

coverage with LONG and a Dec‟18 TP of Rs 8,993 set at 30x Dec‟18 EPS. Largest dealership network + high resale value + lower service cost = competitive

edge: Due to its large network, MSIL is in an ideal position to capitalize on India‟s 4W

growth opportunity. Over FY11-FY17, the company expanded its sales network at a

16% CAGR, from 933 to 2,312 outlets, and plans to expand this further to 3,500 over

the next few years. About ~30% of its sales are generated through the exchange of

old cars, which the company promotes through its True Value format, outlets of

which have grown at a 24% CAGR over FY12-FY17. MSIL‟s large reach gives it a

distinct advantage in providing low-cost services. Successful new launches to help deliver industry-leading growth: Over the last

two years, MSIL has caught up well with changing consumer preferences towards

aggressive styling, as seen by the success of Baleno, Vitara Brezza and new Dzire. Its

new fifth generation A-platform (used for Ignis and Baleno RS) has helped cut down

vehicle weight by up to 15%, leading to better fuel efficiency. Large volumes enable

MSIL to offer more features at a lower cost. Launch of the new Swift by CY17-end

should help keep up the volume momentum. Expect 11% volume CAGR over FY17-FY20E driven by mid-to-premium cars, leading

to better value growth: Volume growth will be driven by compact cars and small UVs.

With higher growth in premium cars, we expect an increase in ASPs as well. Discounts

are also likely to be lower due to waiting periods, and will keep margins healthy. Structural growth story; waiting period on key models to help trade at premium

valuations: We believe MSIL is a structural growth story and waiting periods on some

of its large-selling models will help it trade at premium valuations, similar to what

we saw in case of Eicher Motors in the past. Initiate coverage on MSIL with LONG.

Showrooms Nexa

NEXA Service

New True Value

ARENA

Models Baleno Brezza Dzire

Ignis

2015 2016 2017

Transformation to provide better Experience to Customers

Consolidated Financials

Rs. Mn YE Mar FY17A FY18E FY19E FY20E

Sales 680,850 787,761 908,955 1,074,383

EBITDA 103,581 111,494 137,645 161,831

Depreciation 26,039 27,903 30,048 32,367

Interest Expense 894 313 0 0

Other Income 22,896 22,362 24,160 28,869

Reported PAT 75,100 76,336 95,524 114,791

Recurring PAT 74,865 75,619 95,524 114,791

Total Equity 370,751 418,008 477,184 550,174

Gross Debt 4,836 0 0 0

Cash 291,741 329,844 393,312 473,675

Rs. Per Share FY17A FY18E FY19E FY20E

Earnings 247.8 250.3 316.2 380.0

Book Value 1,227 1,384 1,580 1,821

Dividends 75.0 80.0 100.0 115.0

FCFF 38.9 239.1 330.4 404.4

P/E (x) 31.1 30.8 24.4 20.3

P/B (x) 6.3 5.6 4.9 4.2

EV/EBITDA (x) 19.8 18.0 14.1 11.5

ROE (%) 22 % 19 % 21 % 22 %

Core ROIC (%) 57 % 60 % 76 % 94 %

EBITDA Margin (%) 15 % 14 % 15 % 15 %

Net Margin (%) 11 % 10 % 11 % 11 %

Maruti Suzuki India Ltd. Absolute – LONG Relative – Overweight 13% ATR in 16 Months


Company Snapshot

How we differ from Consensus

- Equirus Consensus % Diff Comment

EPS FY18E 250.3 270.7 -8 % We are below consensus in FY18 as we

believe that increasing RM prices will

hurt margins, price increases likely with

a lag

FY19E 316.2 320.9 -1 %

Sales FY18E 787,761 786,673 0 %

FY19E 908,955 903,291 1 %

PAT FY18E 76,336 82,463 -7 %

FY19E 95,524 97,184 -2 %

Key Investment arguments:

Largest dealership network, high resale value and lower service cost are key

advantages

Success of new launches has put MSIL in a strong position to deliver industry-

leading growth

Volumes to grow at 11% CAGR over FY17-FY20E driven by mid-to-premium

segment cars, leading to better value growth

Structural growth story; waiting period on key models to help stock trade at

valuation premiums

Key estimates:

FY16 FY17 FY18E FY19E FY20E Volumes ('000) 1,429 1,569 1,749 1,931 2,178

yoy change 11% 10% 11% 10% 13%

ASP (Rs/car) 402,579 433,729 450,527 470,610 493,395

yoy change 4% 8% 4% 4% 5%

Sales (Rs mn) 575,381 680,348 787,761 908,955 1,074,383

yoy change 15% 18% 16% 15% 18%

EBITDA Margin 15.4% 15.2% 14.2% 15.1% 15.1%

EBITDA (Rs mn) 88,844 103,530 111,494 137,645 161,831

Key Triggers

Waiting period on new model launches

Monthly production volumes

Sensitivity to Key Variables % Change % Impact on EPS

Revenue 5 % 4 %

EBITDAM 1 % 5 %

- - -

DCF Valuations & Assumptions

Rf Beta Ke Term. Growth Debt/IC in Term. Yr

6.7 % 0.8 11.5 % 2.5 % 0.0 %

- FY18E FY19E FY20-22E FY23-27E FY28-32E

Sales Growth 16 % 15 % 15 % 10 % 8 %

NOPAT Margin 8 % 9 % 9 % 9 % 9 %

IC Turnover 7.64 8.92 10.89 10.89 10.89

RoIC 60.0 % 76.1 % 99.2 % 101.0 % 99.8 %

Years of strong growth 1 2 5 10 15

Valuation as on date (Rs) 3,142 3,737 4,780 6,118 7,113

Valuation as of Mar'18 3,633 4,322 5,528 7,074 8,225

Based on DCF, assuming 20 years of 13% CAGR growth and 87% average ROIC, we derive

31st Dec‟18 fair value of Rs 8,641.

Company Description:

MSIL is the leading passenger vehicle manufacturer in India with 47.4% of domestic

market share. The company was established in 1981 as a JV between the Government of

India and Suzuki Motor Corporation (SMC), Japan. Today, it is SMC‟s largest subsidiary in

terms of volume of production and sales. SMC owns 56.21% equity stake in the company.

MSIL‟s operational structure consists of manufacturing sites at Gurugram and Manesar

with an installed capacity of 1.55mn vehicles per year. It also sources vehicles from

SMC‟s new plant in Gujarat, India.

Comparable valuation Mkt Cap

Rs. Mn.

Price

Target

Target

Date

EPS P/E BPS P/B RoE Div Yield

Company Reco. CMP FY17A FY18E FY19E FY17A FY18E FY19E FY17A FY18E FY17A FY18E FY19E FY17A FY18E

Maruti Suzuki LONG 7,700 2,326,107 8,993 31st Dec'18 247.8 250.3 316.2 31.1 30.8 24.4 1,227.3 5.6 22 % 19 % 21 % 1.0 % 1.0 %

TATAMOTORS NA 436 1,389,519 NA NA 22.0 29.3 44.3 17.1 12.9 8.5 30.6 6.0 10 % 56 % 45 % 0.0 % 0.9 %

M&M NA 1,409 874,995 NA NA 67.4 76.5 92.7 19.9 17.6 14.5 143.6 5.8 27 % 26 % 21 % 1.0 % 0.8 %



Investment rationale

Largest dealership network + high resale value + lower service

cost = competitive edge

Largest network in Indian passenger car market, and remains in expansion mode: As

the market leader and one of India‟s oldest passenger companies, MSIL has the largest

dealer network and continues to expand it. Over FY11-FY17, the company grew its

dealership network at a 16% CAGR to 2,312, where the maximum increase happened in

smaller formats such as sub-dealers, which are essentially an extension of main

dealerships, to penetrate semi-urban and rural areas. MSIL further plans to expand its

sales network to 3,500 over next few years. The company also introduced its premium

format NEXA during FY16, with the number of such outlets at 252 as of Mar‟17.

Exhibit 01: MSIL dealership network: Significant ramp-up

Source: Company, Equirus Securities

NEXA brings the missing ‘premium tag’ to MSIL: Some of MSIL‟s most successful cars

such as Maruti 800 or Alto were in the entry segment, and therefore the company was

typically perceived as a small car company. MSIL was also traditionally viewed as a weak

player in the premium segment, which was dominated by Honda and Hyundai. While Ciaz,

MSIL‟s 2014 launch, did well in the sedan segment, management wanted to create a

plusher buying experience for premium segment buyers. The company thus started its

new premium dealership NEXA in FY16, which should have 350 outlets by FY19-end.

Exhibit 02: NEXA vs. traditional dealership

Baleno, S-Cross, Ciaz and IGNIS currently sold through NEXA: MSIL first launched

S-Cross through NEXA but it wasn‟t successful due to its higher pricing and not-so-

aggressive looks versus other segment options such as Hyundai Creta. Baleno however

was a huge success due to its aggressive and youthful looks, features and pricing. MSIL

later launched Ignis, its compact SUV segment offering, also through the NEXA platform.

Ciaz, its sedan segment offering, was launched through traditional dealerships before

NEXA was formed; however, its new facelift version was launched through NEXA. Vehicles

sold through NEXA contributed 11% of MSIL‟s domestic sales in FY17, with this proportion

likely to increase to 20% by FY20.

681 802 933 1,100 1,204 1,310

1,619 1,820

2,020

127

252

681 802

933 1,100

1,204 1,310

1,619

1,947

2,312

0

500

1,000

1,500

2,000

2,500

FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Traditional Outlets Nexa CV Total Network



Redefining service through NEXA: After providing a premium quotient to car purchases

though NEXA, MSIL also now plans to offer premium service experience to customers.

Until now, cars purchased from NEXA were serviced through normal MSIL dealerships.

However, the company will now come up with exclusive service stations for NEXA

customers, the first of which was recently opened at Gurugram. Following are some key

differentiating factors of the NEXA service:

Workshops have been upgraded to plush and premium service centers carrying

forward the NEXA‟s signature monochromatic theme.

Customers will be provided with personalized services by dedicating a service

manager as a central point of contact throughout the car purchase journey.

For the first time in India, NEXA comes with the initiative of a „health card‟ to

indicate the vehicle health on various parameters and help customers make

informed decisions on jobs to be executed on their vehicle.

Technology would be leveraged to provide online service appointment facility

and pre-allocation of customer bays with advanced diagnostic features.

A premium lounge area with digital display has been set up for customers to

view live video of the car being serviced.

NEXA service will be expanded in phases and MSIL expects 300 NEXA service

workshops to be operational by 2020.

Transforming existing network through Maruti Suzuki ARENA:

Plans to revamp existing network through ARENA, which will have modern look

Targets to set up 80 ARENA stores by Mar‟18 and entire exiting network will

move to the same concept over next 3-5 years

Digital integration will be a key differentiator: ~75% of car buyers in India

research online before actual purchase. At ARENA, the customers who register

on website can explore entire product portfolio through interactive product

vision touch screens at the showroom.

Customers can also electronically personalize their cars by a mix and match of

accessories.



Focus on increasing rural presence; villages covered increase>3x over FY13-FY16:

MSIL, with the largest dealer and sub-dealer network in India, saw increasing presence in

villages as a natural extension. The company sold vehicles in 44k villages in FY13, which

increased to 125k in FY15 and to 144k in FY16. The contribution of rural sales to total

volumes has increased from 20% in FY11 to 33% in FY17 (Exhibit 03).

Exhibit 03: Rural sales contribution in total domestic volumes (in ‘000)


Expansion in used-car network to lead to better new-car sales as well: MSIL‟s used-car

network, True Value, almost tripled over FY12 to FY17 from 409 to 1184 outlets. Sales

through exchange for the company also increased from 17% in FY11 to 30% in FY16. Our

channel interactions indicate that the average length of new car ownership has reduced

over the past few years, which increases the importance of used-car market.

Exhibit 04: Expansion of True Value format: Increasing presence in used-car market


Reviving the True Value format: MSIL to offer one-year warranty, free aftersales

service similar to new cars

MSIL is revamping its True Value operations to offer buyers of pre-owned cars

the same experience as new car buyers.

The company plans to set up 150 standalone True Value outlets across India by

Mar‟18.

The new outlets will have advanced infrastructure with a larger display area for

a variety of pre-owned cars.

These outlets will be digitally integrated through a portal so that customers can

access specifications, features and ratings on all cars available at True Value

outlets nationwide. The seamless digital integration would enable customers to

select cars online and visit the relevant True Value outlets for test drives.

To improve transparency, cars would be selected, refurbished and issued the

„True Value certification‟ only after evaluating it on 376 check points. A

certified car will have a one-year warranty and free aftersales service similar to

new cars.

72

151

228 245

291

336

414 451

477

10%

17%

20%

24%

28%

32%

35% 35%

33%

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

100

200

300

400

500

600


Rural Sales as % of domestic volumes

409 450 600

867 1,007

1,184

17% 17%

22% 23%

27%

30% 30%

0%

5%

10%

15%

20%

25%

30%

35%

0

200

400

600

800

1000

1200

1400

FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

True Value Outlets % of Sales derived through exchange



MSIL’s network, brand name influence cost-conscious buyers in smaller cities: 4Ws

command high aspirational value even in smaller cities, and the cost of servicing and

resale value are major factors, apart from features, which influence purchase decisions.

Due to MSIL‟s large service network (3,305 as of Mar‟17 with likely expansion to 5,000

over next few years), servicing is much easier for its cars with even the neighborhood

mechanic repairing small faults, keeping servicing costs low. In case of other car players

(apart from Hyundai, MM and Tata) servicing cost is higher due to lower number of

service outlets & also as dealers try to make more money through service in absence of

high volumes. A larger population of MSIL vehicles on road also helps in pushing up resale

values higher than competition. In most small cities, MSIL becomes the first choice by

default due to the above reasons.

Low servicing cost attracts potential buyers: Our channel checks indicate that servicing

cost of cars is an important purchase consideration among buyers. We thus compared the

servicing cost of cars by different OEMs in the compact segment. Our analysis indicates

that MSIL, Hyundai and Honda cars have the lowest servicing cost per year, while

Volkswagen‟s servicing cost is on the higher side (Exhibit 05). Servicing is a regular

income source for a dealer and therefore MSIL, Hyundai and Honda dealers benefit from

higher volumes vs. OEMs having a smaller market share.

Exhibit 05: MSIL, Hyundai and Honda have lowest servicing cost/year (in Rs)

Source: Dealers, Equirus Securities

MSIL, Hyundai and Honda command resale value premium due to larger vehicle

population: We interacted with a few used-car dealers to get a sense of resale value of

cars after 3-4 years of usage. Our interaction indicates that MSIL cars have the highest

resale value compared to other OEMs; however, the difference between MSIL, Hyundai

and Honda is quite narrow. OEMs like Tata Motors and Volkswagen relatively fetch very

low value. Resale value of cars significantly influences purchase decisions given that the

ownership tenure of first owners has come down over the last few years.

0

4,000

8,000

12,000

MSIL Swift MSIL Dzire Hyundai i10 Hyundai i20 Honda Amaze Volkswagen Polo



Successful new launches to help MSIL deliver industry-leading growth

Baleno and Vitara Brezza outshine due to exterior styling: In the mid segment, MSIL

had lagged behind Hyundai in terms of aggressive styling, a key reason behind the success

of i20. But with Baleno, MSIL went a step ahead of competition on the styling front. One

of the reasons for S-Cross not doing too well in the market was its looks vis-à-vis Hyundai

Creta in the same segment, but with Vitara Brezza, MSIL went ahead of the curve. New

Dzire launched during May‟17 has also got a good response due to its looks and features.

Baleno and Brezza – Aggressive, youthful look a key reason for success

Ignis and new Dzire

Economies of scale gives edge over peers in offering better features such as AGS at

aggressive pricing: Over the past three years, MSIL has come up with many new models,

which have kept up its sales momentum and helped it gain market share. Celerio,

launched in 2014, was a breakthrough model which offered first-of-its-kind automatic

gear shift (AGS) in the segment, providing riding comfort in heavy city traffic.

Considering the success of AGS in Celerio, MSIL offered the same for its entry segment

car Alto K10 as well. Even in its new model Ignis, 27% of sales come from AGS, which is

offered in variants Delta and Zeta, and recently in top trim Alpha variant as well.



Feature-rich Baleno at aggressive pricing receives overwhelming response: MSIL‟s

Baleno came as a feature-rich car to take on Hyundai i20 and Honda Jazz (Exhibit 06), its

key competitors in the segment. MSIL stressed a lot on safety features and all variants of

the car were provided with anti-lock braking system (ABS), dual air bags and electronic

break-force distribution (EBD) systems. Baleno also features front and rear LED lighting

and multimedia console like S-Cross, giving it a premium look. Baleno was launched

through the company‟s new premium dealership, NEXA. Demand for the car remains

strong with a waiting period of 18 weeks. By keeping control on car weight, Baleno also

offers best-in-class fuel efficiency. We believe that aggressive pricing along with features

has helped Baleno garner strong demand. Despite other offerings by MSIL in the compact

segment, Baleno clocked volumes of 120k in FY17 vs. 126k by Hyundai i20.

Exhibit 06: Base model comparison: Maruti Baleno, Hyundai i20,Honda Jazz

Particulars MSIL Baleno Hyundai i20 Honda Jazz

Engine 1.2L VVT 1.2L VTVT 1.2L iVTEC

CC 1197cc 1197cc 1198cc

Power (bhp@RPM) 83 @ 6000 82 @ 6000 89@ 6000

Torque (Nm@RPM) 115 @ 4000 115 @ 4000 110 @ 4800

Length 3995mm 3985mm 3955mm

Width 1745mm 1734mm 1694mm

Height 1500 mm 1505mm 1544mm

Fuel Petrol Petrol Petrol

Mileage 21.4 kmpl 18.6 kmpl 18.7 kmpl Price (Ex-Showroom

Delhi) Rs 5.26lacs Rs 5.32lacs Rs 5.89lacs

Airbags 2 (driver and co-

driver) 2 (driver and co-

driver) 2 (driver and co-

driver) ABS Yes No No

Seat belt warning Yes Yes Yes Electronic Break Force

Distribution Yes No No

Central Locking Keyless With Key No Outside Rear View

Mirror Body Coloured Black Black

Source: Carwale, Equirus Securities

Vitara Brezza helps MSIL attain leadership in fastest-growing small UV segment: Small

UV is the fastest growing segment of India‟s 4W market as the sporty look of vehicles

along with good ground clearance has attracted customers. Small UVs are primarily urban

SUVs for the middle class who don‟t want to invest a lot of money but still want the feel

of a SUV. The segment was first created by Renault Duster and later grown by Hyundai

Creta. Vitara Brezza was an instant success due to its looks, price point and features,

and helped MSIL become the number one player in compact SUVs.

Good line-up of new models and facelifts in 2017: In May‟17, MSIL launched a new

Dzire. Before that, Baleno‟s turbo-charged variant Baleno RS was launched. MSIL plans to

launch a new Swift by the end of CY17.A strong launch pipeline should thus keep up

volume momentum for the company.

MSIL enhances fuel efficiency – a key purchase consideration - over last few years:

During Oct‟14, MSIL launched new Swift with 10% higher fuel efficiency, followed by new

Swift Dzire in Feb‟15 with 13% higher fuel efficiency. Over the last few years, MSIL has

worked on launching cars with better fuel efficiency and improving efficiency of existing

ones. Celerio diesel also offers best-in-class efficiency of 27.6kmpl. For Baleno, lower

weight has enhanced fuel efficiency. MSIL has also come up with hybrid versions of Ciaz

and Ertiga with a new technology, Smart Hybrid Vehicle by Suzuki (SVHS); these Ciaz and

Ertiga variants have 7% and 18% higher fuel efficiency versus their earlier models,

respectively.

Exhibit 07: Improvement in fuel efficiency (Km/litre) of MSIL’s cars

Model Old model New model Change (%)

Swift 18.60 20.44 10%

Swift (diesel) 22.90 25.20 10%

Dzire 19.10 20.85 9%

Dzire (diesel) 23.40 26.59 14%

Alto K10 20.92 24.07 15%

Ciaz* 16.50 20.73 26% Source: Company, Equirus Securities

*Ciaz compared with earlier model SX4



Suzuki’s 5th generation platform – Total Effective Control Technology – makes vehicles

lighter, increasing fuel efficiency: A new vehicle platform Total Effective Control

Technology (TECT) by MSIL has mass-optimized automotive body structures, thus lowering

kerb weight. The technology has made vehicles up to 15% lighter, while also making them

stronger and safer. Reduction of weight has increased fuel efficiency and emission

performance. MSIL‟s two new models launched in FY17, Ignis and Baleno RS, were built

on the TECT platform. Baleno RS, for instance, is nearly 90 kg lighter than a conventional

platform and is therefore more fuel efficient.

Ignis, first vehicle launched on TECT platform, has better safety features: Ignis is

compliant to pedestrian safety, side-impact and offset crash regulations. Additional

safety features in the car include dual airbags, ABS with EBD systems, and ISOFIX

Anchorage (a child seat restraint system). It has fuel efficiency of 20.89kmpl in petrol

and 26.80kmpl in the diesel variant. Ignis is the first vehicle in MSIL‟s portfolio to be

equipped with two-pedal automatic manual transmission in both petrol and diesel

variants, along with the extension of smartphone connectivity using Android Auto in

addition to Apple CarPlay.

Baleno RS – launched with one-litre booster jet engine having 20% more power

delivery: A1.0L booster direct injection turbo-charged engine offers 20% more power and

30% more torque compared to 1.2L naturally aspirated engine, peak torque is available

for a wide range of engine Revolutions Per Minute (RPM). Its direct-injection system

allows enhanced control over fuel injection directly into the combustion chamber,

resulting in better engine performance and lower CO2 emissions. It is compliant to future

regulations on pedestrian safety, side impact and offset crash. Advanced safety features

include dual airbags, ISOFIX Anchorage, seatbelts with pre-tensioners and force limiters,

disc brakes in all wheels, ABS and EBD, and driver-seat belt reminder buzzer.

Expect 11% volume CAGR over FY17-FY20E driven by mid-to-premium

segment cars, leading to better value growth

UVs to lead growth on new launches; growth in compact segment to remain strong:

With the success of Vitara Brezza, MSIL saw 107% yoy growth in the utility segment in

FY17. Vitara Brezza is currently having a waiting period of 21 weeks, and therefore

growth momentum in the segment is likely to continue. We believe growth in the

compact segment will also remain strong driven by Baleno and new Dzire. MSIL‟s mini car

segment is expected to see lower growth due to higher competition in the segment,

especially from Renault Kwid. The new Swift, which is likely to be launched by

CY17-end, should also help volume growth. Overall, we expect volumes to grow at 11%

CAGR over FY17-20E.

Exhibit 08: Domestic volume growth for MSIL: UVs to grow at fastest pace over FY17-

FY20E; mini segment growth to be lower

‘000

Source: Company, SIAM, Equirus Securities

1,171

1,305

1,444

1,642

1,859

2,108

-300

200

700

1,200

1,700

2,200

FY15 FY16 FY17E FY18E FY19E FY20E

Mini Compact Super Compact Mid Size Utility Vans



4Ws to outperform 2Ws due to lower penetration; 4Ws turning aspirational for youth:

4W penetration in India at 23 per 1,000 people is very low as compared to 76 in China,

which makes 4W growth trend secular. We believe increase in penetration will also be

supported by the rising inclination of youth towards cars after bikes (as against a house

for the previous generation). Even in smaller cities, car ownership is seen as an

increasing trend. We believe that with already improved penetration of 2Ws in India, 4Ws

will outperform 2Ws over the next 10 years.

Near-term taxi aggregator demand tepid, but to remain a strong driver ahead: OEMs

saw a sharp jump in sales to taxi aggregators over the last two years. MSIL sold ~65,000

cars to app-based cab aggregators in FY17, which formed ~4.5% of its total domestic

sales. Similarly for Hyundai, such sales formed ~6% of CY16 revenues as against 2% in

CY15. The fleet size of Ola and Uber is estimated at around 500k+. Ola is currently

operational in 110 cities and Uber in 29 cities, with both having aggressive expansion

plans. Over the last six months, taxi addition in aggregator‟s fleet had been slow due to a

decline in incentives offered by these companies and tax increases post GST. However,

considering the driving convenience these aggregators provide, we believe the share of

sales to these aggregators in total industry volumes will move up going ahead.

Gujarat plant to be ramped up to 0.5mn units by FY20E: MSIL‟s Gujarat plant has

started operations from Feb‟17. Phase I of the plant will have a total capacity of 0.25mn

units, which will be fully operational by FY19. In FY18, the plant is expected to

manufacture 0.15mn cars, with production of Baleno initially. Phase II of 0.25mn units

will commence operations from the later part of FY19 and be fully operational in FY20.

Existing plants in Haryana can produce 1.6mn units and are operating at full capacity;

therefore, the Gujarat ramp-up is crucial for MSIL‟s volume growth.

Expect MSIL to beat its sales target of 2mn cars/year by 2020: In its FY14 annual

report, management had articulated its vision to achieve 2mn units of sales in 2020. We

believe that MSIL will beat this goal as over the last two years, the company has launched

successful models in the UV and sedan segments, where its presence was limited earlier.

Last two years of performance and upcoming models put MSIL in a higher growth

trajectory than envisaged by management three years back.

Exhibit 09: Volumes to grow at 11% CAGR over FY17-20


Exhibit 10: Domestic sales to grow faster than exports (Rs bn)


1,133 1,006 1,051 1,054 1,171 1,305

1,445 1,644

1,862 2,111

138 127 120 101

122 124

124

115

127

140

1,271 1,134 1,171 1,155

1,292 1,429

1,569

1,760

1,988

2,251

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

-100

400

900

1,400

1,900

2,400

FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E

Domestic Export yoy change

331 319 390 396 453

530 620

742 874

1,030

35 37 46 41

46

48

60

56

61

67

366 356

436 437 500

577

680

798

935

1,097

0

200

400

600

800

1,000

1,200

FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E

Domestic Export



Profitability improves with successful new models, discounts to remain low due to

mix: The average discount per car for MSIL has come down from ~Rs 19,000 in FY16 to

~Rs 17,000 in FY17 with the success of its new launches Baleno, Vitara Brezza, Ignis and

new Dzire, which have a long waiting period due to strong demand; note that MSIL‟s few

other models also have some waiting period due to production constraints. Currently,

discounts are mainly offered on models like Alto and Wagon R. We believe with more

new launches/refreshes in 2017, discounts per car will remain at a lower level and could

even see a decline. Higher sales from compact and mid-size segments (as against the

entry segment earlier) should also lead to better blended realizations for the company in

the coming years.

Exhibit 11: Cost items & EBITDA/vehicle: Operating leverage, lower discounts to drive

EBITDA/car (in Rs ‘000)


Forecast: Key assumptions & sensitivity

We expect volumes to grow at 11% CAGR over FY17-FY20E, which would have been higher

in the absence of capacity constraints. Domestic volumes are expected to grow faster

than export volumes. EBITDA margins are expected to be soft in FY18 due to rising

commodity prices which will mostly be passed on, however some lag is possible. However

FY19 onwards, we expect margins to remain around 15% despite incremental volumes

coming from Gujarat (where plant depreciation will be captured above EBITDA), as no

discount is offered on new models.

Exhibit 12: Key assumptions

FY16E FY17 FY18E FY19E FY20E

Volumes ('000) 1,429 1,569 1,749 1,931 2,178

yoy change 11% 10% 11% 10% 13%

Domestic ('000) 1,305 1,445 1,628 1,805 2,045

yoy change 12% 11% 13% 11% 13%

Export ('000) 124 124 121 127 133

yoy change 2% 0% -3% 5% 5%

ASP (Rs/car) 402,579 433,729 450,527 470,610 493,395

yoy change 4% 8% 4% 4% 5%

Sales (Rs mn) 575,381 680,348 787,761 908,955 1,074,383

yoy change 15% 18% 16% 15% 18%

EBITDA Margin 15.4% 15.2% 14.2% 15.1% 15.1%

EBITDA (Rs mn) 88,844 103,530 111,494 137,645 161,831


Exhibit 13: Sensitivity of earnings to EBITDA margins

% change in EBITDAM -2% -1% 0% 1% 2%

Change in EBITDA 12% 6% 0% -6% -12%

Change in PAT 14% 7% 0% -7% -14%

Source: Equirus Securities

220 223 248 278 271 271 272 297 314 326 338

39 29 22

36 44 52 63 66

67 70 73

0

50

100

150

200

250

300

350

400

450

500

FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E

RM Employee cost Other Expense EBITDA



Investment risk & concerns

Delay in ramp-up of Gujarat plant: There is a long waiting period for some MSIL‟s

models due to capacity constraints at its existing plants; thus, production ramp-up

and quick execution of phase II is crucial. During FY17, MSIL was able to produce

more-than-rated capacity. We therefore believe management understands the

urgency and is working to ramp up the plant as quickly as possible. Understanding

these constraints, we have not gone aggressive in our volume growth estimates

and hence believe chances of an estimate cut are limited.

Yen appreciation can hurt margins due to component sourcing, royalty

payments: MSIL pays ~5.5% of sales to parent Suzuki Corp as royalty, which is

denominated in Yen. The company also sources some components from Japan

which constitute ~16% of sales. In case of Yen appreciation, these costs will go

up in INR terms, pressurizing EBITDA margins. However, the company is

consciously trying to bring down Yen denominated exposure, and even royalty on

jointly-developed new models such as Vitara Brezza are denominated in INR.

Spike in metal commodity prices a risk, but high waiting period on some best-

selling models makes pass-through easier: RM costs constitute ~69% of sales,

and therefore a spike in prices of key raw materials like steel and aluminium can

hurt margins. However, given the success of new models (with most

commanding long waiting periods), MSIL is in a better position to pass on the

impact to consumers.

Fire safety at company, supplier plants: During FY17, fire at two supplier

plants disrupted production at MSIL plants as well, forcing the company to

modify its maintenance schedule to minimize the impact. Learning from this

event, the company has undertaken an evaluation of most of its suppliers on fire

prevention and control. The gaps identified are being addressed.

Corporate governance

Over the past five years, MSIL‟s dividend payout ratio has gradually improved

from 11% to 24%. As per the new dividend policy, the board will keep dividend

payout within the range of 18-40%. Upper limit was increased from 30% earlier

to 40% in FY17.

As of Mar‟17, MSIL had 12 directors on its board, comprising two executive, six

non-executive and four independent directors. Mr. R C Bhargava is the

company‟s non-executive chairman.

Renowned firm Price Waterhouse is MSIL‟s auditor.

MSIL has been prompt in conducting con-calls post quarterly results and

releasing detailed presentations along with the same.

During FY17, MSIL‟s CSR spends went up by 14% to Rs 894.5mn and were in line

with a requirement of 2% of its average net profit of the previous three years.

One of the major corporate governance concerns highlighted by investors in the

recent past was that of MSIL informing the exchanges that the Gujarat plant

would be owned by parent Suzuki Corp. Later, due to strong resistance from

institutional investors, the company made some changes to the terms so as to

ensure that the final plan was more favorable. MSIL had to go for minority

voting, where they secured more than 80% of votes in favor of the deal vs. the

regulatory requirement of 50%.



Valuation

MSIL best placed to ride 4W penetration wave in India: We believe the 4W industry is

at a juncture where the 2W industry was around 10-12 years back, and can see a ~10%

volume CAGR over the next five years. MSIL, with its market leadership, large sales &

service network and cost advantage due to volumes, is in the best position to ride this

demand wave. The company has its finger on the pulse of customers, evident from the

success of its recently-launched models like Baleno, Vitara Brezza, and Dzire. We look at

MSIL as a multi-year CAGR story and initiate coverage on the stock with a LONG rating.

Valuations at higher end of trading range; set to sustain due to multi-year

opportunity: Over the last three years, MSIL has traded in a TTM P/E multiple range of

25x-30x vs. 15x-20x over FY09-FY14 due to (a) strong growth delivery, (b) strong

performance in the premium segment where it was traditionally weak and (c) huge

potential. We believe that multiples are likely to remain elevated on expectations of a

17% EPS CAGR over FY17-FY20. We initiate coverage on MSIL with a LONG rating and a

Dec‟18 TP of Rs 8,993 set at 30x Dec‟18 TTM EPS, at which stock would trade at 23x 1-

year forward EPS.

Exhibit 14: TTM P/E vs. 2 year forward EPS Growth

Exhibit 15:TTM P/B vs. 2 year forward RoE

Exhibit 16:TTM EV/EBITDA vs. 2 year forward EBITDA Growth

10x

15x

20x

25x

-30%-20%-10%0%10%20%30%40%50%

0

2000

4000

6000

8000

10000

12000

Mar/

04

Nov/04

Jul/

05

Mar/

06

Nov/06

Jul/

07

Mar/

08

Nov/08

Jul/

09

Mar/

10

Nov/10

Jul/

11

Mar/

12

Nov/12

Jul/

13

Mar/

14

Nov/14

Jul/

15

Mar/

16

Nov/16

Jul/

17

Mar/

18

Nov/18

EPS Growth

0%

5%

10%

15%

20%

25%

30%

0

2000

4000

6000

8000

10000

Mar/

04

Nov/04

Jul/

05

Mar/

06

Nov/06

Jul/

07

Mar/

08

Nov/08

Jul/

09

Mar/

10

Nov/10

Jul/

11

Mar/

12

Nov/12

Jul/

13

Mar/

14

Nov/14

Jul/

15

Mar/

16

Nov/16

Jul/

17

Mar/

18

Nov/18

RoE

2x

3x

4x

5x

6x

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

0

500000

1000000

1500000

2000000

2500000

3000000

Mar/

04

Sep/04

Mar/

05

Sep/05

Mar/

06

Sep/06

Mar/

07

Sep/07

Mar/

08

Sep/08

Mar/

09

Sep/09

Mar/

10

Sep/10

Mar/

11

Sep/11

Mar/

12

Sep/12

Mar/

13

Sep/13

Mar/

14

Sep/14

Mar/

15

Sep/15

Mar/

16

Sep/16

Mar/

17

Sep/17

Mar/

18

Sep/18

Mar/

19

4x

8x

12x

16x

20x

EBITDA Growth



Annexure 1: Industry overview

Passenger vehicle industry growth of 12% CAGR over FY03-FY17: Growth in India‟s PV

industry was strong during FY03-FY11 (17% CAGR), but plummeted during FY12-FY15 (to

1% CAGR) amid an economic slowdown. However, over last two years (FY15-17E), growth

has picked up to 8%. Passenger cars/UVs/vans contributed 69%/25%/6% of industry

volumes in FY17. Over the last 14 years, UV contribution has improved from 16% to 25%.

Exhibit 17: Industry grew at 12% CAGR over FY03-FY17: Higher growth over FY03-FY11

Source: SIAM, Equirus Securities

UVs garner a large share of total PV market with the advent of small UVs: UVs in India

were primarily diesel-driven, except the new-age smaller UVs which are gaining traction

over the past 2-3 years. With huge disparity between diesel and petrol prices due to

higher subsidy on diesel earlier, UV demand picked up in FY13 and its share in industry

volumes increased from 14% to 21% during that year. Over FY14-FY16, UV share remained

stagnant as artificial price disparity between diesel and petrol reduced due to the

removal of subsidy on diesel. However over the last five years, small UVs started gaining

share from larger UVs and the success of Hyundai Creta and Maruti Vitara Brezza shored

up the share of UVs in the total passenger vehicle market to 25% during FY17. The share

of small UVs in the total UV market more than doubled from 32% in FY11 to 67% in FY17.

Exhibit 18: Industry share between passenger cars, UV and vans: UVs gain share


Exhibit 19: UV breakup: Small UVs share increased from 32% in FY11 to 67% in FY17


-20%

-10%

0%

10%

20%

30%

40%

50%

60%

2003-0

4

2004-0

5

2005-0

6

2006-0

7

2007-0

8

2008-0

9

2009-1

0

2010-1

1

2011-1

2

2012-1

3

2013-1

4

2014-1

5

2015-1

6

2016-1

7Cars UV Total

77% 77% 77% 78% 78% 79% 78% 79% 77% 71% 71% 72% 73% 69%

16% 17% 17% 16% 16% 15% 14% 13% 14% 21% 21% 21% 21% 25%

7% 6% 6% 6% 7% 7% 8% 8% 9% 9% 8% 7% 6% 6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Cars UV Vans

101 125

273 290 321 370

513 215

237

280 235 232

217

249

32% 35%

49%

55% 58%

63% 67%

0%

10%

20%

30%

40%

50%

60%

70%

80%

0

100

200

300

400

500

600

700

800

900

FY11 FY12 FY13 FY14 FY15 FY16 FY17

<4400mm >4400mm <4400mm % of UV Sales



With success of small UVs, MM’s UV market share plummeted due to limited urban

offerings while MSIL gained: MM was the market leader in UVs with its successful diesel

portfolio (Scorpio, XUV500) in the large UV space. In the smaller UV segment, it was

leading through its model Bolero, mainly used in rural and semi-urban areas. However,

with small urban SUVs entering the market and models like Maruti Vitara Brezza, Hyundai

Creta and Ford Ecosport commanding a larger share, MM‟s share in the UV segment fell

sharply over the last five years. In fact, during the 4MFY18, MSIL was the market leader

in UVs with the success of Vitara Brezza and Ignis.

Compact, super compact segment garner larger share of passenger cars, while

mini/micro lose out: The share of micro & mini segment, which includes Maruti Alto and

Wagon R, Hyundai Eon and Tata Nano, declined from 38% of domestic passenger car

volumes in FY11 to 28% in FY17. At the same time, the share of compact & super compact

segment increased from 49% of domestic passenger car volumes in FY11 to 63% in FY17.

Over the last two years, the entry segment has been supported by Renault Kwid, which

has gained good share in the segment. However, first-time buyers (FTB) are clearly

moving up the chain now.

MSIL lost ground in FY09-FY12, but regains it over FY13-FY17: Over FY09-FY12, MSIL‟s

market share in the passenger car market (not including UVs and vans) reduced sharply

from 52% to 43% as new global OEMs like Toyota and Volkswagen entered the market.

This period also saw higher demand and high waiting periods for diesel vehicles, while

MSIL faced engine capacity constraints. However over FY13-FY16, helped by new model

launches and increased demand for petrol cars, MSIL regained more market share than it

had lost earlier (Exhibit 21).

Passenger car share of Ford, GM, Toyota & Volkswagen declines from 17% in FY12 to

7% in FY17: While cars from these global OEMs generated good demand initially (also

supported by aggressive pricing), demand fizzled out in later years. While India offers

strong growth potential to all aspiring OEMs, the market is price-sensitive. Also, though

OEMs were ready to forgo profitability in the initial years to generate profits in later

years, the long gestation period forced the exit of players like GM recently. We believe

that apart from low-cost platforms of OEMs, low servicing costs and higher resale value

are important metrics which can improve only with a higher population of cars on road.

Exhibit 20: Share of compact & super compact segment among passenger cars has

improved from 49% to 63% over FY11-FY17, while micro & mini has lost out


Exhibit 21: OEM market share in passenger cars: MSIL regained more than it lost earlier


38% 35% 33% 33% 29% 28% 28%

49% 51% 54% 57% 60% 62% 63%

13% 13% 13% 10% 11% 10% 8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Micro/Mini Compact/Super Compact Others

17% 21% 19% 17% 18% 18% 18% 20% 21%

18% 19% 20%

21% 22% 21% 20% 19%

54% 49% 51% 51% 52% 51% 51% 52% 50%

49% 43%

46%

50% 52% 53%

52% 57%

13% 13% 12% 10% 9% 9% 12% 11% 12% 17%

22% 21% 15%

11% 10% 10% 8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18

Honda Siel Hyundai Motors Maruti Suzuki Renault India Tata Motors Others



Renault Kwid heated up competition in mini segment, hurting MSIL’s share: Indian

customers have become more demanding and ready to experiment with new designs, if

these are cost effective. Renault Kwid, with its SUV look, was an instant hit and has

dented MSIL‟s hold in the segment (market share down from 81% in FY15 to 71% in FY17).

Renault and Nissan, coming from low-cost platforms developed to cater to emerging

markets, have kept pricing very competitive to push volumes.

Total passenger car market remains concentrated, with top-5 players having 83%

share: Over the last six years, top players have mostly remained the same (expect for

Honda which entered the fray later). MSIL gained market share after losing over FY11 and

12 due to a sharp increase in UV sales, a segment where it was not present earlier. We

don‟t see the top-5 players changing over the next 5 years; nevertheless, other players

like Renault and Nissan could gain market share due to their cost-effective offerings from

low- cost platforms.

Exhibit 22: Passenger vehicle market share: Top-5 players with 85% market share


4W penetration in India one of the lowest globally, suggesting growth potential:

India‟s 4W penetration at 23 per 1,000 people is one of the lowest among emerging

economies, followed by China at 76; as against this, the proportion for developed

countries like USA, Japan and EU stands at over 400, suggesting huge potential for growth

in India. However, automobile growth will also depend on income levels of a country,

which we analyze in next section.

Exhibit 23: 4W per 1,000: India at the lower end of the world’s spectrum


Automobile sales growth strongly linked with GDP per capita growth: Over 2005-15,

China‟s GDP per capita grew at 16% CAGR; CAGR in automobile sales over this period was

also similar, implying strong positive correlation between the two (Exhibit 24). India‟s

current GDP per capita is at almost the same level where China‟s GDP per capita was in

2004. China‟s automobile sales grew at a 19% CAGR over FY05-FY16. India‟s automobile

sales grew at 7.5% CAGR over FY08-FY16 while GDP per capita over CY07-CY15 at 6%,

suggesting slight outperformance to GDP per capita for India. With an expected revival in

India‟s GDP growth, we believe India‟s automobile sales can grow around 8-10% over next

the five years.

14% 15% 14% 15%

16% 17% 17% 16%

7% 9% 12% 10% 9% 8%

8% 8%

45% 39% 39%

42% 45% 47%

48% 52%

3% 6% 6% 5%

5% 5% 5% 5%

13% 15% 14% 14% 11% 11% 13% 10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FY11 FY12 FY13 FY14 FY15 FY16 FY17 YTDFY18

Honda Hyundai Motors M&M Maruti Suzuki

Tata Motors Toyota Kirloskar Others

0

100

200

300

400

500

600

India

Chin

a

Mexic

o

Bra

zil

Mala

ysi

a

USA

UK

Germ

any

Aust

ralia



Exhibit 24: China annual car sales vs. GDP per capita

Source: Bloomberg, Equirus Securities

Census data points to huge opportunity in 4W penetration: As per 2011 census, 4W

ownership in rural households owning some assets was at 2.3%, for urban areas at 9.7%

and for total households at 4.7% (Exhibit 25). Considering 4W industry sales over the past

four years, we believe penetration level in total households owning assets would have

reached 8% in 2016. With lower penetration and increasing per capita income levels, we

believe India offers huge potential for 4W penetration.

Exhibit 25: 4W penetration in asset owning households as per 2011 census

Total Rural Urban

Total no. of households owning asset 247 168 79

Houses owning car/jeep/Van 11 4 8

% owning car/jeep/van 4.7% 2.3% 9.7%

Exhibit 26: State-wise contribution to domestic 4W sales (FY17)

Exhibit 27: Region-wise 4W sales break up


0

5,000

10,000

15,000

20,000

25,000

30,000

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

GDP per capita Car Sales

Maharashtra, 13.0%

Gujarat, 8.5%

Uttar Pradesh, 8.0%

Karnataka, 7.8%

Kerala, 7.5% Tamil Nadu,

7.0% Delhi, 6.6%

Haryana, 5.5%

Rajasthan, 4.8%

Telangana, 4.0%

Madhya Pradesh, 3.2%

Punjab, 3.2%

West Bengal, 3.1%

Others, 17.8%

West, 31%

South , 29%

North, 28%

East, 11%



Competitor analysis:

Exhibit 28: Financial matrix of MSIL, Hyundai and Honda Cars

FY15 FY16

Maruti

Suzuki

Hyundai

Motors

Honda

Cars

Maruti

Suzuki

Hyundai

Motors

Honda

Cars

Sales 499,706 271,939 128,399 577,463 318,761 130,672

YoY growth 14% 8% 61% 16% 17% 2%

EBITDA 67,130 24,267 11,253 89,785 30,264 13,406

YoY Growth 32% 4% 61% 34% 25% 19%

As % of Sales

Raw Material 70% 80% 75% 67% 80% 72%

Employee Cost 3% 3% 4% 3% 2% 4%

Other expenses 13% 8% 13% 14% 8% 14%

EBITDA Margin 13% 9% 9% 16% 9% 10%

PAT Margin 7% 4% 3% 8% 4% 3%

ROE 16% 19% 30% 18% 20% 30%

ROCE 27% 6% 9% 39% 8% 7%

Size, profitability provide MSIL an advantage in offering more features per car: As

seen in Exhibit 28, MSIL operates at significantly higher EBITDA, PAT margins and core

RoIC, which helps it in offering features per car without compromising on profitability.

MSIL‟s RM cost to sales is significantly lower than both Honda and Hyundai, which we

think is due to lower import content.



Exhibit 29: FY17 segment-wise market shares of major players in passenger cars, UVs and vans


Micro/mini segment, 19% of 4W (PC + UV) market, is dominated

by MSIL with a 71% market share Compact segment,42% of 4W (PC + UV) market, is dominated by MSIL

with 46% a market share

Mid-size segment, 5% of 4W (PC + UV) market, MSIL is the leader

with 39% market share, closely followed by Honda

UV <4400mm (price <15,00,000), 17% of 4W (PC + UV) market,

MSIL became the market leader due to Brezza

UV >4400mm (price <Rs 15,00,000),7% of 4W (PC + UV) market, MM

is market leader, closely followed by Toyota

Vans segment, 6% of 4W (PC + UV) market , dominated by MSIL with

an 84% market share

Renault, 19%

Hyundai Motors, 10%

Maruti Suzuki, 71%

Honda, 6%

Hyundai Motors, 26%

Maruti Suzuki, 46%

Nissan Motor,

4%

Tata Motors, 10%

Others, 8%

Honda, 35%

Hyundai Motors, 9%

Maruti Suzuki, 39%

Skoda, 6%

Volkswagen India, 7%

Others, 3%

Ford, 9%

M&M, 25%

Maruti Suzuki, 38%

Renault, 4%

Hyundai, 19%

Others, 5% GM, 6%

Honda, 9%

M&M, 44%

Renault, 2%

Tata Motors, 3%

Toyota Kirloskar, 36%

Maruti Suzuki, 84%

M&M, 6%

Tata Motors, 11%



Annexure 2: Company overview

MSIL is the largest passenger vehicle company in India with a 48% market share. In

sub-segments, it has a higher market share in cars at 52%, while its UV market share is at

26% (FY17). The company has a strong 55% share in petrol vehicles as Japanese auto

companies are traditionally known for petrol engines. MSIL‟s volumes have grown at a

10% CAGR over FY07-FY17 (Exhibit 30).

Exhibit 30: MSIL’s volumes (in ‘000) have grown at 10% CAGR over FY07-FY17


17%/18% sales/EBITDA CAGR over FY07-FY17, higher than volume CAGR: MSIL‟s sales

have grown at a 17% CAGR over FY07-FY17, outstripping volume CAGR of 10% during this

period, driven by an improved product mix and price increases. While the small car

segment contributed a major portion of sales earlier, the contribution of compact/UV

segments has increased over time, leading to a better product mix. The 4W industry also

has a good track record of seeing regular price increases. EBITDA margins had been under

pressure over FY11-FY13 when industry growth had slowed down and companies had to

offer higher discounts. Exhibit 31 depicts MSIL‟s sales, EBITDA and margin performance

over FY07-FY17. Spares sales have grown at a 22% CAGR over FY12-FY17, outperforming

car sales, and contributed 10% of sales in FY17.

Exhibit 31: Sales & EBITDA (Rs mn) have grown at a 17%/18% CAGR over FY07-FY17

Exhibit 32: Spare sales grew at 22% CAGR over FY12-17, formed 10% of Sales in FY17

Rs mn


675

765 792

1,018

1,271

1,134 1,171 1,155

1,292

1,429

1,569

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Sales EBITDA EBITDA Margin

380,057 362,111

441,163 436,120 490,806

583,858

696,253

24,072 24,001

39,950 42,088

46,841

55,719

65,155

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000


Passenger Vehicle Spare Sales



Petrol vehicles remain MSIL’s forte, even as diesel price deregulation provides

support: Traditionally, Japanese and US car makers had a strong footprint in petrol cars

and European car makers in diesel vehicles. Over FY09-FY13, when the diesel car share in

industry volumes increased from 34% to 58%, MSIL‟s market share in passenger car

industry fell sharply from 58% to 39% However, post diesel price deregulation, petrol car

sales picked up as diesel prices were no longer artificially suppressed; this trend

benefitted MSIL as well, with the company ramping up its diesel portfolio over time.

Exhibit 33: Diesel car share in industry volumes vs. share in MSIL’s volumes


Petrol cars in demand again after diesel price deregulation: Even when diesel car

demand peaked in FY13, petrol cars made more economical sense for people running less

than 10,000km/day due to lower initial cost. Despite this, diesel cars were preferred due

to lower running cost. MSIL‟s petrol car sales declined steeply over FY11-FY13 (Exhibit

10). However, after diesel price deregulation, petrol cars regained lost ground with a

recovery in market share. MSIL has benefitted from this trend given its strong market

share in petrol cars (Exhibit 34).

Exhibit 34: MSIL’s market share in diesel cars increasing led by Brezza/Ciaz; already

high in petrol

Exhibit 35: Sharp decline in petrol car sales over FY11-FY13 but pick up seen in past

3 years


15% 19% 17%

24%

39%

32% 30% 30% 31%

34% 35% 36%

48%

58%

53%

48% 44%

40%

0%

10%

20%

30%

40%

50%

60%

70%


% diesel cars in MSIL's Volumes % diesel cars in Industry Volumes

52% 50%

45%

38% 39%

42%

45% 47% 47%

67%

63%

58% 56%

58%

61% 61% 59%

55%

23%

27%

22%

26% 26% 28%

32%

36%

20%

25%

30%

35%

40%

45%

50%

55%

60%

65%

70%


MSIL's market share in 4W Industry MSIL's market share in petrol 4Ws

MSIL's market share in diesel 4Ws

612 708

934 763

658 715 821

915 1,001

110

163

199

243 393 339

350

390

444

722

871

1,133

1,006 1,051 1,054

1,171

1,305

1,445

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

-100

100

300

500

700

900

1,100

1,300

1,500


Petrol Diesel % y/y growth in petrol % y/y growth in diesel



Declining Europe exports compensated by non-Europe volumes over past 7 years:

FY17 export volumes were lower than FY10, but this is despite Europe export volumes

declining sharply over the past seven years. During FY10, Europe contributed 77% of

exports but only 6% in FY15. However, non-Europe volumes grew at 23% CAGR over FY10-

FY16. Key export markets for MSIL are Africa and South East Asia. During FY17, while

export volumes remained flat, Baleno volumes surged ~5x over FY16; Alto volumes

declined 61% yoy. Baleno volumes also helped revival in export to European countries

during FY17.

Exhibit 36: Europe export volumes declined at 36% CAGR over FY10-FY16, but non-

Europe volumes grew at 23% CAGR


RM cost drops over last few years on lower RM prices, discounts: Average discounts as

percentage of domestic ASPs have come down from 5.1% in FY15 to 4.1% in FY17; with

waiting periods on most new models like Baleno, Brezza and Ignis, no discounts are

offered on them. A decline in RM prices over the last few years also helped the company

reduce its RM costs as percentage of sales. The second largest cost component for the

company is royalty paid to Suzuki Corp. Over FY11-FY16, royalty has remained around

5.1-5.6% as a percentage of sales. Exhibit 37 indicates the break-up of different cost

items as a percentage of sales in FY17.

Exhibit 37: FY17 cost break-up

Exhibit 38: % of financed vehicle in MSIL’s domestic sales


114,151

59,219

43,047 27,964 28,730

15,946 7,648

33,424

79,047

84,332

92,424

72,622 105,767 116,249

147,575

138,266

127,379 120,388

101,352

121,713 123,897 124,062

-10,000

10,000

30,000

50,000

70,000

90,000

110,000

130,000

150,000

FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17E

Europe Non-Europe Total

Raw Material, 68.7%

Employee, 3.4% Royalty, 5.7%

Advertisments, 1.2%

Power & Fuel, 0.8%

freight, 0.8%

Sales promotion, 0.8%

Others, 3.5%

72.0%

74.0%

75.0%

77.0%

79.8%

68.0%

70.0%

72.0%

74.0%

76.0%

78.0%

80.0%

82.0%

FY13 FY14 FY15 FY16 FY17



Exhibit 39: Details of sales & service network

Outlet No. of outlets No. of cities

Sales 2,020 1,652

NEXA 252 152

True Value 1,184 932

Commercial 40 38

Service 3,305 1,570

Exhibit 40: Top 5 exporting destinations of MSIL in FY17

Country Volumes

Chile 12,931

Indonesia 8,505

Nepal 7,960

Sri Lanka 7,771

Bolivia 5,583


Key management profile

Mr. R.C. Bhargava

Mr. R.C. Bhargava is the Chairman of MSIL. Born on 30 Jul‟34, Mr. Bhargava is an IAS by

qualification. He is associated with MSIL since 1981, and started his journey in the

company as a Director of Marketing. He later got promoted as a Joint Managing Director

in 1984-85, and further as Managing Director in 1985 and Chairman and Managing Director

in 1990-92. Currently, he is MSIL‟s chairman since 2007. He is also the President and CEO

of RCB Consulting Private Limited, a management and HR consultancy.

Mr. Kenichi Ayukawa

Mr. Ayukawa, MSIL‟s Managing Director and CEO, is a law graduate from Osaka University.

He joined Suzuki Motor Corporation in 1980. Associated with MSIL since Jul‟08, he served

as a director on the MSIL board from Jul‟08 to Mar‟13. Before taking charge as MSIL‟s

Managing Director, he served as a Managing Executive Officer of Global Marketing, Suzuki

Motor Corporation.

Mr. Toshiaki Hasuike

Mr. Hasuike is MSIL‟s Joint Managing Director. He has a vast experience of over 32 years

in automobile design and engineering. He started his career with Suzuki Motor

Corporation in 1980 where he handled key assignments in automobile engineering, design

product planning and quality. He was appointed as the Joint Managing Director of the

company from Apr‟13 and heads supply chain, engineering, production and quality.

Mr. Randhir Singh Kalsi

Mr. Kalsi is MSIL‟s Executive Officer, Marketing & Sales. He is a graduate from Delhi

College of Engineering and associated with the company since 1984. He was the Chief

General Manager & Commercial Business Head of North Zone from 2005 to 2008. He was

later promoted as the Chief General Manager & National Sales Head from 2008 to 2009.

Mr. Ajay Seth

A CA by profession, Mr. Seth is currently MSIL‟s CFO and has been associated with the

company since 2005. Before joining MSIL, Mr. Seth had worked in companies like Eicher

Motors, Birla Yamaha, JCB and Escort Ltd. He was the CFO of Escorts Ltd. from 1998 to 2005.



Standalone Quarterly Earnings Forecast and Key Drivers Rs in Mn 1Q17A 2Q17A 3Q17A 4Q17A 1Q18A 2Q18E 3Q18E 4Q18E 1Q19E 2Q19E 3Q19E 4Q19E FY17A FY18E FY19E FY20E

Revenue 149,273 178,428 168,648 183,334 175,457 202,449 198,670 211,185 203,740 232,343 229,098 243,774 680,348 787,761 908,955 1,074,383

(Increase)/Decrease in stock 2,031 1,907 -2,445 -5,294 -3,564 0 0 0 0 0 0 0 -3,801 -3,564 0 0

Raw materials consumed 90,420 109,519 109,266 116,177 104,983 142,726 138,275 146,985 141,803 161,711 159,452 169,667 426,296 532,969 632,633 750,994

Purchase of Traded Goods 8,803 9,315 9,917 16,786 21,465 0 0 0 0 0 0 0 44,821 21,465 0 0

Employee Cost 5,790 5,191 6,169 6,160 6,521 6,681 6,556 6,969 6,723 7,667 7,560 8,045 23,310 26,727 29,996 35,455

Other Expenditure 20,072 22,122 20,851 23,898 22,740 24,699 24,834 26,398 23,634 27,416 28,866 28,765 86,192 98,671 108,682 126,103

EBITDA 22,157 30,374 24,890 25,607 23,312 28,343 29,006 30,833 31,580 35,548 33,219 37,297 103,530 111,494 137,645 161,831

Depreciation 6,389 6,300 6,349 7,010 6,839 6,875 6,993 7,196 7,216 7,413 7,611 7,808 26,021 27,903 30,048 32,367

EBIT 15,768 24,074 18,541 18,597 16,473 21,468 22,012 23,637 24,364 28,135 25,608 29,489 77,509 83,591 107,597 129,464

Interest 181 197 290 226 313 0 0 0 0 0 0 0 894 313 0 0

Other Income 4,833 8,126 5,919 4,449 6,827 4,831 5,213 5,492 5,859 5,657 6,148 6,497 22,798 22,362 24,160 28,869

PBT 20,420 32,003 24,170 22,820 22,987 26,299 27,225 29,129 30,223 33,792 31,756 35,986 99,413 105,640 131,757 158,333

Tax 5,558 8,023 6,725 5,730 7,423 7,101 7,487 8,010 8,311 9,293 8,733 9,896 26,036 30,021 36,233 43,541

Recurring PAT 14,862 23,980 17,445 17,090 15,564 19,198 19,738 21,118 21,912 24,499 23,023 26,090 73,377 75,619 95,524 114,791

Extraordinary -54 -1,076 417 -1,504 -717 0 0 0 0 0 0 0 0 -717 0 0

Reported PAT 14,916 25,056 17,028 18,594 16,281 19,198 19,738 21,118 21,912 24,499 23,023 26,090 73,377 76,336 95,524 114,791

EPS (Rs) 49.20 79.38 57.75 56.57 51.52 63.55 65.34 69.91 72.54 81.10 76.22 86.37 242.91 250.33 316.22 380.00

Key Drivers

Volumes 348,443 418,470 387,251 414,439 394,571 455,640 436,585 461,735 435,755 503,094 482,022 510,570 1,568,603 1,748,532 1,931,440 2,177,530

ASP 428,400 426,382 435,500 442,367 444,678 444,317 455,055 457,373 467,557 461,828 475,286 477,455 433,729 450,527 470,610 493,395

- - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - -

Sequential Growth (%)

Revenue -2 % 20 % -5 % 9 % -4 % 15 % -2 % 6 % -4 % 14 % -1 % 6 % - - - -

(Increase)/Decrease in stock -199 % -6 % -228 % 117 % -33 % -100 % - - - -

EBITDA -5 % 37 % -18 % 3 % -9 % 22 % 2 % 6 % 2 % 13 % -7 % 12 % - - - -

EBIT 0 % 53 % -23 % 0 % -11 % 30 % 3 % 7 % 3 % 15 % -9 % 15 % - - - -

Recurring PAT 1 % 61 % -27 % -2 % -9 % 23 % 3 % 7 % 4 % 12 % -6 % 13 % - - - -

EPS 1 % 61 % -27 % -2 % -9 % 23 % 3 % 7 % 4 % 12 % -6 % 13 % - - - -

Yearly Growth (%)

Revenue 12 % 29 % 12 % 20 % 18 % 13 % 18 % 15 % 16 % 15 % 15 % 15 % -37 % 16 % 15 % 18 %

EBITDA 2 % 35 % 16 % 10 % 5 % -7 % 17 % 20 % 35 % 25 % 15 % 21 % -36 % 8 % 23 % 18 %

EBIT 5 % 53 % 30 % 18 % 4 % -11 % 19 % 27 % 48 % 31 % 16 % 25 % -40 % 8 % 29 % 20 %

Recurring PAT 23 % 60 % 47 % 16 % 5 % -20 % 13 % 24 % 41 % 28 % 17 % 24 % -36 % 3 % 26 % 20 %

EPS 23 % 60 % 47 % 16 % 5 % -20 % 13 % 24 % 41 % 28 % 17 % 24 % -36 % 3 % 26 % 20 %

Margin (%)

EBITDA 15 % 17 % 15 % 14 % 13 % 14 % 15 % 15 % 16 % 15 % 15 % 15 % 15 % 14 % 15 % 15 %

EBIT 11 % 13 % 11 % 10 % 9 % 11 % 11 % 11 % 12 % 12 % 11 % 12 % 11 % 11 % 12 % 12 %

PBT 14 % 18 % 14 % 12 % 13 % 13 % 14 % 14 % 15 % 15 % 14 % 15 % 15 % 13 % 14 % 15 %

PAT 10 % 13 % 10 % 9 % 9 % 9 % 10 % 10 % 11 % 11 % 10 % 11 % 11 % 10 % 11 % 11 %



Consolidated Financials P&L (Rs Mn) FY17A FY18E FY19E FY20E

Balance Sheet (Rs Mn) FY17A FY18E FY19E FY20E

Cash Flow (Rs Mn) FY17A FY18E FY19E FY20E

Revenue 680,850 787,761 908,955 1,074,383 Equity Capital 1,510 1,510 1,510 1,510 PBT 99,544 105,640 131,757 158,333

Op. Expenditure 577,269 676,268 771,310 912,552 Reserve 369,241 416,498 475,673 548,663 Depreciation 26,039 27,903 30,048 32,367

EBITDA 103,581 111,494 137,645 161,831 Networth 370,751 418,008 477,184 550,174 Others -21,452 717 0 0

Depreciation 26,039 27,903 30,048 32,367 Long Term Debt 4,836 0 0 0 Taxes Paid 23,229 30,021 36,233 43,541

EBIT 77,542 83,591 107,597 129,464 Def Tax Liability 11,422 11,422 11,422 11,422 Change in WC 21,918 7,778 14,245 15,006

Interest Expense 894 313 0 0 Minority Interest 154 154 154 154 Operating C/F 102,820 112,017 139,817 162,164

Other Income 22,896 22,362 24,160 28,869 Account Payables 83,692 96,384 111,258 131,630 Capex -33,748 -40,005 -40,000 -40,000

PBT 99,544 105,640 131,757 158,333 Other Curr Liabi 43,840 48,134 58,345 67,825 Change in Invest -58,475 5 0 0

Tax 26,162 30,021 36,233 43,541 Total Liabilities & Equity 514,695 574,103 658,362 761,205 Others 491 0 0 0

PAT bef. MI & Assoc. 73,382 75,619 95,524 114,791 Net Fixed Assets 133,107 144,960 154,912 162,545 Investing C/F -91,732 -40,000 -40,000 -40,000

Minority Interest 10 0 0 0 Capital WIP 12,523 12,523 12,523 12,523 Change in Debt 2,527 -4,836 0 0

Profit from Assoc. 1,493 0 0 0 Others 16,277 16,521 16,521 16,521 Change in Equity 0 0 0 0

Recurring PAT 74,865 75,619 95,524 114,791

Inventory 32,637 37,578 43,377 51,319 Others -13,820 -29,079 -36,349 -41,801

Extraordinaires -235 -717 0 0 Account Receivables 12,026 13,814 15,945 18,865 Financing C/F -11,293 -33,915 -36,349 -41,801

Reported PAT 75,100 76,336 95,524 114,791 Other Current Assets 16,384 18,864 21,772 25,756 Net change in cash -205 38,102 63,468 80,363

FDEPS (Rs) 247.8 250.3 316.2 380.0 Cash 291,741 329,844 393,312 473,675 RoE (%) 22 % 19 % 21 % 22 %

DPS (Rs) 75.0 80.0 100.0 115.0 Total Assets 514,695 574,103 658,362 761,205

RoIC (%) 22 % 19 % 21 % 22 %

CEPS (Rs) 334.0 342.7 415.7 487.2 Non-cash Working Capital -66,485 -74,263 -88,508 -103,514

Core RoIC (%) 57 % 60 % 76 % 94 %

FCFPS (Rs) 38.9 239.1 330.4 404.4 Cash Conv Cycle -35.6 -34.4 -35.5 -35.2 Div Payout (%) 36 % 38 % 38 % 36 %

BVPS (Rs) 1,227.3 1,383.8 1,579.7 1,821.3 WC Turnover -10.2 -10.6 -10.3 -10.4 P/E 31.1 30.8 24.4 20.3

EBITDAM (%) 15 % 14 % 15 % 15 % FA Turnover 4.7 5.0 5.4 6.1 P/B 6.3 5.6 4.9 4.2

PATM (%) 11 % 10 % 11 % 11 % Net D/E -0.8 -0.8 -0.8 -0.9 P/FCFF 198.0 32.2 23.3 19.0

Tax Rate (%) 26 % 28 % 28 % 28 % Revenue/Capital Employed 2.7 2.7 2.6 2.6 EV/EBITDA 19.8 18.0 14.1 11.5

Sales Growth (%) 18 % 16 % 15 % 18 %

Capital Employed/Equity 1.1 1.0 1.0 1.0

EV/Sales 3.0 2.5 2.1 1.7

FDEPS Growth (%) 37 % 1 % 26 % 20 %

Dividend Yield (%) 1.0 % 1.0 % 1.3 % 1.5 %

TTM P/E vs. 2 yr forward EPS growth TTM EV/EBITDA vs. 2 yr forward EBITDA growth TTM P/B vs. 2 yr forward RoE

10x

15x

20x

25x

-40%

-20%

0%

20%

40%

60%

0

2000

4000

6000

8000

10000

12000

Ma

r/0

4N

ov/

04

Jul/

05

Ma

r/0

6N

ov/

06

Jul/

07

Ma

r/0

8N

ov/

08

Jul/

09

Ma

r/1

0N

ov/

10

Jul/

11

Ma

r/1

2N

ov/

12

Jul/

13

Ma

r/1

4N

ov/

14

Jul/

15

Ma

r/1

6N

ov/

16

Jul/

17

Ma

r/1

8N

ov/

18

EPS Growth

-30%-20%-10%0%10%20%30%40%50%

0

500000

1000000

1500000

2000000

2500000

3000000

Mar

/04

Sep/

04M

ar/0

5Se

p/05

Mar

/06

Sep/

06M

ar/0

7Se

p/07

Mar

/08

Sep/

08M

ar/0

9Se

p/09

Mar

/10

Sep/

10M

ar/1

1Se

p/11

Mar

/12

Sep/

12M

ar/1

3Se

p/13

Mar

/14

Sep/

14M

ar/1

5Se

p/15

Mar

/16

Sep/

16M

ar/1

7Se

p/17

Mar

/18

Sep/

18M

ar/1

94x

8x

12x

16x

20x

EBITDA Growth

0%

5%

10%

15%

20%

25%

30%

0

2000

4000

6000

8000

10000

Ma

r/0

4N

ov/

04

Jul/

05

Ma

r/0

6N

ov/

06

Jul/

07

Ma

r/0

8N

ov/

08

Jul/

09

Ma

r/1

0N

ov/

10

Jul/

11

Ma

r/1

2N

ov/

12

Jul/

13

Ma

r/1

4N

ov/

14

Jul/

15

Ma

r/1

6N

ov/

16

Jul/

17

Ma

r/1

8N

ov/

18

RoE

2x

3x

4x

5x

6x



Historical Consolidated Financials P&L (Rs Mn) FY14A FY15A FY16A FY17A

Balance Sheet (Rs Mn) FY14A FY15A FY16A FY17A

Cash Flow (Rs Mn) FY14A FY15A FY16A FY17A

Revenue 444,506 508,014 575,890 680,850 Equity Capital 1,510 1,510 1,510 1,510 PBT 37,339 49,760 74,658 99,544

Op. Expenditure 392,467 439,573 487,003 577,269 Reserve 213,454 258,710 304,650 369,241 Depreciation 21,160 25,153 28,218 26,039

EBITDA 52,039 68,441 88,887 103,581 Networth 214,964 260,220 306,160 370,751 Others -7,390 -7,123 -11,978 -21,452

Depreciation 21,160 25,153 28,218 26,039 Long Term Debt 18,653 1,802 774 4,836 Taxes Paid 8,582 10,751 19,475 23,229

EBIT 30,879 43,288 60,669 77,542 Def Tax Liability 10,445 2,650 5,604 11,422 Change in WC 7,419 8,352 14,421 21,918

Interest Expense 1,846 2,178 817 894 Minority Interest 122 134 144 154 Operating C/F 49,945 65,391 85,844 102,820

Other Income 8,305 8,650 14,806 22,896 Account Payables 49,999 56,860 74,089 83,692 Capex -35,360 -32,631 -26,047 -33,748

PBT 37,339 49,760 74,658 99,544 Other Curr Liabi 19,933 32,494 35,578 43,840 Change in Invest -17,102 -15,239 -47,917 -58,475

Tax 9,023 11,854 20,875 26,162 Total Liabilities & Equity 314,115 354,160 422,349 514,695 Others 2,493 2,060 776 491

PAT bef. MI & Assoc. 28,316 37,906 53,783 73,382 Net Fixed Assets 110,337 120,323 125,296 133,107 Investing C/F -49,969 -45,810 -73,188 -91,732

Minority Interest 16 12 10 10 Capital WIP 26,395 18,169 10,069 12,523 Change in Debt 3,790 -13,578 -2,255 2,527

Profit from Assoc. 229 180 998 1,493 Others 31,846 17,078 17,034 16,277 Change in Equity 0 0 0 0

Recurring PAT 28,529 38,074 54,771 74,865 Inventory 17,632 26,831 31,326 32,637 Others -4,529 -6,457 -10,133 -13,820

Extraordinaires 0 0 -191 -235 Account Receivables 14,891 11,181 13,234 12,026 Financing C/F -739 -20,035 -12,388 -11,293

Reported PAT 28,529 38,074 54,962 75,100 Other Current Assets 16,469 14,671 18,125 16,384 Net change in cash -763 -454 268 -205

EPS (Rs) 94.4 126.0 181.3 247.8 Cash 96,545 145,907 207,265 291,741

RoE (%) 14 % 16 % 19 % 22 %

DPS (Rs) 12.0 25.0 30.0 75.0

Total Assets 314,115 354,160 422,349 514,695

RoIC (%) 13 % 16 % 19 % 22 %

CEPS (Rs) 164.5 209.3 274.7 334.0 Non-cash Working Capital -20,939 -36,671 -46,982 -66,485 Core RoIC (%) 19 % 27 % 40 % 57 %

FCFPS (Rs) 4.6 70.3 43.8 38.9 Cash Conv Cycle -17.2 -26.3 -29.8 -35.6 Div Payout (%) 15 % 24 % 20 % 36 %

BVPS (Rs) 711.6 861.4 1,013.5 1,227.3 WC Turnover -21.2 -13.9 -12.3 -10.2

P/E 81.5 61.1 42.5 31.1

EBITDAM (%) 12 % 13 % 15 % 15 % FA Turnover 3.3 3.7 4.3 4.7 P/B 10.8 8.9 7.6 6.3

PATM (%) 6 % 7 % 10 % 11 % Net D/E -0.4 -0.6 -0.7 -0.8 P/FCFF 1,690.9 109.5 175.6 198.0

Tax Rate (%) 24 % 24 % 28 % 26 % Revenue/Capital Employed 2.7 2.6 2.5 2.7 EV/EBITDA 43.6 32.0 24.0 19.8

Sales growth (%) 0 % 14 % 13 % 18 %

Capital Employed/Equity 1.1 1.1 1.1 1.1

EV/Sales 5.1 4.3 3.7 3.0

FDEPS growth (%) 16 % 33 % 44 % 37 %

Dividend Yield (%) 0.2 % 0.3 % 0.4 % 1.0 %


Equirus Securities

Research Analysts Sector/Industry Email

Equity Sales E-mail

Abhishek Shindadkar IT Services [email protected] 91-22-43320643 VishadTurakhia [email protected] 91-22-43320633

AshutoshTiwari Auto, Metals & Mining [email protected] 91-79-61909517 SubhamSinha [email protected] 91-22-43320631

Depesh Kashyap Mid-Caps [email protected] 91-79-61909528 SwetaSheth [email protected] 91-22-43320634

Devam Modi Power & Infrastructure [email protected] 91-79-61909516 Viral Desai [email protected] 91-22-43320635

DhavalDama FMCG, Mid-Caps [email protected] 91-79-61909518 BinoyDharia [email protected] 91-22-43320632

Manoj Gori Consumer Durables [email protected] 91-79-61909523 Dealing Room E-mail

Maulik Patel Oil and Gas [email protected] 91-79-61909519 Ashish Shah [email protected] 91-22-43320662

PrafulBohra Pharmaceuticals [email protected] 91-79-61909532 IleshSavla [email protected] 91-22-43320666

Rohan Mandora Banking & Financial Services [email protected] 91-79-61909529 Manoj Kejriwal [email protected] 91-22-43320663

Associates E-mail Dharmesh Mehta [email protected] 91-22-43320661

Ankit Choudhary [email protected] 91-79-61909533 SandipAmrutiya [email protected] 91-22-43320660

Ashdeep Kaur [email protected] 91-79-61909527 Compliance Officer E-mail

Bharat Celly [email protected] 91-79-61909524 Jay Soni [email protected] 91-79-61909561

Harshit Patel [email protected] 91-79-61909522

Meet Chande [email protected] 91-79-61909513

Parva Soni [email protected] 91-79-61909521

Pranav Mehta [email protected] 91-79-61909514

Ronak Soni [email protected] 91-79-61909525

Samkit Shah [email protected] 91-79-61909520

ShreepalDoshi [email protected] 91-79-61909541

Vikas Jain [email protected] 91-79-61909531

Rating & Coverage Definitions: Absolute Rating • LONG : Over the investment horizon, ATR >= Ke for companies with Free Float market cap > Rs 5 billion and ATR >= 20% for rest of the companies • ADD: ATR >= 5% but less than Ke over investment horizon • REDUCE: ATR >= negative 10% but <5% over investment horizon • SHORT: ATR < negative 10% over investment horizon Relative Rating • OVERWEIGHT: Likely to outperform the benchmark by at least 5% over investment horizon • BENCHMARK: likely to perform in line with the benchmark • UNDERWEIGHT: likely to under-perform the benchmark by at least 5% over investment horizon Investment Horizon Investment Horizon is set at a minimum 3 months to maximum 18 months with target date falling on last day of a calendar quarter. Lite vs. Regular Coverage vs. Spot Coverage We aim to keep our rating and estimates updated at least once a quarter for Regular Coverage stocks. Generally, we would have access to the company and we would maintain detailed financial model for Regular coverage companies. We intend to publish updates on Lite coverage stocks only an opportunistic basis and subject to our ability to contact the management. Our rating and estimates for Lite coverage stocks may not be current. Spot coverage is meant for one-off coverage of a specific company and in such cases, earnings forecast and target price are optional. Spot coverage is meant to stimulate discussion rather than provide a research opinion.

Registered Office:

Equirus Securities Private Limited

Unit No. 1201, 12th Floor, C Wing, Marathon Futurex,

N M Joshi Marg, Lower Parel,

Mumbai-400013.

Tel. No: +91 – (0)22 – 4332 0600

Fax No: +91- (0)22 – 4332 0601

Corporate Office:

3rd floor, House No. 9,

Magnet Corporate Park, Near Zydus Hospital, B/H Intas Sola Bridge,

S.G. Highway Ahmedabad-380054

Gujarat

Tel. No: +91 (0)79 - 6190 9550

Fax No: +91 (0)79 – 6190 9560

mailto:[email protected]



























© 2017 Equirus Securities Private Limited. All rights reserved. For Private Circulation only. This report or any portion hereof may not

be reprinted, sold or redistributed without the written consent of Equirus Securities Private Limited

Analyst Certification

I, AshutoshTiwari, author to this report, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also

certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.

Disclosures

Equirus Securities Private Limited (ESPL) having Corporate Identification Number U65993MH2007PTC176044 is registered in India with Securities and Exchange Board of India (SEBI) as a trading member on the

Capital Market (Reg. No. INB231301731), Futures & Options Segment (Reg. No.INF231301731) of the National Stock Exchange of India Ltd. (NSE) and on Cash Segment (Reg. No.INB011301737) of Bombay Stock

Exchange Limited (BSE).ESPL is also registered with SEBI as Research Analyst under SEBI (Research Analyst) Regulations, 2014 (Reg. No. INH000001154), as a Portfolio Manager under SEBI (Portfolio Managers

Regulations, 1993 (Reg. No. INP000005216) and as a Depository Participant of the Central Depository Services (India) Limited (Reg. No. IN-DP-324-2017). There are no disciplinary actions taken by any regulatory

authority against ESPL. ESPL is a subsidiary of Equirus Capital Pvt. Ltd. (ECPL) which is registered with SEBI as Category I Merchant Banker and provides investment banking services including but not limited to

merchant banking services, private equity, mergers & acquisitions and structured finance.

As ESPL and its associates are engaged in various financial services business, it might have: - (a) received compensation (except in connection with the preparation of this report) from the subject company for

investment banking or merchant banking or brokerage services in the past twelve months;(b) managed or co-managed public offering of securities for the subject company in the past twelve months; or (c) have

received a mandate from the subject company; or (d) might have other financial, business or other interests in entities including the subject company (ies) mentioned in this Report. ESPL & its associates, their

directors and employees may from time to time have positions or options in the company and buy or sell the securities of the company (ies) mentioned herein. ESPL and its associates collectively do not own (in

their proprietary position) 1% or more of the equity securities of the subject company mentioned in the report as the last day of the month preceding the publication of the research report. ESPL or its Analyst or

Associates did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ESPL nor

Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or

brokerage service transactions. ESPL has not been engaged in market making activity for the subject company.

The Research Analyst engaged in preparation of this Report:-

(a) has not received any compensation from the subject company in the past twelve months; (b) has not managed or co-managed public offering of securities for the subject company in the past twelve months;

(c) has not received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (d) has not received any compensation for products

or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (e) has not received any compensation or other benefits from the

subject company or third party in connection with the research report; (f) might have served as an officer, director or employee of the subject company; (g) is not engaged in market making activity for the

subject company.

This document is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution,

publication, availability or use would be contrary to law, regulation or which would subject ESPL and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein

may or may not be eligible for sale in all jurisdictions or to a certain category of investors. Persons in whose possession of this document are required to inform themselves of, and to observe, such applicable

restrictions. Please delete this document if you are not authorized to view the same. By reading this document you represent and warrant that you have full authority and all rights necessary to view and read this

document without subjecting ESPL and affiliates to any registration or licensing requirement within such jurisdiction.

This document has been prepared solely for information purpose and does not constitute a solicitation to any person to buy, sell or subscribe any security. ESPL or its affiliates are not soliciting any action based

on this report. The information and opinions contained herein is from publicly available data or based on information obtained in good faith from sources believed to be reliable but ESPL provides no guarantee as

to its accuracy or completeness. The information contained herein is as on date of this report, and is subject to change or modification and any such changes could impact our interpretation of relevant

information contained herein. While we would endeavour to update the information herein on reasonable basis, ESPL and its affiliates, their directors and employees are under no obligation to update or keep the

information current. Also there may be regulatory, compliance, or other reasons that may prevent ESPL and its group companies from doing so. This document is prepared for assistance only and is not intended

to be and must not alone be taken as the basis for an investment decision. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an

investment in the securities of companies referred to in this document including the merits and risks involved. This document is intended for general circulation and does not take into account the specific

investment objectives, financial situation or particular needs of any particular person. ESPL and its group companies, employees, directors and agents accept no liability, and disclaim all responsibility, for the

consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. ESPL/its affiliates do and seek to do business with

companies covered in its research report. Thus, investors should be aware that the firm may have conflict of interest.



A graph of daily closing prices of securities is available at http://www.nseindia.com/ChartApp/install/charts/mainpage.jsp and www.bseindia.com (Choose a company from the list on the browser and select the

“three years” period in the price chart).

Disclosure of Interest statement for the subject Company Yes/No If Yes, nature of such interest

Research Analyst‟ or Relatives‟ financial interest No

Research Analyst‟ or Relatives‟ actual/beneficial ownership of 1% or more No

Research Analyst‟ or Relatives‟ material conflict of interest No

Disclaimer for U.S. Persons

ESPL/its affiliates are not a registered broker–dealer under the U.S. Securities Exchange Act of 1934, as amended (the“1934 act”) and under applicable state laws in the United States. In addition Equirus is not a

registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the “Acts”), and under applicable state laws in the United States.

Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by Equirus, including the products and services described herein are not available to or intended

for U.S. persons. The information contained in this Report is not intended for any person who is a resident of the United States of America or a resident of any jurisdiction, the laws of which imposes prohibition

on soliciting the securities business in that jurisdiction without going through the registration requirements and/ or prohibit the use of any information contained in this report. This Report and its respective

contents do not constitute an offer or invitation to purchase or subscribe for any securities or solicitation of any investments or investment services and/or shall not be considered as an advertisement tool. "U.S.

Persons" are generally defined as a natural person, residing in the United States or any entity organized or incorporated under the laws of the United States. US Citizens living abroad may also be deemed "US

Persons" under certain rules.

maruti suzuki india limited absolute : long · 2017-09-05 · maruti suzuki india limited (msil) is...

Documents