MARUTI SUZUKI INDIA LTD

RESEARCH
EQUITY RESEARCH May 15, 2009

RESULTS REVIEW Maruti Suzuki India Limited Hold

New production capacity to drive volume
Share Data
Market Cap Rs. 244.9 bn • For Q4’09, Maruti Suzuki India Limited (MSIL) reported a sharp jump in
Price Rs. 847.55 sales, up 30.9% yoy to Rs. 63 bn. The surge in sales was driven by a
BSE Sensex 12,173.42
robust volume growth of ~17% yoy and an improvement in net price
Reuters MRTI.BO
Bloomberg MSIL IN realisations. In the face of 4% cut in CENVAT, announced in December
Avg. Volume (52 Week) 0.2 mn 2008, MSIL witnessed ~12% yoy (Rs. 266,582 per unit) growth in net
52-Week High/Low Rs. 873 / 428.4
Shares Outstanding 288.9 mn
price realisations.
• Despite a record volume achieved during the quarter, the net profit
Valuation Ratios (Consolidated)
reported by the Company declined substantially, mainly due to the losses
Year to 31 March 2010E 2011E
EPS (Rs.) 56.8 67.5 on account of forex fluctuations and higher raw material cost. For Q4’09,
+/- (%) 33.8% 18.8% the EBITDA margin declined ~500 bps yoy to 7%, and adj. net profit
PER (x) 14.9x 12.6x
margin declined ~400 bps yoy to 3.8%. Consequently, the adj. net income
EV/ Sales (x) 0.9x 0.8x
EV/ EBITDA (x) 8.8x 7.6x plunged 35.3% yoy to Rs. 2.4 bn for the fourth quarter.
Capacity expansion plans; expanding presence in Diesel segment
Shareholding Pattern (%)
• The Company plans to make an investment of Rs.18 bn towards
Promoter 54
FIIs 19 production expansion.
Institutions 22 • MSIL is planning to increase its production capacity by an additional 2
Public & Others 5
lakh (both petrol and diesel) cars by FY11. The increased volumes will
Relative Performance cater largely to the compact-car segment, which has shown considerable

1,000
growth in the last few years and is expected to expand further.
800 • Moreover, MSIL is expanding its presence in the Diesel segment, another
600 growing segment. To meet the increasing demand of the diesel variants in
400 its models, MSIL is increasing its production capacity by one lakh units
200
(part of Rs.18 bn capex plan). New capacity will help reduce the waiting
May-08

May-09
Mar-09
Nov-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Oct-08

Dec-08
Jan-09
Feb-09

Apr-09

time of diesel models, which currently stands at around 3-5 months.

MSIL Rebased BSE Index

Key Figures (Standalone)
Quarterly Data Q4'08 Q3'09 Q4'09 YoY% QoQ% 2008 2009 YoY%
(Figures in Rs. mn, except per share data)

Net Sales 48,174 45,676 63,084 30.9% 38.1% 180,208 205,579 14.1%
Adj. EBITDA 5,816 3,518 4,493 (22.7)% 27.7% 27,837 18,675 (32.9)%
Adj. Net Profit 3,759 2,117 2,431 (35.3)% 14.8% 17,899 12,275 (31.4)%

Margins(%)

EBITDA 12.0% 7.5% 7.0% 14.9% 8.8%

NPM 7.8% 4.5% 3.8% 9.6% 5.8%
Per Share Data (Rs.)
Adj. EPS 13.0 7.3 8.4 (35.3)% 14.9% 62.0 42.5 (31.4)%

Please see the end of the report for disclaimer and disclosures. -1-
 MARUTI SUZUKI INDIA LTD
RESEARCH
EQUITY RESEARCH May 15, 2009

Change in product mix; better price realisations

• While the capacity expansion plans will allow the Company to tap the
growing demand in the compact car segment, increasing contribution
from the higher priced cars should effect a further improvement in the
average price realisations of the Company.

Domestic Volume Q4'08 Q1'09 Q2'09 Q3'09 Q4'09

A1- (Maruti 800) 17,568 16,649 12,137 8,521 12,076

Increasing production of high-price Share in total volume 9.4% 9.2% 7.1% 5.4% 5.7%
bracket cars
A2- (Alto, Wagon-R, Zen, Swift, A-Star) 131,885 125,427 118,083 115,241 152,645
Share in total volume 70.5% 69.6% 68.8% 72.5% 72.2%
A3- (Dzire, SX4, Baleno) 12,433 15,940 18,849 17,911 23,228
Share in total volume 6.6% 8.9% 11.0% 11.3% 11.0%
C - (Omni, Versa) 24,170 20,761 20,209 15,557 21,421
Share in total volume 12.9% 11.5% 11.8% 9.8% 10.1%
MUV- (Grand Vitara, Gypsy) 1,129 1,316 2,428 1,630 2,115
Share in total volume 0.6% 0.7% 1.4% 1.0% 1.0%
Total Sales 187,185 180,093 171,706 158,860 211,485

Source: CMIE
Increased rural penetration and lower interest rates
• During the first eight months of FY09, the domestic passenger cars
segment witnessed a substantial pressure on volumes, mainly due to the
firm interest rates and cautious approach adopted by private banks in
disbursing automobile loans. While domestic car sales fell in four out of
the first eight months in FY09, the cumulative sales in the domestic
market increased marginally by 1.3% (852,164 units) in April–November
2008. However, the industry witnessed signs of recovery after the
government announced various rate cuts (CRR and repo rate) to infuse
more money in the economy, coupled with a 4% cut in CENVAT,
announced in December 2008.

Passenger car sales' volume

200

170
Vehicles '000

140

110

80

50
Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar-
08 08 08 08 08 08 08 08 08 08 09 09 09
Car Sales
Source: CMIE

Please see the end of the report for disclaimer and disclosures. -2-
 MARUTI SUZUKI INDIA LTD
RESEARCH
EQUITY RESEARCH May 15, 2009

• Higher demand from rural areas led to a 4% growth in passenger car

sales in April, the third consecutive month in a row. With healthy
agriculture growth during the past few years and increasing selling prices
of agri-products, spending power of rural India has increased significantly.
• On the whole, we believe that MSIL should be able to manage a healthy
~8% volume growth through FY10E–FY12E, in the face of lower interest
rates and increased availability of finance, coupled with increasing rural
demand and MSIL’s production capacity.

Valuation
We have revised our estimates based on the current market scenario. We
expect a healthy volume growth on the back of increased rural penetration
and improving availability of finance. Accordingly, we estimate ~16.2%
revenue CAGR for FY09-FY12E.
Further, we expect the net price realisation to improve further on the back of
a shift in product mix, and the reduction in excise duty that was announced
in December 2008. Moreover, the commodity prices have eased and are
down from their peak in July 2008, which should help ease the pressure on
the Company's margin. On the whole we expect the EBITDA margin to
improve 8.8% in FY09 to 10.5%-11.0% in FY10E and FY11E. Accordingly,
we expect the Company’s EPS to be Rs. 56-58 and Rs. 66-69 for FY10E
and FY11E, respectively.
At the CMP of Rs. 847.55, MSIL’s stock is trading at a P/E of 14.9x and
12.6x for its FY10E and FY11E earnings, respectively. We have valued
MSIL by using the DCF methodology. Assuming a 14.1% WACC and a 5%
terminal growth rate, we have arrived at a target price of Rs. 809. Our
valuation suggests that the stock is fairly valued at the CMP of Rs. 847.5;
hence, we reiterate our Hold rating.

Please see the end of the report for disclaimer and disclosures. -3-
 MARUTI SUZUKI INDIA LTD
RESEARCH
EQUITY RESEARCH May 15, 2009

As the DCF valuation is sensitive to the changes in the WACC and terminal
growth rate, we have performed a sensitivity analysis for the same.

Sensitivity Analysis
WACC

Terminal growth
809 13.1% 13.6% 14.1% 14.6% 15.1%
4.00% 853 813 777 745 715
4.50% 873 830 792 758 726
5.00% 895 850 809 772 739
5.50% 921 871 827 788 752
6.00% 950 896 848 806 768
Source: Indiabulls Research

Key Figures (Consolidated)

Year to March FY08 FY09 FY10E FY11E FY12E CAGR (%)
(Figures in Rs. mn, except per share data) (FY09-12E)
Net Sales 180,208 205,579 249,680 283,643 322,421 16.2%
Adj. EBITDA 27,837 18,675 27,092 31,217 36,682 25.2%

Adj. Net Profit 17,899 12,275 16,419 19,501 23,360 23.9%

Margins(%)

EBITDA 14.9% 8.8% 10.6% 10.8% 11.2%

NPM 9.6% 5.8% 6.4% 6.8% 7.1%

Per Share Data (Rs.)

Adj. EPS 62.0 42.5 56.8 67.5 80.8 23.9%
PER (x) 13.4x 20.0x 14.9x 12.6x 10.5x

Please see the end of the report for disclaimer and disclosures. -4-
 MARUTI SUZUKI INDIA LTD
RESEARCH
EQUITY RESEARCH May 15, 2009

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