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Maruti Suzuki India Ltd>
  • CMP : 9,658.6 Chg : -48.90 (-0.50%)
  • Target : 11,200.0 (28.74%)
  • Target Period : 12-18 Month

30 Jan 2023

Higher ASP & other income drive PAT outperformance

About The Stock

Maruti Suzuki (MSIL) is the market leader in the domestic passenger vehicle (PV) space with market share pegged at ~43.4% and popular models being Alto, WagonR, Swift, Brezza, Baleno, Ertiga, etc., among others.

  • Market leader in each sub-segment - cars (63.6%), UV (19.5%), vans (95.7%)
  • Strong b/s; ~₹ 42,000 crore cash and investment on books as of FY22

The company posted steady performance in Q3FY23.

  • Total operating income came in at ₹ 29,044 crores down 3% QoQ. With 10% QoQ drop in volumes, ASP’s surprised positively at ₹6 lakh/unit, up 8% QoQ
  • EBITDA margins in Q3FY23 stood at 9.8%, up 50 bps QoQ
  • Consequent PAT stood at ₹ 2,833 crore up 14% QoQ. PAT performance was driven by higher other income which for the quarter stood at ₹861 crore.
What should Investors do?

MSIL’s stock price has de-grown at ~1.3% CAGR from
~₹ 9,280 levels in Jan 2018, underperforming the broader Nifty Auto index.

  • We retain our BUY rating tracking reignited focus towards SUV’s, market share gains ambition, clear timeframe for EV launch & robust order-book.
Target Price and Valuation

Introducing FY25E, we now value MSIL at unchanged target price of ₹ 11,200 i.e., 28x P/E on FY24E-25E average EPS of ₹400/share.

Key Triggers for future price performance
  • Robust demand in SUV space aided by new launches, bookings for higher end models & greater UV share to lead healthy uptick in volumes and ASPs’, we have built 23%/13.3% sales/volume CAGR for FY22-25E.
  • Leadership position in the CNG space with CNG penetration at >20% of sales volume amid strong new offerings like Grand Vitara, XL6, Baleno, etc
  • Technology work being done in the alternate fuel vehicle domain; flex fuel (ethanol powered) vehicle & BEV’s showcased in Auto Expo 2023.
  • Robust order backlog of >3.6 lakh units amid improved supply side situation
  • Aggressive capex spends to augment capacities both brownfield (Manesar ~1 lakh units) and greenfield (new plant in Haryana, first phase capacity pegged at ~2.5 lakh units) to ensure sufficient capacity to meet demand.
Alternate Stock Ideas

Apart from MSIL, in our OEM coverage we like M&M.

  • Focused on prudent capital allocation, UV differentiation & EV proactiveness


  • BUY with target price of ₹ 1,590

Key Financial Summary

Key Financials FY20 FY21 FY22 5 year CAGR (FY17-22) FY23E FY24E FY25E 3 year CAGR (FY22-25E)
Total Operating Income 75,610.6 70,332.5 88,295.6 5.4 118,452.8 145,995.9 164,288.8 23.0
EBITDA 7,302.6 5,345.3 5,701.2 -11.2 10,800.5 14,662.7 17,244.9 44.6
EBITDA Margins (%) 9.7 7.6 6.5 - 9.1 10.0 10.5 -
Net Profit 5,650.6 4,229.7 3,766.3 -12.5 7,912.1 11,148.3 13,033.3 51.3
EPS (₹) 187.1 140.0 124.7 - 261.9 369.0 431.5 -
P/E 46.5 62.1 69.8 - 33.2 23.6 20.2 -
RoNW (%) 11.7 8.2 7.0 - 13.3 16.7 17.2 -
RoIC (%) 26.8 24.2 24.5 - 65.6 106.5 76.7 -
Source: Company, ICICI Direct Research

Key takeaways of the recent quarter & Concall highlights

Q3FY23 Results:

  • Total operating income for the quarter stood at | 29,044 down 3% QoQ. Q3FY23 volumes were at 4.7 lakh units, down 10% QoQ. Of this, domestic volumes de-grew by 11% QoQ to 4 lakh units, while exports volumes were down 2% QoQ at 0.62 lakh units. 
  • Average Selling Price (ASP) came in at | 5.98 lakh/unit, up 8.3% QoQ.
  • EBITDA in Q3FY23 stood at ₹ 2,833 crore with corresponding EBITDA margins placed at 9.8%, up ~50 bps QoQ. Gross margin expansion came in lower than anticipated at 44 bps QOQ while savings were realised on the other expenses front which was down 42 bps QoQ, leading to a marginal miss on the overall operating margin profile.
  • Consequent PAT in Q3FY23 came in at | 2,351 crore, up 14% QoQ. PAT performance was driven by higher other income (up 40% QoQ; ₹861 crore)

Q3FY23 Earnings Conference Call highlights    


  • Company remained optimistic about regaining 50% market share amidst new launches like Jimny & Fronx showcased in Auto Expo 2023. Further company also unveiled evolving technologies like BEV’s & Flex Fuel Engine to be launched by 2025 with ~|100 billion investment planned in EV domain in the state of Gujarat by parent i.e., Suzuki Motors.
  • Company informed about crossing 25 million productions (cumulative) with 3,500+ sales network. During the quarter, it started export of grand Vitara in Latin America, South America, Asian and near by countries.
  • Management informed ~46,000 units’ production lost due to chip shortage in Q3FY23 vs ~35,000 lost in Q2FY23. Company expects Q4FY23 to be better in terms of chip supply. The supply situation is however uncertain.
  • Rise in realization was largely due to bookings for higher end models for recent launches & greater share of SUVs in overall portfolio. Company informed about lean stock with network at end of quarter (at ~5 days).
  • Company continues to witness strong order book of ~3.63 lakh units as on Q3FY23 vs ~4.1 lakh units in Q2FY23. With respect to launch of recent products they received ~1.2 lakh bookings.
  • Management informed about large part of commodity benefits being accrued till date incl. Q3FY23 with minimal benefits to accrue in Q4FY23.
  • Management informed about higher promotional spends impacting margins in Q3FY23 which was mitigated via commodity benefits, currency benefits & cost reduction efforts. Royalty rate for Q3FY23 stood at ~3.9%.
  • Avg. discount per car stood at ~₹ 18,291 during Q3FY23 vs. ~₹13,840 in Q2FY23 & ~|15,200 in Q3FY22.
  • Jimmy and Fronx are slated for commercial launch/delivery in Q1FY24.
  • Company informed about demand remaining healthy with rural demand being strong and accounting for 44-45% of total sales.

  • Company has ~ 100-billion-yen exposure.

  • Management informed about cost impact of ~₹20,000 due to mandatory safety regulation (i.e., 6 airbags, 3-point seatbelts, seatbelt reminder etc. which includes sensors & controllers)

  • Retails during the quarter stood at 4.8 lakh

  • Company is comfortably placed meeting the CAFÉ norms and in fact has the lowest average fleet emission across the industry.

  • On BS-VI stage 2 (OBD-2, RDE) it is also well placed with minimal cost implications

  • Starting April 2023 all models at the company will be E-20 compliant (ethanol blending) with first flex fuel vehicle slated to be launched in 2025 (E-85).

  • Management opined that vehicles running on E-85 blended fuel will have ~79% less emissions vs. non blended run vehicles however the fuel needs to be cheaper by ~35% so that running costs/km remains similar for a vehicle owner

  • Higher CNG prices is denting demand of vehicles on the commercial side with company engaging with authorities for some remedy on this front

  • MSIL endeavor will be to grow ahead of industry going forward



I/We, Shashank Kanodia, CFA, MBA (Capital Markets), and Raghvendra Goyal, CA, Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. It is also confirmed that above mentioned Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months and do not serve as an officer, director or employee of the companies mentioned in the report.

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