Msil

CMP: RS.1, 30724-MARCH-2012
TARGET PRICE: RS.1474.96
BUY
MARUTI SUZUKI INDIA LTD.
Equity Research Report
Positive Outlook:-
I am initiating coverage on MSIL with a Buy rating and a target price Rs.1474.96
on upside of 13 %. My call based on the following arguments:A)MSIL valuation (2
year forward P/Ex of 14%) look cheaper compared to the EPS growth expectations
of 30% over the same period. B) Demand scenario is slow in first two quarter then
it expect to grow by taking favorable action by RBI. C) Slowly but positive growth
in world as well as domestic market. D) MSIL is larger car manufacturing company
with good quality product and large service network chain provide continues to be
strong.
Global Scenario:-
Long drawn and contentious negotiations of the troika of IMF, EU and ECB with
Greece had revived investor hopes for an orderly transition but were quickly
dissipated after referendum fears. After long negotiations Europe market is showing
slow equerry and it will continue in 2012-13.
A mixed picture from the US: Data from housing and jobless claims shows
marginal improvement, Consumer confidence indices mixed, modest rebound in
manufacturing but unemployment rate still stubbornly high at 9%. Overall fears of
double dip recession recede as economy moves from recovery to expansion. US
Fed Officials predict CY 12 GDP to grow between 2.5 to2.9% (down from 3.3 to
3.7% in June11) and unemployment by Dec 12 to go no lower than 8.5% to 8.7%
(up from a more upbeat 7.8% to 8.2% envisaged in June11).
I believe that the most likely outcome for the global economy is likely to be
stressed government finances and very slow core economic growth for several
years.
Key Data
AU
Market Cap(bill) 380.075
52 Wk H/L (Rs) 1,375/905.55
Face Value 5.00
Equity
Share(mn)
288.91
Sensex 17,257.36
Nifty 5,243.15
Shareholding
Pattern
Holding in %
Promoters 54.21
MFs &
institutions
36.72
Others 6.60
General
Public
2.47

1
MARUTISUZUKIINDIALTD.|[Pickthedate]
MARUTI SUZUKI INDIA LTD.
Equity Research Report
Indian Economy:-
Fiscal Year 2011-12 was tough for Indian economy. High interest rate
(8%), inflation rate (9%-10%) and negative growth in manufacturing hurts
the economic growth. Rupee depreciation (Rs 52.86) and increasing crude
oil prices was big challenge for policy makers. In financial budget 2012-13
Government set GDP growth at 6.9% which is lowest from last 3 years.
Increase in indirect tax (service and excise duty) will damage confidence of
manufacturing companies (Auto companies) and increase price of basic
goods.
Budget and Auto Companies:-
Financial Budget FY 12-13 will show mix effect on Auto companies.
Increase in excise duty by 2% will increase car prices, but increase in
exemption limit (up to 2L), decrease in interest rate (6.5% to 7%),
appreciation of rupee (Rs 47/49) and no hick in diesel price in
current financial budget and slow growth in global market helps to
boost sale in domestic market.
Company Outlook:
Maruti Suzuki is the largest passenger vehicle manufacturer in India,
with 1.2m units. And the company plans to increase its manufacture
capacity to 1.75 million by year 2013.It dominates the cars segment
with 44.9% market share. It is also emerging as the global export
hub of small cars for Suzuki, with world strategic model A-Star
exclusively produced in India. The company’s domestic contribution
in sale is 88% and Export is 12%.
Exports:- Maruti Suzuki exports, entry-level models across the globe
to over 120 countries and the focus has been to identify new markets.
Some important markets include Latin America, Africa, South East
Asia and Oceana. 11.8% increase in export at end of the Month
February 2012
0
200000
400000
600000
800000
1000000
1200000
1400000
2007
2008
2009
2010
2011
2012E
2013E
NoofUnitsold
Year
Total Sale
Domestic Export

2
Financial Outlook:-
MSIL Showing average growth in Net sale is 25.85% from last 5
years. EBIDTA growth down by 6.84% and PAT down by 8.37% in
financial year 11-12 due to unfavorable economic condition, like
increase oil prices, interest rate, high inflation rate ,global crisis.
At profitability of company EBIDTA margin shown down 11.48%
as against 15.37% last year(FY10) andPAT down by 2% compare to
last year 8.62%(FY10).I expecting to improve it by 1% in FY12.
I can see positive improvement in Div. Yeild is 0.57% as compare to
0.42% in FY10.MSIL giving average return on equity is 18% from
last 5 years, P/E shown positive growth by 0.30% in FY11.
Valuation:-
By taking average growth in Gross sale and no. of unit sold are 24%
and 18%, estimated EPS for the FY12 and FY13 are Rs.104.40 and
Rs.174.00 respectively. Using FCFE model, target price per share for
FY12-13 is Rs.1474.91.I am giving BUY call for on the aspect of
long term returns.
DIVIDEND: The board recommends a dividend of Rs 7.50
per equityshare of Rs 5 each for the year ended 31st
March
2011 amounting to Rs2, 167 million.

3
SIZE OF THE INDUSTRY
The Indian Automotive Industry after de-licensing in July 1991 has grown
at a spectacular rate on an average of 17% for last few years. The industry
has attained a turnover of USD $35.8 billion, (INR 165,000 crores) and an
investment of USD 10.9 billion. The industry has provided direct and
indirect employment to 13.1 million people. Automobile industry is
currently contributing about 5% of the total GDP of India. India's current
GDP is about $1.4 trillion and is expected to grow to $3.75 trillion by
2020. The projected size in 2016 of the Indian automotive industry varies
between $122 billion and $159 billion including USD 35 billion in exports.
This translates into a contribution of 10% to 11% towards India's GDP by
2016, which is more than double the current contribution.
SEGMENTATION OF MARKET SHARE OF AUTOMOBILE
INDUSTRY IN INDIA
India is being recognized as potential emerging auto market.
Foreign players are adding to their investments in Indian auto industry.
Unlike the USA, the Indian passenger vehicle market is dominated by cars (79%).
India is the second largest tractor manufacturer in the world.
India is the fifth largest commercial vehicle manufacturer in the world.
India is the fourth largest car market in Asia - recently crossed the 1 million
mark.

4
Labor cost comparisons ($/Hour)8
Today’s high cost of production
12 $40.0
10 $35.0
8 $30.0
6 $25.0
4 $20.0
3 $15.0
2 $10.0
1 $5.0
0 $0.0
us/canada Mexico Eastern Western Eroup Japan South Eroup India Chiana Brazil
High cost developed markets
Low cost Emerging markets
Cost of Labor
S o urc e : Co s t o f Labo r – Ec o no mic Inte llige nc e Unit, Data Dic tio nary
: Light vehicle production forecast (millions of units)
80
70 South America
60 North America
50 Japan/ Korea
40 South Asia
30 Greater China
20 Middle East/ Africa
10 Europe
2008-09 2010-11 2012-13 2014-15
S o urc e : C S M Wo rldwide
Number of vehicles produced (millions)
Cost of Production
Automakers will focus on more user-friendly and low-cost vehicles that
are also the most advanced technologically.
The automakers will continue to shift their production facilities from high-
cost regions such as North America and the European Union to lower-cost
regions such as China, India and South America. The Indian passenger
vehicle market grew by 29 per cent in 2010-11
Light vehicle production forecast (millions of units)

5
P/E(x)
Company FY07 FY08 FY09 FY10 FY11
Maruti Suzuki indialtd. 14.79 13.73 18.49 16.40 16.61
TataMotors ltd 11.36 2.29 22.21 33.27 6.25
Mahindra& Mahindraltd. 19.20 5.94 35.21 21.09 15.04
Revenue Growth:-
MSIL is a India’s fast growing company with 90% retention ratio
,company is producing 1.2 million cars and expected to increase
production capacity to 1.75 million by 2013.Revenue average increase
by 25% y-to-y and expected same for 2012-13.
P/E ratio:-
Maruti Suzuki showing consistency in P/E ratio gives the good returns to
the investors.As compare to peers it shows high volatility in P/E ratios, it
means MSIL share is cheaper than pears .I am expecting 14x to 10x P/E
ratios in 2012-13 and that is one important reasons which we believe that
why one should prefer MSIL.

6
Income Statement
Y / E, 3 1st Ma rc h FY 0 9 FY 10 FY 11 FY 12 E FY 13 E
Ne t S a le s 2 , 0 3 , 5 8 3 2 , 8 9 , 5 8 5 3 , 6 1, 2 8 2 4 , 5 3 , 3 4 8 5 , 2 0 , 8 2 3
EBITDA 2 4 , 3 3 3 4 4 , 5 10 4 1, 4 6 7 5 4 , 2 0 5 8 0 , 7 2 3
EBITDA margin (%) 12% 15% 11% 12% 15%
Depreciation 7,065 8,250 10,135 13,168 16,099
EBIT 17 , 2 6 8 3 6 , 2 6 0 3 1, 3 3 2 4 1, 0 3 7 6 4 , 6 2 4
Other income 10,001 10,243 12,227 15,343 17,626
Interest exp/ (inc) 510 335 244 394 624
P BT 16 , 7 5 8 3 5 , 9 2 5 3 1, 0 8 8 4 0 , 6 4 3 6 3 , 9 9 9
PBT margin (%) 8% 12% 9% 9% 12%
Cos share in JV 0 0 0 0 0
Taxes 4,571 10,949 8,202 10,495 13,741
Extra ord exp/ Minority Interest 0 0 0 0 0
P AT (Re porte d) 12 , 18 7 2 4 , 9 7 6 2 2 , 8 8 6 3 0 , 14 8 5 0 , 2 5 8
Less: Extraordinary Income /Others 0 0 0 0 0
Adj P AT 12 , 18 7 2 4 , 9 7 6 2 2 , 8 8 6 3 0 , 14 8 5 0 , 2 5 8
Adj PAT margin (%) 6% 9% 6% 7% 10%
EP S 42.18 86.45 79.22 104.35 173.96
FINACIAL OUTLOOK
The Net revenue of the Company was Rs.3,61,282
million as against Rs.2,89,585 million in the previous
year showing a growth of 24.6 per cent. Sale of vehicles in
the domestic market increased to 1,132,739 units as
compared to 870,790 units in the previous year showing a
growth of 30.1 per cent.Total number of vehicles exported
was 138,266 as compared to 147,575 last year.
Earnings before interest, depreciation, tax and amortisation
(EBIDTA) was Rs. 41,467 million against Rs. 44,510
million in the previous year.
Profit beforetax (PBT) was Rs.31,088 million against Rs.
35,925 million in the previous year and profit after tax
(PAT) stood at Rs.22,886 million against Rs. 24,976
million in the previous year.

7
Balance sheet
Y/E, 31st March FY09 FY10 FY11 FY12E FY13E
Liabilities
Equity share capital 1,445 1,445 1,445 1,445 1,445
Reserves & Others 92,004 1,16,906 1,37,230 1,64,830 2,10,465
Total Shareholders’ funds 93,449 1,18,351 1,38,675 1,66,275 2,11,910
Secured 1 265 312 343 378
Unsecured 6,988 7,949 2,781 2,677 2,577
Total loans 6,989 8,214 3,093 3,020 2,955
Deferred tax lia. (net) 1,551 1,370 1,644 1,585 1,532
Total liabilities 1,01,989 1,27,935 1,43,412 1,70,881 2,16,397
Assets
Net fixed assets 87,206 1,04,067 1,17,377 1,45,987 1,75,999
Less: Depreciation / Amortisation 46,498 53,820 62,083 77,215 93,089
Capital WIP 8,613 3,876 14,286 13,319 15,522
Total non- current assets 49,321 54,123 69,580 82,091 98,432
Investments 31,733 71,766 51,067 75,436 95,423
Current assets
Inventories 9,023 12,088 14,150 17,756 20,399
Sundry debtors 9,378 8,099 8,933 12,439 12,114
Cash & cash equivalents 19,390 982 25,085 11,597 24,918
Loans and Advances 16,328 15,707 13,722 17,203 19,778
Other current assets 981 848 1,673 2,097 2,411
Total current assets 55,100 37,724 63,563 61,093 79,620
Total current liabilities 30,358 29,365 35,540 41,182 49,830
Total provisions 3,807 6,313 5,258 6,557 7,249
Net current assets 20,935 2,046 22,765 13,354 22,541
Misc. expenditure 0 0 0
Total assets 1,01,989 1,27,935 1,43,412 1,70,881 2,16,397

8
P e r sha re Da ta (Rs)
Y /E, 3 1st Ma rc h FY 0 9 FY 10 FY 11 FY 12 E FY 13 E
EPS Adj 42.2 86.4 79.2 104.4 174.0
EPS diluted Wtd. 42.2 86.4 79.2 104.4 174.0
CEPS 66.6 115.0 114.3 149.9 229.7
BVPS 307.4 366.6 444.8 527.5 653.3
Dividend 3.5 6.0 7.5 9.4 17.4
O/s shares.- actual (mn) 288.91 288.91 288.91 288.91 288.91
Dividend Yield (%) 0.45% 0.42% 0.57% 0.64% 1.07%
Ratios
Y /E, 3 1st Ma rc h FY 0 9 FY 10 FY 11 FY 12 E FY 13 E
Growth
Net sales (%) 13.99% 42.24% 24.76% 25.48% 14.88%
EBITDA (%) - 22.28% 82.92% - 6.84% 30.72% 48.92%
PAT adjusted (%) - 29.95% 104.94% - 8.37% 31.73% 66.71%
EPS adjusted (%) - 30% 105% - 8% 32% 67%
EPS diluted wtd. (%) - 30% 105% - 8% 32% 67%
EPS Consolidated & dil
V a lua tions
P/E (x) 18.5 16.4 16.6 14.1 9.3
Price/BV (x) 2.5 3.9 3.0 2.8 2.5
EV/EBITDA (x) 8.7 9.4 8.6 7.7 5.5
P/ Sales (x) 1.1 1.4 1.1 0.9 0.9
P rofita bility
EBITDA margin (%) 11.95% 15.37% 11.48% 11.96% 15.50%
Adj PAT margin (%) 5.99% 8.62% 6.33% 6.65% 9.65%
RoE (%) 12.59% 21.95% 16.12% 18.00% 23.97%
RoCE (%) 12.76% 21.93% 17.00% 19.09% 25.08%
BVPS (Rs) 307.4 366.6 444.8 527.5 653.3
Liquidity a nd Le ve ra ge ra tios
Quick Ratio 1.35 0.72 1.21 0.96 1.16
Total Asset Turnover 1.50 1.77 1.96 2.03 1.82
Debt to Equity Ratio 0.07 0.07 0.02 0.03 0.05
Debt Ratio 0.83 0.85 0.68 0.80 0.88
Current Ratio 1.61 1.06 1.56 1.33 1.52

9
5 FORCE MODEL

10
SOWT ANALYSIS

11
Stock Performance

12
Risks to my call
Fluctuations in the US$-INR and GBP-INR and GBP-US$
Change in the economic climate/ legislation against Indian offshore development
in the countries where the company provides its services.
Hick in petrol and disel prices will adversely impact on Sale.
Any slowdown in the Auto sector can adversely affect the company revenues.
Availability of Tax holidays and incentives from Government of India.
Rating definition
Buy : > 15% returns relative to Sensex Reduce : Up to (-) 15% returns relative to Sensex
Accumulate : Up to (+) 15% returns relative to Sensex Sell : > (-) 15% returns relative to Sensex

13
DESCLAIMER
This document is prepared for assistance only and is not intended to be and must not alone be taken as
the basis for any investment decision .The investment discussed of views expressed may not be suitable
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