Motilal Oswal expects Maruti to hit Rs 14,000; here's Q4FY18 results preview



How Suzuki's Hansalpur plant became Gujarat's top car manufacturing unit

  On Friday, Maruti Suzuki will report the financial performance for the January – March 2018 quarter (Q4FY18) and the full financial year 2017-18 (FY18). 


The automobile sector, which witnessed a healthy sales growth in FY18 led by higher demand from rural markets and the fast-growing SUV segment, should continue to do well in the new fiscal year (FY19) as well, analysts say.

According to data, sales of passenger vehicles (PV) of the country's top six car makers cumulatively rose by about 11% in FY18, as compared to 9% growth in FY17.

Maruti Suzuki has underperformed the markets thus far in calendar year 2018 (CY18) by falling around 8% as compared to 0.4% rise in the Nifty50 and around 4% fall in the Nifty Auto index, ACE Equity data shows.

Analysts expect the earnings upgrade cycle for Maruti to continue in FY19 as well, driven by higher volumes and margins. 

"Our FY19/20 consolidated earnings per share (EPS) is higher by 5% / 13% than the consensus, led by higher margins. The stock trades at 26x/20.1x FY19/20E consolidated EPS. Maintain 'buy' with a one-year target price of Rs 10,525. Over 3 years, we estimate total return of 15.3% CAGR with target price of Rs 14,213," says an analyst tracking the company with Motilal Oswal Research in a recent report.

Meanwhile, here's what leading brokerages expect from Maruti's Q4FY18 numbers due later on Friday.

BNP Paribas research

4QFY18E revenue to grow at 14.7% y-o-y supported by 11.6% y-o-y volume growth and higher realisations on a better mix. Strong realisation due to better product mix (Dzire and Baleno) and less discounting vs 4QFY17 which was impacted by demonetisation and Gujarat plant ramp-up costs.

Expect 135bp y-o-y EBITDA margin gain on higher volume, better mix and less discounting, partly pulled down by higher commodity costs. Watch out management commentary on retail demand; industry discounting; inventory; rural demand trends; Gujarat plant ramp up; EVs; collaborations; road-map for FY19 and ahead. Our 12-month DCF-based target price is Rs 10,600.

Kotak institutional equities

We expect revenues to increase by 14% y-o-y in 4QFY18 on the back of 12% y-o-y volume growth and 4% y-o-y increase in realizations due to a better product mix (higher Baleno and Brezza volumes). We expect EBITDA to increase by 27% y-o-y in 4QFY18 led by strong revenue growth and operating leverage benefits.

Edelweiss Research

We expect revenue growth of 13% y-o-y driven by volume growth of 11.4% Y-o-y and favourable mix. We expect operating margins to remain flat sequentially at 15.8% as benefits of a favourable mix are offset by slightly lower volumes and Gujarat plant ramp up.

IDBI Capital

We expect revenues to grow by 13% y-o-y (+7% q-o-q) to Rs 206 billion, led by growth of +11% y-o-y (+7% q-o-q) in sales volumes. EBITDA margin is pegged at 15.5%, due to better scale and favourable product mix. Adjusted PAT (profit after tax) is likely to increased +22% y-o-y (+15% q-o-q) to Rs 20.7 billion.