Stocks
Q3FY11 analysis: Maruti Suzuki, Bank of Baroda

Maruti gets hit by higher raw material & staff costs; BoB’s asset quality continues to improve

MARUTI SUZUKI

  •     Net profits and sales were at the lower end of expectations.
  •    The company was hit by higher raw material costs and staff costs. The Rs1,000 per vehicle discounts due to the festive season also had an impact. Staff costs are likely to remain at current levels to sales, the management indicated.
     
  •    The company also saw adverse currency impact-the yen appreciated sharply against the rupee.
     
  •    Maruti's capacity has increased to 1.4 million units from April 2011 (from 1.3 million units)-this could help reduce the waiting periods for its 'Swift' and 'Dzire' models, going forward.
     
  •     In its conference call, it said that it has hedged its euro exposure for the first half of FY12 but kept its dollar exposure un-hedged-and 70% of its current exports are dollar denominated. It has also not taken any price increases on exports.
  •    It has no plans to launch diesel models below the Swift's price point (aroundRs6,00,000) as yet, while competition has already launched diesel models.
     
  •    Upcoming small car launches by Toyota (March 2011) and Honda (October 2011) could limit Maruti's ability to take price hikes and this could pressure margins.
     
  •  Maruti's CNG models seem to be doing well. CNG models account for 20% of sales in the cities where they have been launched and an expansion of CNG infrastructure should boost volumes.
  •    What is great about this quarter is that Maruti has been able to defend its market share quite well. Market share was up at 54.3% in Q3 from 51% in Q2 and 50% in Q1. Defending it further may not be so easy and its biggest competitors are likely to be Honda, Hyundai, Toyota, and Volkswagen.

Maruti Suzuki Q3

FY11 Result Highlights

(Rs million)

Dec 09

Sept 10

Dec 10

Net sales

75,029

91,473

94,945

EBITDA

11,339

9,603

9,018

Profit after tax

6,875

5,982

5,652

Excise duty to gross sales (%)

8.8

10.5

10.7

Raw material to net sales (%)

74.5

77.4

78.4

Staff costs to net sales (%)

1.8

1.7

2.4

EBITDA margin

15.1

10.5

9.5

 

Maruti's share price has underperformed the Sensex quite sharply in the last three months.

 BANK OF BARODA

  •     Both NII and net profit came in higher than expectations.
     
  •    NII growth was led by 33% y-o-y and 7% q-o-q growth in loans.
     
  •   Deposits grew at 31% and 4% y-o-y and q-o-q.
     
  •    Credit/deposit ratio at 71% is amongst the best in the industry.
     
  •    Non-interest income moderated a bit mainly due to a huge fall in treasury income. However, forex income was up sharply.
     
  •    Provisions were up y-o-y but NPL provisions were down 15%.
     
  •     Net profit growth at 28% is one of the best among PSU banks.
     
  •    Restructured loans were Rs56 billion, almost the same as in Q2. Overall restructured assets are 2.9% (facility-wise) of loan book.
     
  •    The bank has confirmed that its total provision will be Rs20.60 billion for pension (annual charge of Rs4.10 billion to be amortized over five years) and Rs900 million for gratuity. A total of 22,400 of its employees participated in the second pension option.

 

Bank of Baroda

Q3 FY11 Result Highlights

(Rs million)

Dec 09

Sept 10

Dec 10

Net interest income

16,012

 20,381

 22,923

Forex

987

 1,000

 1,471

Treasury

1,393

 1,101

 848

Provisions

2,425

 1,855

3,041

Net profit

8,325

 10,193

 10,689

NIM (%)

3

3

3.2

Cost/income (%)

46

41

40

CASA

36%

36%

35%

Gross NPA

(% of loans)

1.4

1.4

1.3

 Bank of Baroda's shares fell quite sharply over a three-month period and have underperformed the Sensex by quite a margin. However, the shares have started picking up after the results.

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