Net sales grew 20% y-o-y (+9% q-o-q) to Rs 183.3 bn (est. of ~Rs 186.4 bn), driven by 5% y-o-y growth (+2% q-o-q) in realisations to Rs 442 k (est. of Rs 450 k). Adjusted Ebitda (for pre-operative costs) grew 15% y-o-y (+8% q-o-q) to Rs 26.8 bn (est. of Rs 27.2 bn). Adjusted Ebitda margin shrunk ~20 bp q-o-q (-70 bp y-o-y) to 14.6% (in-line), dragged by higher RM costs (+40 bp q-o-q). Further, lower other income restricted adjusted PAT growth to ~22% y-o-y (+3% q-o-q ) to ~Rs 18 bn; est. of ~Rs 18.2 bn). Dividend is raised from Rs 35/share to Rs 75/share y-o-y implying 37% payout (~24% in FY16).
Earnings call highlights: (i) Capacities can support up to 12% growth, but there is headroom to stretch, if needed. (ii) Waiting period on Ignis at 8-10 weeks. (iii) Impact of commodity price inflation largely reflected in Q4FY17. (iv) Discounts were lower by ~Rs 3,854/unit q-o-q to ~Rs 15.2 k (~90 bp contribution at Ebitda level). (v) All future new model agreement would have Rupee-based royalty. (vi) Recurring impact of Gujarat plant negligible in Q4FY17, to impact H1FY18.
Valuation and view: We remain positive considering (i) multi-year favourable product lifecycle, (ii) improvement in product mix, (iii) reducing JPY exposure, (iv) high FCF generation and sharp improvement in RoIC as capex intensity reduces and (v) scope for further improvement in payout. The stock trades at 21.2x/17.2x FY18e/19e consolidated EPS. Maintain Buy with a target price of Rs 7,319 (~20x Mar-19 core EPS + ~Rs 1,387 cash/share).
Volume growth recovers post demonetisation; Realisations at all-time high
Volume for Q4FY17 grew 15% y-o-y (+7% q-o-q) to 414 k units, led by improving situation post demonetisation. However, MSIL was better placed compared to its peers, primarily due to waiting periods in Baleno and Brezza, which accounted for bulk of growth.
Export volumes grew 18% y-o-y (+3% q-o-q), while domestic volumes rose 15% y-o-y (+7% q-o-q). Growth for MSIL during the quarter was driven by continued momentum in UV volumes led by Vitara Brezza. The entry-level segment continued to be under pressure as rural growth is still recovering gradually from the impact of demonetisation.
Domestic market share for MSIL increased 20 bp y-o-y to 52.7% (+130 bp q-o-q) in Q4FY17. We expect MSIL’s market share to improve going forward on the back of incremental volumes of recently launched Ignis, along with robust volumes of Baleno and Brezza, which still continue to enjoy high waiting periods.
Realisations grew ~5% y-o-y (+2% q-o-q) to ~Rs 442.4 k (est. of Rs 449.8 k). Improved product mix on account of higher volumes of Baleno and Brezza boosted realisations. As a result, net revenues grew ~20% y-o-y (+9% q-o-q) to ~Rs 183 bn (est. of ~Rs 186.4 bn).