Maruti Suzuki, LIC Housing Finance, SBI Cards, JK Cement, Symphony And More Q2 Review: HDFC Securities

HDFC Securities Institutional Equities

Maruti Suzuki - In-line performance

Maruti Suzuki India Ltd.’s Q2 FY25 adjusted profit after tax at Rs 36.6 billion surpassed our estimates of Rs 35.3 billion on account of forex gains. Sequentially, adverse commodity costs and higher advertising spending impacted gross margin by 130 bps. With sequential growth in volumes, there was a benefit of 30-40 bps op leverage on margins.

Management alluded to a healthy festive demand, albeit with higher discounts. The Kharkhoda facility is expected to be commissioned by the end of FY25.

While the demand in the entry-level car segment is yet to pick up significantly, SUVs continue to drive growth. On the back of its aggressive launch spree over the last few quarters, Maruti Suzuki continues to be the market leader in the UV segment. We maintain Buy with a price target of Rs 14,300.

LIC Housing Finance - Growth remains tepid

LIC Housing Finance Ltd. reported a mixed set of results, with moderation in net interest margins (by 6 bps), and muted loan growth, partly offset by lower-than-expected credit costs (11bps). LIC Housing Finance’s core spreads continued to moderate to 2.04% (Q1 FY25: 2.07%), driven by moderation in yields driving NIMs to 2.71% (Q1 FY25: 2.76%).

NIMs are likely to continue to moderate during FY25-FY26E due to lower incremental spreads, driven by elevated competitive intensity, moderation in demand, and the rising cost of funds (management guidance of 2.7% - 2.9%).

Loan growth remains tepid (+6% YoY) across segments. Management has indicated a revival in the developer finance segment and the launch of affordable home loan products for the self-employed segment to aid margins and growth.

However, LIC Housing Finance’s experience in developer finance in the past and limited visibility of investments in the affordable home loans segment provide little comfort on the asset quality.

We increase our FY25/FY26E earnings estimates by 5%/3% to factor in lower credit costs and maintain Reduce, with a revised RI-based target price of Rs 605 (implying one time Sep-26 adjusted book value per share).

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