MARUTI SUZUKI: Oct-10 volumes above estimates:: Motilal Oswal

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MARUTI SUZUKI: Oct-10 volumes above estimates; Highest ever at 118,908 (+39% YoY, 10% MoM); Buy

-          Maruti's Oct-10 volumes are above estimates with 39% YoY growth (~10% MoM) to 118,908 units (est 111,000 units). This is driven by 33% YoY growth in domestic volumes and 10% growth in exports. These are highest ever monthly volumes and are boosted by de-bottlenecking of capacity by 10,000 units/month from Oct-10.

-          Domestic volumes grew 50% YoY (~13% MoM) to 107,555 units (v/s est 100,000 units). Volume growth in domestic market was driven by newly launched Eeco (C segment grew by 92% YoY) as well as recently launched Alto K-10 and New Wagon-R.

-          Inventory build-up at est 4 weeks at end Oct-10 (v/s 3.4-4 weeks in Sep-10) ahead of festive season.

-          While C segment volumes grew 92% YoY (11% MoM), both A2 and A3 segment witnessed robust growth of 51% YoY (~12.5% MoM) and 32% YoY (~10% MoM).

-          Recently launched Alto K-10 has received strong response and contributes ~40-45% of total Alto volumes.

-          Export volumes were above estimates at 11,353 units (v/s est 11,000), a decline of 18% YoY (~12% MoM), impacted by significant decline in exports to EU. However, recent launch of A-Star in non-European markets has diluted impact of decline in exports to EU. Non-EU markets accounts for ~60% of exports v/s 20% in Oct-09.

-          Volume growth in domestic market will remain robust driven by strong retail demand and launch of Alto-K10 as well as re-launch of Wagon-R CNG and other CNG fitted vehicles (Alto 800, Eeco, Estilo and SX4) in 2^nd week of October.

-          It is focusing on preponing commissioning of brownfield expansion of 0.25m cars at Manesar by 3QFY12 and another 0.25m cars by 4QFY12.

-          We model FY11 volume growth of 22% to 1.24m units (v/s guidance of 1.2m), with domestic volume growth of 26% and export volume de-growth of 2%, implying residual monthly run rate of 105,187 units (v/s 102,269 units in FY11YTD) and a residual growth of 14% v/s 28% in 1HFY11.

-          The stock trades at 15.6x FY12 EPS and 14.5x FY12 consolidated EPS.