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India Equity Research Reports, IPO and Stock News
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Per capita near inflexion point for car demand: Car penetration
in India was estimated at ~12 vehicles/1,000 people in FY2009
compared to around 21 vehicles/1,000 people in China.
Moreover, India’s PPP-based per capita is estimated to approach
US $5,000 over the next 4–5 years, which is expected to be the
inflexion point for the country’s car demand. Increasing
penetration is estimated to drive ~13% CAGR in domestic
volumes over FY2010–12E. Further, Maruti has a sizeable
competitive advantage over new foreign entrants due to its
widespread distribution network (nearly 2,767 and 681 service
and sales outlets, respectively), which is not easy to replicate..
Suzuki to make Maruti a small car-manufacturing hub: Suzuki
Japan is making Maruti a manufacturing hub to cater to the
increasing global demand for small cars, due to rising fuel prices
and stricter emission standards. Thus, we believe there is a huge
potential for the company to increase its share in the export
market. Moreover, R&D capabilities, so far largely housed at
Suzuki Japan, are progressively moving to Maruti. It is aiming to
achieve full model change capabilities over the next couple of
years, which will enable it to launch new models and variants in
the domestic markets at a much faster pace enabling it to
maintain its market share.
Valuation: The company reported a CAGR of ~15% in volume
over FY2008-10 (inline with the industry) and we estimate Maruti
to clock ~17% volume CAGR over FY2010-12E leading to ~19%
revenue CAGR. We believe that, high growth potential of Indian
car market would mitigate the impact of rising competition for
market leader Maruti Suzuki. At `1,183, the stock is trading at
15.4x and 11.7x FY2011E and FY2012E earnings of `76.6 and
`101, respectively. Owing to the recent decline in the stock price
we recommend a Buy on the stock with a Target Price of `1,515,
at which level it would trade at 15x FY2012E earnings.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Per capita near inflexion point for car demand: Car penetration
in India was estimated at ~12 vehicles/1,000 people in FY2009
compared to around 21 vehicles/1,000 people in China.
Moreover, India’s PPP-based per capita is estimated to approach
US $5,000 over the next 4–5 years, which is expected to be the
inflexion point for the country’s car demand. Increasing
penetration is estimated to drive ~13% CAGR in domestic
volumes over FY2010–12E. Further, Maruti has a sizeable
competitive advantage over new foreign entrants due to its
widespread distribution network (nearly 2,767 and 681 service
and sales outlets, respectively), which is not easy to replicate..
Suzuki to make Maruti a small car-manufacturing hub: Suzuki
Japan is making Maruti a manufacturing hub to cater to the
increasing global demand for small cars, due to rising fuel prices
and stricter emission standards. Thus, we believe there is a huge
potential for the company to increase its share in the export
market. Moreover, R&D capabilities, so far largely housed at
Suzuki Japan, are progressively moving to Maruti. It is aiming to
achieve full model change capabilities over the next couple of
years, which will enable it to launch new models and variants in
the domestic markets at a much faster pace enabling it to
maintain its market share.
Valuation: The company reported a CAGR of ~15% in volume
over FY2008-10 (inline with the industry) and we estimate Maruti
to clock ~17% volume CAGR over FY2010-12E leading to ~19%
revenue CAGR. We believe that, high growth potential of Indian
car market would mitigate the impact of rising competition for
market leader Maruti Suzuki. At `1,183, the stock is trading at
15.4x and 11.7x FY2011E and FY2012E earnings of `76.6 and
`101, respectively. Owing to the recent decline in the stock price
we recommend a Buy on the stock with a Target Price of `1,515,
at which level it would trade at 15x FY2012E earnings.
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