Maruti Suzuki - Jan’11 volume: Good show, in line with expectations: Anand Rathi

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Maruti Suzuki India
Jan’11 volume: Good show, in line with expectations
In Jan ’11, Maruti Suzuki posted stable volume growth of 14.7%
yoy (and 10.6% mom) to 109,743 units, in line with expectations.
Volumes followed the normal January trend, being better mom.

 Good domestic performance. Domestic volumes grew 23.8%
yoy and 12.2% mom. Volumes were boosted by the A2 segment,
+23.8% yoy and +12.4% mom. Other key segments were MPVs,
+27.7% yoy and +2.9% mom, and A3, which also did well
+32.6% yoy and +27.4% mom. The MPV sales were boosted by
‘Eeco’, launched in Jan’10; despite the base now kicking in,
volume growth in the segment has been good.
 Lower exports. The discontinuation of the scrappage benefits in
Europe meant that MSIL’s exports have plateaued in the 9-13,000
per month band in the near term. In Jan, MSIL’s exports were
36% lower yoy (and 4.5% mom) to 9,321 units. MSIL has been
strengthening its presence in non-EU markets to counter the
shrinking demand in Europe, and thereby arrest the decline in its
exports.
 Valuation and risks MSIL has had a good growth rate in YTD
FY11, of 25.5% yoy. The residual growth estimate ahead is 14.3%.
The company is expanding its capacity to capture incremental
demand ahead. MSIL trades at 12.6x FY12e and 10.4x FY13e
EPS. We recommend a Buy. Risks: Slump in car demand,
unfavourable currency movement, and rise in commodity costs.