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Automotives
Maruti Suzuki
Maruti reiterated its expectation of 15% industry growth next year and its target of
maintaining a marketshare of 45% in the Indian passenger vehicle market. It also highlighted
that pricing momentum could remain subdued due to numerous launches by competition.
However, the company intends to maintain its EBITDA margin at 10% in the near term and is
striving to increase it to 11-12% in the medium term. In its view, the levers for margin
expansion would be increased localisation at the vendor level.
Key takeaways:
Competition: Impact of Etios launch has not been significant on Dzire demand. Waiting
period has come down due to increased availability. However, the spate of new
launches by competition limits the ability to pass on higher costs in the form of
increased pricing.
Discounts: Discounting increased in 3Q to Rs 10,500/car (vs. Rs 8,500/car in 2Q); th
company expects it to come down and the average for FY11E is expected at Rs
9,200/car. The average level of discounts has come down from FY10.
Growth drivers and segments: Car demand in smaller cities and towns is growing
much faster than the larger ones. Sales in top 10 cities currently contribute 44% of
overall sales compared with 53% five years ago. Rural India accounts for 20% of
Maruti's sales.
Capacity: Maruti will achieve a capacity of 1.4m/year from April 2011 (vs. 1.3m
currently). It is also on track to achieve 1.9m/year capacity by the beginning of FY13E.
Maruti plans for capacity expansion by forecasting industry growth and budgeting for
50% marketshare. Total capex for capacity expansion over two years in Rs 36bn.
Margins - Commodity costs will put pressure on margins in the near term. New
contracts for steel will be entered into in April 2011 and the company expects steel
makers to demand an increase in prices. However, the biggest lever of margins is
localisation. For Maruti, costs equivalent to 28% of sales (14% at company level and
14% at the vendor level) are denominated in JPY. The company intends to bring down
the exposure of its vendors to 7% over the next three years.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Automotives
Maruti Suzuki
Maruti reiterated its expectation of 15% industry growth next year and its target of
maintaining a marketshare of 45% in the Indian passenger vehicle market. It also highlighted
that pricing momentum could remain subdued due to numerous launches by competition.
However, the company intends to maintain its EBITDA margin at 10% in the near term and is
striving to increase it to 11-12% in the medium term. In its view, the levers for margin
expansion would be increased localisation at the vendor level.
Key takeaways:
Competition: Impact of Etios launch has not been significant on Dzire demand. Waiting
period has come down due to increased availability. However, the spate of new
launches by competition limits the ability to pass on higher costs in the form of
increased pricing.
Discounts: Discounting increased in 3Q to Rs 10,500/car (vs. Rs 8,500/car in 2Q); th
company expects it to come down and the average for FY11E is expected at Rs
9,200/car. The average level of discounts has come down from FY10.
Growth drivers and segments: Car demand in smaller cities and towns is growing
much faster than the larger ones. Sales in top 10 cities currently contribute 44% of
overall sales compared with 53% five years ago. Rural India accounts for 20% of
Maruti's sales.
Capacity: Maruti will achieve a capacity of 1.4m/year from April 2011 (vs. 1.3m
currently). It is also on track to achieve 1.9m/year capacity by the beginning of FY13E.
Maruti plans for capacity expansion by forecasting industry growth and budgeting for
50% marketshare. Total capex for capacity expansion over two years in Rs 36bn.
Margins - Commodity costs will put pressure on margins in the near term. New
contracts for steel will be entered into in April 2011 and the company expects steel
makers to demand an increase in prices. However, the biggest lever of margins is
localisation. For Maruti, costs equivalent to 28% of sales (14% at company level and
14% at the vendor level) are denominated in JPY. The company intends to bring down
the exposure of its vendors to 7% over the next three years.
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