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Maruti Suzuki India Ltd.
Solid growth, distress
valuations
Preferred pick in autos
Maruti is our preferred pick in autos for this year. Although adverse currency
movement has driven cut in margin assumptions, and therefore our profit
forecasts by 7%-3% over FY12-13, we maintain our above consensus estimates
of fastest 23% EPS CAGR in this space. Our PO has been tweaked to Rs 1,700.
Margins bottoming out
We expect margins to recover from next fiscal, as negative impact of higher
commodity prices, adverse currency movement and competitive pricing would be
more than offset by operating leverage, improved sales mix (domestic, profitable
models Swift/Dzire) and benefits of cost restructuring especially localization (cut
indirect JPY denominated imports to 5% from 12% in 3 years).
Mid teens growth likely
Maruti’s domestic sale growth of 30% in FY11 is similar to industry, and ahead of
street expectations. Significantly, other incumbents like Hyundai, Tata Motors
have slipped behind despite key launches. We expect Maruti to register 18%
sales CAGR driven by company’s superior franchise, shift to rural markets (now
20%) and slew of new launches in segments not represented so far (Utility
vehicles) or well ahead of competition (CNG).
Concerns overdone
Following 20% underperformance (versus the market) over the past fiscal year,
we believe de-rating relating to rising costs, competitive pressures is behind us.
As a proxy play to the fastest growing segment in passenger vehicles, our
imputed multiple is in line with historical average.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Maruti Suzuki India Ltd.
Solid growth, distress
valuations
Preferred pick in autos
Maruti is our preferred pick in autos for this year. Although adverse currency
movement has driven cut in margin assumptions, and therefore our profit
forecasts by 7%-3% over FY12-13, we maintain our above consensus estimates
of fastest 23% EPS CAGR in this space. Our PO has been tweaked to Rs 1,700.
Margins bottoming out
We expect margins to recover from next fiscal, as negative impact of higher
commodity prices, adverse currency movement and competitive pricing would be
more than offset by operating leverage, improved sales mix (domestic, profitable
models Swift/Dzire) and benefits of cost restructuring especially localization (cut
indirect JPY denominated imports to 5% from 12% in 3 years).
Mid teens growth likely
Maruti’s domestic sale growth of 30% in FY11 is similar to industry, and ahead of
street expectations. Significantly, other incumbents like Hyundai, Tata Motors
have slipped behind despite key launches. We expect Maruti to register 18%
sales CAGR driven by company’s superior franchise, shift to rural markets (now
20%) and slew of new launches in segments not represented so far (Utility
vehicles) or well ahead of competition (CNG).
Concerns overdone
Following 20% underperformance (versus the market) over the past fiscal year,
we believe de-rating relating to rising costs, competitive pressures is behind us.
As a proxy play to the fastest growing segment in passenger vehicles, our
imputed multiple is in line with historical average.
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