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Maruti Suzuki India (MRTI.BO; Rs1,227.90; 2L)
Takeaways from Mumbai — Maruti presented at the Citi India Investor
Conference in Mumbai. Below are key takeaways.
Consumption signals are mixed — MSIL management noted that whilst
consumer enquiries are up 28% Y/Y, consumers are deferring the purchase
decision on account of factors like rising consumer expenditure, and also a
combination of factors like inflation, fuel price hikes, et al. that are negatively
impacting consumer sentiment. Management alluded that incentives might be
increased to stimulate demand over the next few months. The positives are
healthy liquidity and continued availability of bank credit to the auto sector as
banks haven’t (yet) imposed more stringent credit evaluation criteria.
Growth - yes - but in pockets — Regionally, growth is strong in south and west
India, but decelerating in north and east India. Across cities, growth is robust in
the top 10 cities and in rural India (>15%), but is faltering in tier 2/3 cities.
Pricing - and margins - constrained over the short term — Management
noted that MSIL, in aggregate, has a cost+ pricing strategy; within segments
however, it might not fully pass through costs as it seeks to counter competition.
Input costs - primarily steel and rubber - have risen 10%/20% respectively YoY
and MSIL hasn’t fully passed through these costs to counter competition. Over
the next 1-2 years, management endeavours to increase margins by 100-
200bps.
Long term growth outlook robust — MSIL management noted that by FY16,
annual sales should be around 4.5-5m units for the market. MSIL is expanding
capacities to 1.9m units (end FY13) and will commission a new 1m unit plant (in
Gujarat) to ensure it has sufficient capacity to cater to demand over the next 5
years. The long term outlook is supported by factors like rising income levels,
younger first time buyers, increasing purchases of additional cars, and a faster
replacement cycle.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Maruti Suzuki India (MRTI.BO; Rs1,227.90; 2L)
Takeaways from Mumbai — Maruti presented at the Citi India Investor
Conference in Mumbai. Below are key takeaways.
Consumption signals are mixed — MSIL management noted that whilst
consumer enquiries are up 28% Y/Y, consumers are deferring the purchase
decision on account of factors like rising consumer expenditure, and also a
combination of factors like inflation, fuel price hikes, et al. that are negatively
impacting consumer sentiment. Management alluded that incentives might be
increased to stimulate demand over the next few months. The positives are
healthy liquidity and continued availability of bank credit to the auto sector as
banks haven’t (yet) imposed more stringent credit evaluation criteria.
Growth - yes - but in pockets — Regionally, growth is strong in south and west
India, but decelerating in north and east India. Across cities, growth is robust in
the top 10 cities and in rural India (>15%), but is faltering in tier 2/3 cities.
Pricing - and margins - constrained over the short term — Management
noted that MSIL, in aggregate, has a cost+ pricing strategy; within segments
however, it might not fully pass through costs as it seeks to counter competition.
Input costs - primarily steel and rubber - have risen 10%/20% respectively YoY
and MSIL hasn’t fully passed through these costs to counter competition. Over
the next 1-2 years, management endeavours to increase margins by 100-
200bps.
Long term growth outlook robust — MSIL management noted that by FY16,
annual sales should be around 4.5-5m units for the market. MSIL is expanding
capacities to 1.9m units (end FY13) and will commission a new 1m unit plant (in
Gujarat) to ensure it has sufficient capacity to cater to demand over the next 5
years. The long term outlook is supported by factors like rising income levels,
younger first time buyers, increasing purchases of additional cars, and a faster
replacement cycle.
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