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S t r i k e d e n t s p r o d u c t i o n; i m p a s s e c o n t i n u e s …
Maruti Suzuki India Ltd. (MSIL) has again witnessed a standoff with the
workers since August 29. This was triggered as the management
prohibited workers from entering the factory premises unless they signed
a “Good Conduct Bond”, after alleged intentional sabotage/go-slow led to
a loss of ~10,000 vehicles in July 2011.
Contentious issue of 'good conduct' bond
Production had come to a halt on August 29, after MSIL suspended and
dismissed 21 employees on charges of sabotaging production and
deliberately causing quality problems. It has asked all workers to sign the
“Good Conduct Bond” failing which they would be prevented from
resuming duty. The management is firm in its stance and has reiterated
that it would not tolerate any compromise in discipline. The combined
volume loss from the strike and prior slow tactics in July 2011 is
estimated in excess of 20,000 units.
Workforce recruitment results in lesser volume shrinkage
The company has reached pre-strike levels of Swift production of 500
cars/day with the start of plant-B and by hiring semi-trained workers. The
overall workforce has touched 1200 workers and is increasing every
passing day with increasing hiring.
Resurgence in volumes for H2FY12 seems lost
MSIL has witnessed a market share loss of ~400 bps in the last couple of
months. This was primarily due to production hassles. We believe MSIL
would claw back a significant portion. However, opportunity of volume
resurgence owing to festive season for MSIL looks to have gone amiss.
V a l u a t i o n
We have cut down our volume estimates by ~8.0% and 6.5% for FY12E
and FY13E considering near term and long-term pressures. At the CMP of
| 1108, the stock is trading at 11.2x FY13E EPS of | 98.9. We have valued
it at 13.0x FY13E EPS to arrive at a value of | 1286 per share. We maintain
our BUY rating and recommend that investors who have invested at
higher levels make a staggered entry into the stock at lower levels.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
S t r i k e d e n t s p r o d u c t i o n; i m p a s s e c o n t i n u e s …
Maruti Suzuki India Ltd. (MSIL) has again witnessed a standoff with the
workers since August 29. This was triggered as the management
prohibited workers from entering the factory premises unless they signed
a “Good Conduct Bond”, after alleged intentional sabotage/go-slow led to
a loss of ~10,000 vehicles in July 2011.
Contentious issue of 'good conduct' bond
Production had come to a halt on August 29, after MSIL suspended and
dismissed 21 employees on charges of sabotaging production and
deliberately causing quality problems. It has asked all workers to sign the
“Good Conduct Bond” failing which they would be prevented from
resuming duty. The management is firm in its stance and has reiterated
that it would not tolerate any compromise in discipline. The combined
volume loss from the strike and prior slow tactics in July 2011 is
estimated in excess of 20,000 units.
Workforce recruitment results in lesser volume shrinkage
The company has reached pre-strike levels of Swift production of 500
cars/day with the start of plant-B and by hiring semi-trained workers. The
overall workforce has touched 1200 workers and is increasing every
passing day with increasing hiring.
Resurgence in volumes for H2FY12 seems lost
MSIL has witnessed a market share loss of ~400 bps in the last couple of
months. This was primarily due to production hassles. We believe MSIL
would claw back a significant portion. However, opportunity of volume
resurgence owing to festive season for MSIL looks to have gone amiss.
V a l u a t i o n
We have cut down our volume estimates by ~8.0% and 6.5% for FY12E
and FY13E considering near term and long-term pressures. At the CMP of
| 1108, the stock is trading at 11.2x FY13E EPS of | 98.9. We have valued
it at 13.0x FY13E EPS to arrive at a value of | 1286 per share. We maintain
our BUY rating and recommend that investors who have invested at
higher levels make a staggered entry into the stock at lower levels.
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