Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Risk – Reward turning favourable: Maruti Suzuki’s (MSIL) stock price has
declined by 15.2% in last 6 months underperforming the broader markets by
6.0%. Increased competition, negative currency impact (Yen appreciated by
~8%) coupled with higher commodity prices led to a severe underperformance.
However, given the current valuation of 11.5x FY13E EPS, which is well below
the 5yr average of 15.2x 1yr fwd PE, and the expected recovery in volumes in
FY13E, we believe the risk: reward ratio for Maruti Suzuki is turning favourable.
Upgrade to ‘Accumulate’ from ‘Reduce’ on account of limited downside : We
have been maintaining our ‘Reduce’ rating since Feb’10 on account of capacity
constraints, competition and appreciating yen. However, at the CMP, the stock
is trading at 13.9x FY12E EPS and 11.5x FY13E EPS, which is attractive, given the
20.6% YoY growth in earnings for FY13E. Given the limited downside from the
current level and attractive valuations, we are upgrading our recommendation
to ‘Accumulate’ from ‘Reduce’ earlier.
Interest rate cycle nearing its peak: The strongest indicator that rates have
peaked, or are near peak, is seen in the trends in the OIS (Overnight Indexed
Swaps) curve. The OIS curve has turned sharply inverted in the last 60 days with
longer tenor swaps yielding 100-150bps lower than near-term swaps. This
indicates that the bond market now expects rates to come down in the not-toodistant
future. With interest rate cycle nearing its peak, we believe the four
wheeler space will be the most likely beneficiary of the same.
Average one‐year fwd P/E stands at 15.2x: Assuming a 10% discount to the
average 1-Yr fwd P/E of 15.2x (last 5 years average) i.e. 13.7x, we arrive at a
target price of Rs1,313 based on FY13E EPS a potential upside of 18.8%.
Worst case Scenario target price @ Rs1,000: We assume volume growth of only
5.8% against our base case of 12% volume growth in FY13E. At the same time,
we have modelled no improvement in operating margins. As a result, we arrive
at a TP of Rs1,000/ share based on the current valuation of 11.6x FY13E EPS of
Rs86.2.
Our volume estimates: We estimate a flat volume for FY12E at 1.25mn and a
12% volume growth for FY13E at 1.4mn units. New Swift has received a good
response and MSIL already has an advance booking of ~50,000 units. Initial
wholesale volumes are expected to be higher at 16,000 units / month compared
to earlier Swift which use to sell around 12,000 units/ month.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Risk – Reward turning favourable: Maruti Suzuki’s (MSIL) stock price has
declined by 15.2% in last 6 months underperforming the broader markets by
6.0%. Increased competition, negative currency impact (Yen appreciated by
~8%) coupled with higher commodity prices led to a severe underperformance.
However, given the current valuation of 11.5x FY13E EPS, which is well below
the 5yr average of 15.2x 1yr fwd PE, and the expected recovery in volumes in
FY13E, we believe the risk: reward ratio for Maruti Suzuki is turning favourable.
Upgrade to ‘Accumulate’ from ‘Reduce’ on account of limited downside : We
have been maintaining our ‘Reduce’ rating since Feb’10 on account of capacity
constraints, competition and appreciating yen. However, at the CMP, the stock
is trading at 13.9x FY12E EPS and 11.5x FY13E EPS, which is attractive, given the
20.6% YoY growth in earnings for FY13E. Given the limited downside from the
current level and attractive valuations, we are upgrading our recommendation
to ‘Accumulate’ from ‘Reduce’ earlier.
Interest rate cycle nearing its peak: The strongest indicator that rates have
peaked, or are near peak, is seen in the trends in the OIS (Overnight Indexed
Swaps) curve. The OIS curve has turned sharply inverted in the last 60 days with
longer tenor swaps yielding 100-150bps lower than near-term swaps. This
indicates that the bond market now expects rates to come down in the not-toodistant
future. With interest rate cycle nearing its peak, we believe the four
wheeler space will be the most likely beneficiary of the same.
Average one‐year fwd P/E stands at 15.2x: Assuming a 10% discount to the
average 1-Yr fwd P/E of 15.2x (last 5 years average) i.e. 13.7x, we arrive at a
target price of Rs1,313 based on FY13E EPS a potential upside of 18.8%.
Worst case Scenario target price @ Rs1,000: We assume volume growth of only
5.8% against our base case of 12% volume growth in FY13E. At the same time,
we have modelled no improvement in operating margins. As a result, we arrive
at a TP of Rs1,000/ share based on the current valuation of 11.6x FY13E EPS of
Rs86.2.
Our volume estimates: We estimate a flat volume for FY12E at 1.25mn and a
12% volume growth for FY13E at 1.4mn units. New Swift has received a good
response and MSIL already has an advance booking of ~50,000 units. Initial
wholesale volumes are expected to be higher at 16,000 units / month compared
to earlier Swift which use to sell around 12,000 units/ month.
No comments:
Post a Comment