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Strike at Maruti’s Manesar plant has been called off
The month-long strike at Maruti’s Manesar plant has been ended after an agreement was
reached between the workers and the company’s management. The agreement was
reached on September 30, 2011, and the full production is expected to be resumed from
October 3, 2011. As part of the agreement, workers have agreed to sign the good conduct
bond and management has agreed to reinstate 18 trainees who were earlier suspended.
However, the company has not taken back 44 regular employees against whom
disciplinary action was taken and they are still suspended. Maruti will also be withholding
the salary of the employees for the standoff period. Employees at the Manesar facility were
on a strike since August 29, 2011, after the management prevented workers from entering
the factory premises unless they sign a good conduct bond. This was following the alleged
sabotage and deliberate compromise on the quality front by employees.
The Manesar plant A, which has a daily capacity of ~1,250 units (350,000 units annually),
manufactures Swift, SX4 and A-Star. Recently, in September 2011, Maruti also commenced
production at plant B, which has annual capacity of 250,000 units. While Maruti continued
to produce 600-750 Swift vehicles on a daily basis from the Manesar facility, the
production of A-Star and SX4 was completely halted. As a result, sales for the two models
were adversely impacted in September 2011. We believe the recent strike has led to a
production loss of 20,000-25,000 units for the company, which translates into revenue
loss of `600cr-700cr. Further, due to the strike (in June and August-September), the
market share of the company in the domestic passenger car market has fallen by almost
500bp to ~43%. Considering increased competition in the domestic passenger car market
in recent times, we feel that it will be challenging for the company to regain its lost ground.
We expect 2QFY2012 results of Maruti to be negatively affected due to the recent strike,
which is likely to shrink the company’s bottom line by `35cr-40cr. We revise our volume
estimates downwards for FY2012E/13E by ~12%/~15% to 1.18mn/1.33mn units.
Consequently, our EPS estimates stand revised at `75.4/`90.1. However, we maintain our
Accumulate rating on the stock with a revised target price of `1,172
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Strike at Maruti’s Manesar plant has been called off
The month-long strike at Maruti’s Manesar plant has been ended after an agreement was
reached between the workers and the company’s management. The agreement was
reached on September 30, 2011, and the full production is expected to be resumed from
October 3, 2011. As part of the agreement, workers have agreed to sign the good conduct
bond and management has agreed to reinstate 18 trainees who were earlier suspended.
However, the company has not taken back 44 regular employees against whom
disciplinary action was taken and they are still suspended. Maruti will also be withholding
the salary of the employees for the standoff period. Employees at the Manesar facility were
on a strike since August 29, 2011, after the management prevented workers from entering
the factory premises unless they sign a good conduct bond. This was following the alleged
sabotage and deliberate compromise on the quality front by employees.
The Manesar plant A, which has a daily capacity of ~1,250 units (350,000 units annually),
manufactures Swift, SX4 and A-Star. Recently, in September 2011, Maruti also commenced
production at plant B, which has annual capacity of 250,000 units. While Maruti continued
to produce 600-750 Swift vehicles on a daily basis from the Manesar facility, the
production of A-Star and SX4 was completely halted. As a result, sales for the two models
were adversely impacted in September 2011. We believe the recent strike has led to a
production loss of 20,000-25,000 units for the company, which translates into revenue
loss of `600cr-700cr. Further, due to the strike (in June and August-September), the
market share of the company in the domestic passenger car market has fallen by almost
500bp to ~43%. Considering increased competition in the domestic passenger car market
in recent times, we feel that it will be challenging for the company to regain its lost ground.
We expect 2QFY2012 results of Maruti to be negatively affected due to the recent strike,
which is likely to shrink the company’s bottom line by `35cr-40cr. We revise our volume
estimates downwards for FY2012E/13E by ~12%/~15% to 1.18mn/1.33mn units.
Consequently, our EPS estimates stand revised at `75.4/`90.1. However, we maintain our
Accumulate rating on the stock with a revised target price of `1,172
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