Maruti Suzuki India Ltd. Downside risk to earnings persists, Downgrade to HOLD :Emkay,

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Maruti Suzuki India Ltd.

Downside risk to earnings persists, Downgrade to HOLD

HOLD

CMP: Rs1,128                                        Target Price: Rs1,140

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n     Results below est. EBIDTA at Rs 5.2bn (est - Rs 5.8bn) and APAT at Rs 2.6bn (est. - Rs 3.4bn). Consider MTM (Rs 1bn)  on royalty as normal exp. as payment due in Nov 2011

n     Demand is skewed towards diesel vehicles. Sales of petrol vehicles registered decline in 1HFY12. Slower ramp up at Manesar plant to limit optimal utilization in the near term

n     Lower FY12/FY13 vols. by 7.9%/2.4% to 1.19/1.5 mn units, EPS by 20%/10% to Rs 63.9/77.6. Factoring in Re/JPY at 1.7/1.64  vs 1.75/1.7 for FY12/13

n     Downgrade to HOLD, see downside risks from lower volumes. Near term upsides arise from depreciating Yen (4% in one day) as MSIL will start hedging its 2HFY12 exposure