Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Spoke to Maruti top mgmt, to asses impact of Japan's tragic earthquake (has 28% of net
sales as yen exposure). It said no production impact as its Japanese vendor base is not
located on the impacted region. However, yen appreciation will have major dent on its profits
as it is carrying very low hedges currently.
Production will not be impacted in short-term despite large imports
Management said its major vendor base was safe, as it was not located in the recent
earthquake zone.
Maruti carries few months inventory of imported components, to reduce impact of such
unforeseen disruptions.
However, the power black-out may have few months down impact, as its vendors don't
have standby generators.
Yen appreciation will be dampener as hedges are very low
Maruti currently carries very low yen hedges in the book in spite of its high exposure to
currency (23% from imported components and 5% for royalty payment).
Compared to tradition of carrying 6 months hedges, we believe it carries just month or
two equivalent hedges, as it had a view of yen depreciation from US upturn. But with this
catastrophic strike on Japan, yen charting the course of appreciation in short term will
have an impact on Maruti profits.
Our sensitivity analysis shows that, a 10% yen appreciation leads to 25% impact on its
EBITDA.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Spoke to Maruti top mgmt, to asses impact of Japan's tragic earthquake (has 28% of net
sales as yen exposure). It said no production impact as its Japanese vendor base is not
located on the impacted region. However, yen appreciation will have major dent on its profits
as it is carrying very low hedges currently.
Production will not be impacted in short-term despite large imports
Management said its major vendor base was safe, as it was not located in the recent
earthquake zone.
Maruti carries few months inventory of imported components, to reduce impact of such
unforeseen disruptions.
However, the power black-out may have few months down impact, as its vendors don't
have standby generators.
Yen appreciation will be dampener as hedges are very low
Maruti currently carries very low yen hedges in the book in spite of its high exposure to
currency (23% from imported components and 5% for royalty payment).
Compared to tradition of carrying 6 months hedges, we believe it carries just month or
two equivalent hedges, as it had a view of yen depreciation from US upturn. But with this
catastrophic strike on Japan, yen charting the course of appreciation in short term will
have an impact on Maruti profits.
Our sensitivity analysis shows that, a 10% yen appreciation leads to 25% impact on its
EBITDA.
No comments:
Post a Comment