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Maruti Suzuki India Ltd. — More pain, before
gain
Estimate Change
Cut forecasts, but retain PO
Maruti continues to be impacted by sluggish demand, largely industry-related, as
well as company-specific issues, i.e., JPY exposure. We, therefore, are cutting
our profit forecasts by 10% in FY12E (Street should follow) and 6% in FY13E (5%
above consensus). However, we are maintaining our PO of Rs 1,460 on a higher
imputed multiple of 13.3x FY13E P/E, which is closer to its historical average, on
expectations of a sales and profit rebound starting later this year.
Domestic slowdown likely to prolong
Inflationary pressures will likely result in a delayed peaking of the interest rate
cycle, thereby impacting discretionary spending this year. We, therefore, revise
industry sales growth expectations to ~5% in FY12E (earlier 10-12%), but we
expect a 20-22% rebound in FY13E, on pent-up demand. Maruti is likely to fare
worse this fiscal year, i.e., flat vs. 8% earlier, due to a skewed dependence on
petrol-driven vehicles, but we believe that it is likely to recover sharply ahead of
the industry, at 25%, in FY13E (21% earlier), due to (1) the ramp-up of diesel
engine capacity by ~40%, and (2) key launches (See below).
Maruti has lined up key launches
Over the next year, Maruti has a slew of new launches, both replacements for
compact/premium hatchbacks (55% of industry) and new Utility/Multi-purpose
vehicles (13%). We believe these initiatives should enable the company to regain
market share. The new entries are: (1) Swift, which has bookings of 50,000 units,
which should improve the monthly run-rate by 40-50% compared to earlier, (2) R3
Utility vehicle, where the company has no presence so far, and (3) a compact car
straddling the Alto 800, where competition is limited, possibly with a diesel variant
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Maruti Suzuki India Ltd. — More pain, before
gain
Estimate Change
Cut forecasts, but retain PO
Maruti continues to be impacted by sluggish demand, largely industry-related, as
well as company-specific issues, i.e., JPY exposure. We, therefore, are cutting
our profit forecasts by 10% in FY12E (Street should follow) and 6% in FY13E (5%
above consensus). However, we are maintaining our PO of Rs 1,460 on a higher
imputed multiple of 13.3x FY13E P/E, which is closer to its historical average, on
expectations of a sales and profit rebound starting later this year.
Domestic slowdown likely to prolong
Inflationary pressures will likely result in a delayed peaking of the interest rate
cycle, thereby impacting discretionary spending this year. We, therefore, revise
industry sales growth expectations to ~5% in FY12E (earlier 10-12%), but we
expect a 20-22% rebound in FY13E, on pent-up demand. Maruti is likely to fare
worse this fiscal year, i.e., flat vs. 8% earlier, due to a skewed dependence on
petrol-driven vehicles, but we believe that it is likely to recover sharply ahead of
the industry, at 25%, in FY13E (21% earlier), due to (1) the ramp-up of diesel
engine capacity by ~40%, and (2) key launches (See below).
Maruti has lined up key launches
Over the next year, Maruti has a slew of new launches, both replacements for
compact/premium hatchbacks (55% of industry) and new Utility/Multi-purpose
vehicles (13%). We believe these initiatives should enable the company to regain
market share. The new entries are: (1) Swift, which has bookings of 50,000 units,
which should improve the monthly run-rate by 40-50% compared to earlier, (2) R3
Utility vehicle, where the company has no presence so far, and (3) a compact car
straddling the Alto 800, where competition is limited, possibly with a diesel variant
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