Aug 09, 2012, 12.49 PM | Source: Moneycontrol.com
Way2Wealth has recommended an underperformer rating on Maruti Suzuki India in its July 31, 2012 research report.
, Way2Wealth |
“Maruti Suzuki India (MSIL) Q1FY13 topline is above expectations with a 28% YoY growth , which has come on the back of a mere 5% volume growth. Reinforcing factors has been higher average realizations on account of a favourable product mix and improved export realisation. However, margin pressure persists with unfavourable exchange move leading to unremitting costs. This is amidst a falling market, especially when looking into the Passenger Car space and company specific strike magnifying the ‘already’ sluggish business cycle. Q1 has highlighted the grave concerns for the company in terms of Market Share in lieu of the changing and evolving Industry. At this point, despite it being on a strong footing in respect to its peers, its sustained vulnerability to Competition, Currency & Consumption has led us to give it an ‘UnderPerform’ Rating.”
“MSIL’s latest and first launch in the SUV segment has already bookings for 32k units. SUV segment which forms 18% of the total domestic passenger vehicle sales has been the outperforming segment in FY12 and infact has grown by a stellar 51% in Q1FY13. 3 year CAGR for the segment has been 20%. For MSIL , the B (UV) segment growth has been phenomenal (low base) on account of Ertiga. Its market share in the <4400mm UV segment has seen a spurt from 5.5% to 37%. Infact in Q1, MSIL at 16.1% market share has come close to Toyota Kirloskar Motor, 2nd largest player in the UV market, which has a market share of 20.4%. As of now Diesel engine capacity for MSIL is at 3 lac units. As the assembly of Swift and Dzire is halted. we are of the view that the diesel engines from SPIL can be directed towards the Ertiga. This would provide the much needed margin relief to the company, given its unique pricing and positioning. Infact with this product the company has widened its Target market including SUV buyers and sedan buyers. Ertiga has the potential to add 550bps to MSIL’s Domestic growth considering 5k units are sold on a monthly basis.”
“Q1, though in line with expectations, does not give any reason to ring bells or blow the trumpet and therefore at this point we have a ‘Underperform’ Rating on the stock. The stock is quoting at a P/E multiple of ~15.9x its FY13E revised earnings of Rs 71.1, a mere 7% discount to its 5 year average multiple of 17x,” says Way2Wealth research report.
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