Maruti Udyog market outperformer: tgt 931: Enam

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Maruti Udyog market outperformer: tgt 931: Enam

Enam Securities is bullish on Maruti Udyog and expects target price of Rs 931. They maintain their sector outperformer rating on the stock with a target price of Rs 931 (based on 14x FY09 Core EPS + Cash/ investments of Rs 120/ share).

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Enam Securities is bullish on Maruti Udyog and expects target price of Rs 931. They maintain their sector outperformer rating on the stock with a target price of Rs 931 (based on 14x FY09 Core EPS + Cash/ investments of Rs 120/ share).  

ENAM Securities research report on Maruti Udyog

MUL's market leadership will continue despite competitive pressures 

• MUL better geared to take on competition post the product portfolio overhaul in the last two years. 
• MUL has launched 5 new models/ variants in the last 18 months. 
• MUL has registered a 19% YTD growth and has bucked the industry trend, despite rising interest rates and tight availability of finance
• Some of MUL's key success factors will remain unchallenged by competition. e.g. MUL's formidable geographical reach

India will become Suzuki's largest manufacturing base by 2009

• Asia remains key to Suzuki as it accounts for 22% of revenues and 38% of operating profits. MUL to play a key role in Suzuki's global plans as Suzuki is increasing production in low cost countries (LCC's) to maintain cost competitiveness 
• MUL expects to export 0.1mn units in FY09 and 0.2 million units by FY10, as compared to 55,000 units in FY08

Short Term Outlook: 

• A further rise in interest rates could stem the volume momentum, however we expect demand for new products to remain strong 
• Lack of product launches by competitors in the near term will help MUL to maintain its market share

Long Term Outlook: 

• Severe competition in 2010, will put pressure on volumes and profitability. Although there will be a drop in market share for MUL, we expect MUL to continue to remain a formidable player 
• Exports to Suzuki will act as a cushion, in case volumes show any negative surprises in the domestic market 
• Royalty payments to Suzuki, could be a major issue in the future ��

Valuations  At CMP of Rs 790, it trades at 13.6x and 11.6x FY08E and FY09E Core EPS of Rs 50 and Rs 58, respectively. We maintain our sector Outperformer rating on the stock with a target price of Rs 931 (based on 14x FY09 Core EPS + Cash/ investments of Rs 120/ share)