May revise price target upwards for Maruti, says IIFL

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May revise price target upwards for Maruti, says IIFL

In an interview with CNBC-TV18, Prayesh Jain of IIFL, gave his views on the auto maker Maruti’s fourth quarter performance and his outlook on the stocks.

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Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » ALSO READ News and Notices about Maruti Industri See interviews with Maruti Industri Management See what other Experts & Brokerages are saying about Maruti Industri See previous Results of Maruti Industri BSE | NSE 01/01/70 Are Mutual Funds betting on ?

In an interview with CNBC-TV18, Prayesh Jain of IIFL, gave his views on the auto maker Maruti 's fourth quarter performance and his outlook on the stocks.

Below is a verbatim transcript of the interview. Also watch the video.

Q: What is the initial reaction for the numbers?

A: The numbers are looking bigger than our expectations. The top-line was very much in line with our expectations. It is to be seen whether operating margins have come out better than our estimates. Overall, it's a good set of numbers.

Q: What about the sales number?

A: Net sales are very much in-line with our expectations. It's mainly the operating margin that has surprised us.

Q: What is the margin according to you because they have not given us the margins just yet?

A: It will need to be worked out but I think it's better than our expectation of around 9.8%.

Q: The general sense has been that auto companies are facing pressures because of raw material cost, rising fuel cost and also the interest rate front. Do you think surprised performances like these can help support stocks that have been generally in a decline mode off late?

A: Yes, it can be going ahead. For Maruti, the volume outlook is strong. It's not that we are expecting around 14% domestic volume growth while the exports we are looking at around 5% on the growth in FY12. The main concern for Maruti has been the operating margin performance.

They have been reporting margins in the vicinity of around 10% over the last few quarters. That needs to be improved for Maruti to be an outperformer.

Q: With these numbers that you know, are you likely to upgrade the stock?

A: It has to be seen as to whether these positives are one-time because quite a substantial element for Maruti margins is driven by currency movements as well. It has to be seen whether it is currency movement or find out the element that has caused this bit of profitability. So if it is sustainable, it will cause upgrade in our estimates.

Q: They have said that their raw material costs are up by 24%. Is that a surprise? Was that what your estimate was?

A: Yes, pretty much.

Q: So henceforth, what is the current view you have on the stock? What kind of a price target?

A: Currently we have a market performer rating with target price of around Rs 1,350 on the stock. Post the results, if there is a scope, we might revise it.

Q: Revise it higher you think?

A: Might be.