Brokerage house Motilal Oswal Securities has downgraded its FY14 and FY15 earnings estimates for car-maker Maruti Suzuki by 11-12 percent, citing weak demand for its diesel variants as the key reason. The brokerage has retained its 'buy' rating on the stock with a price target of Rs 2033.
"While demand for petrol segment seems to be stabilizing (on a low base), demand for diesel segment has weakened, post correction in fuel price disparity. Adverse mix (lower diesel share) could impact Maruti Suzuki's (MSIL) margins," said the Motilal Oswal Securities note to clients.
Analysts Jinesh Gandhi and Chirag Jain estimate 30-40 basis point EBITDA margin and 7 percent EPS impact for 5 percent change in diesel volumes.
"Weak demand and lower diesel share to drive discounts higher by Rs 2,200/unit for 1HFY14E v/s 4QFY13 levels," said the MOSL note.
Also, the brokerage feels that the recent steep depreciation in the rupee to the dollar would dilute benefit of favorable yen/dollar movement.
"While MSIL has hedged around 40 percent of FY14 JPY (yen)/USD exposure, its INR(rupee)/USD leg is unhedged," said the MOSL note.
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