Credit Suisse bets on Maruti, sees double digit EBITDA growth

Credit Suisse says that scale-up in Baleno exports which constitutes half of total exports and success of the Vitara Brezza will work in favour of Maruti. Vitara Brezza forms 10 percent of domestic revenues and royalty is paid in Indian currency only.

June 17, 2016 / 09:49 IST

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Credit Suisse maintains outperform rating on Maruti even though there is a fear that strengthening of yen may cause headwinds. However, the brokerage is bullish that Maruti's yen appreciation is going to have a significantly smaller impact on margins as net exposure to the Japanese currency has reduced.

Credit Suisse says that scale-up in Baleno exports which constitutes half of total exports and success of the Vitara Brezza will work in favour of Maruti. Vitara Brezza forms 10 percent of domestic revenues and royalty is paid in Indian currency only.

RC Bhargava, Chairman of Maruti Suzuki India, is not overly worried about the impact of a stronger yen as the company has reduced its dependence on yen in the last two quarters. "The company has taken efforts to de-risk itself from yen fluctuations," he said in an interview to CNBC-TV18. Maruti, however, is not planning to export any other cars except the Balano to Japan -- something that would have served as a natural hedge in case of a yen appreciation -- because it would first like to see how Baleno performs, Bhargava said.

"Hence net yen import exposure has come down from 18 percent of sales a couple of years back to 10 percent only now. Consequently, earnings sensitivity to yen appreciation has also halved," it says in a note.