“Maruti Suzuki India Limited (MSIL, formerly Maruti Udyog Limited), a subsidiary of Suzuki Motor Corporation of Japan, is India's largest passenger car company, accounting for majority of the domestic car market.”
“Maruti continues to hold dominant position in the passenger car segment with a 51% market share. We expect Maruti to maintain its domestic market leadership in passenger cars, especially in small and compact cars on the back of its strong product mix, efficient marketing strategies & widespread distribution network. With increased focus on export markets would lead to additional volumes in the coming years. Also with recovery in European markets auto demand is set to improve in the next 2-3 years. Maruti’s key export markets are Algeria, Indonesia, Egypt & Sri lanka and company has been ahead of its peers in increasing the capacities to meet the rising domestic & export demand.”
“Maruti Suzuki launched its priciest offering in the sedan segment in India, Kizashi, in the month of February. Also it plans to come out with refreshes of its current models. It is expected to launch a variant of the Swift sometime around diwali with several other products in the pipeline. MSIL has been one of the most aggressive companies in terms of new product launches. The company expects the demand momentum to continue and expects the demand for its products to grow by 15% in the next financial year. The company also says that it is prepared for the increase in demand since its Manesar facility will be operational by start of FY12 taking the total production to 1.4 million units/annum. Also the third plant is expected to be operational by H2 of FY12 which will take the overall production to 1.7 million units/annum.”
“Despite recording highest ever sales during the current quarter the company’s profit degrew by 18% y-o-y on the back of rising input costs. We expect margins to remain under pressure as commodity prices continue their upward trend. But the additional capacity expansion taken by the company will cater to increasing demand, thus reducing waiting period for its products and increasing overall volumes. At the CMP of R 1276, Maruti Suzuki is trading at 15.3x its FY11E EPS of R 82 and at 12.9x its FY12E EPS of R 97, we recommend “BUY” on the stock with target price of Rs 1547,” says KRChoksey research report.
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