Buy Maruti Suzuki; target of Rs 1594: PINC Research

PINC Research is bullish on Maruti Suzuki India and has recommended buy rating on the stock with a target of Rs 1594 in its June 29, 2011 research report.

“Maruti Suzuki India, during FY09- 11, MSIL compact segment volumes grew at 25.7% CAGR against the segment CAGR of 27.9% i.e. a marketshare loss of 200bps. In the same period Hyundai lost 160bps while Tata Motor’s lost is at a whopping 580bps. Of the recent launches, the Figo has been largely successful, helping Ford garner a marketshare of 5% in the segment. The Beat, after tasting initial success fizzled out. Polo ramp up has been slow due to capacity constraints and monthly runrate has stabilized near the 3k mark, exceeding 200bps marketshare.”

“Although the Liva base version has a sticker price lower than even the Swift and Ritz, this version is sans basic features like power steering. Adjusting for the same the Etios Liva is priced roughly Rs10-15k higher than the Swift. In addition, the absence of a diesel engine for starters would affect volumes as the price differential between petrol and diesel continues to remain high. The Etios sedan had received a large pre-booking. However, it faced significant cancellations when the vehicle was displayed in flesh. Although the price point for the Liva is lower, competition is offering superior quality in a similar price range. We do not expect a significant impact on MSIL due to its inherent strength of strong product lineup and large service network. Additionally, the new Swift expected in the coming months would benefit volumes.”

“More than the competition, macroeconomic environment is a far greater treat to MSIL’s volume growth. We are reducing MSIL’s volume estimate by 4.6% and 2.6% for FY12 and FY13 respectively. Consequently our earnings estimate for FY12 and FY13 is lower by 5.9% and 3% respectively. The stock of the company is trading at 10.9x its FY13E earnings of Rs106.2. We maintain a ‘BUY’ recommendation on the stock with a reduced target price of Rs 1,594 discounting FY13E earnings 15x,” says PINC Research report.

Source : moneycontrol.com