PINC Research has recommended hold rating on Maruti Suzuki with a target of Rs 1112, in its September 30, 2011 research report......
PINC Research has recommended hold rating on Maruti Suzuki with a target of Rs 1112, in its September 30, 2011 research report.
“After a scorching volume growth in FY11, Maruti Suzuki (MSIL) has been restrained on multiple fronts in the recent months. The rising fuel costs and interest rates took the wind off the sails of the domestic passenger vehicle industry. Agitating workers at the Manesar facility have taken the sheen out of the high profile New Swift launch. Competition is intensifying with new launches such as the Honda Brio and impending Hyundai Eon at aggressive pricing. Adding to the woes, the 16% appreciation of the Japanese Yen (JPY) in the last six months will have a severe impact on profitability as hedges expire in Q2FY12.”
“Even as the New Swift waitlist crosses the 100k mark, the 30 day worker agitation at the Manesar facility is yet to be resolved. Although production of Swift has been brought to normal levels through hiring of new employees, the ground situation is far from normal. The domestic consumer sentiment has dampened due to hike in fuel prices and interest rates. The domestic passenger car industry has contracted 1.3% YTDFY12 . Honda has turned aggressive in the market with steep price cuts on the City, Jazz and competitive pricing for Brio. Second largest player Hyundai is also expected to unveil Alto competitor Eon next week putting further pressure on MSIL. The 16% appreciation in the JPY against the INR in the last six months since the Tsunami struck Japan is bound to put a severe strain on margins.”
“Due to the bleak outlook, we reduce our volume estimates by 15% for FY12 and FY13. The JPY appreciation and lower operating leverage will lead to a 120bps contraction in margin estimates for FY12. We downward revise our earnings estimate for FY12 and FY13 by 28.7% and 22.5% to Rs61.9 and Rs82.4 respectively. The stock of the company is trading at 13.4x its FY13E earnings. Given the difficult path ahead, we cut our valuations multiple from 15x earlier to 13.5x. We downgrade the rating on the stock to a ‘HOLD’ with a reduced target price of Rs 1112 (earlier Rs1,594) discounting FY13E earnings 13.5x,” says PINC Research report.
PINC Research has recommended hold rating on Maruti Suzuki with a target of Rs 1112, in its September 30, 2011 research report.
“After a scorching volume growth in FY11, Maruti Suzuki (MSIL) has been restrained on multiple fronts in the recent months. The rising fuel costs and interest rates took the wind off the sails of the domestic passenger vehicle industry. Agitating workers at the Manesar facility have taken the sheen out of the high profile New Swift launch. Competition is intensifying with new launches such as the Honda Brio and impending Hyundai Eon at aggressive pricing. Adding to the woes, the 16% appreciation of the Japanese Yen (JPY) in the last six months will have a severe impact on profitability as hedges expire in Q2FY12.”
“Even as the New Swift waitlist crosses the 100k mark, the 30 day worker agitation at the Manesar facility is yet to be resolved. Although production of Swift has been brought to normal levels through hiring of new employees, the ground situation is far from normal. The domestic consumer sentiment has dampened due to hike in fuel prices and interest rates. The domestic passenger car industry has contracted 1.3% YTDFY12 . Honda has turned aggressive in the market with steep price cuts on the City, Jazz and competitive pricing for Brio. Second largest player Hyundai is also expected to unveil Alto competitor Eon next week putting further pressure on MSIL. The 16% appreciation in the JPY against the INR in the last six months since the Tsunami struck Japan is bound to put a severe strain on margins.”
“Due to the bleak outlook, we reduce our volume estimates by 15% for FY12 and FY13. The JPY appreciation and lower operating leverage will lead to a 120bps contraction in margin estimates for FY12. We downward revise our earnings estimate for FY12 and FY13 by 28.7% and 22.5% to Rs61.9 and Rs82.4 respectively. The stock of the company is trading at 13.4x its FY13E earnings. Given the difficult path ahead, we cut our valuations multiple from 15x earlier to 13.5x. We downgrade the rating on the stock to a ‘HOLD’ with a reduced target price of Rs 1112 (earlier Rs1,594) discounting FY13E earnings 13.5x,” says PINC Research report.