Maruti Suzuki –Sell- Anand Rathi

In April 2010, Maruti Suzuki posted robust volume growth of 29.7% y-o-y (declining 2.2% m-o-m) to 93,058 units. This is the smallest mom decline ever for MS for April over March. It has thus sustained the run-rate for the past three months for April as well. Volume growth was driven by domestic demand growing 23% y-o-y and exports 89%, on the lower base.

At home, volume was boosted by the A2 segment (up 20.5% y-o-y, 3% m-o-m), MPVs (+37.9% yoy, but 2% lower mom) and the A3 segment (+41.4% y-o-y, but 4.4% lower mom). MPV sales were boosted by the launch of the MPV ‘Eeco’ in January 2010. In the A2 segment, the new BS-IV compliant WagonR was launched in April 2010.

While yoy export growth, at 89% to 13,024 units, was robust, mom it declined 16.5% from the March 2010 peak (which saw Maruti’s highest monthly export volumes). Ahead, MS expects to maintain FY10’s export volumes despite discontinuing the scrappage incentives in Europe. As a counter to this, MS has been focussing on expanding its reach into newer markets such as Poland, Norway, Australia and Taiwan.

MS has had a good start to the new financial year. At our present estimates, residual growth expectation is 10.3%. The stock, trading at 13x FY11e EPS, is fairly valued. Maintain SELL.

Popularity: 1% [?]

Tags: Anand Rathi, Automobiles Sector, Free Share Tips, Maruti Suzuki

Category: Broker tips