On the fast lane
We raise MSILís stand-alone EPS forecasts by 11% in FY13e (estimates) and 8.4% in FY14e, mainly on revised margin assumptions, driven by (i) favourable currency movement, i.e., JPY (Japanese Yen), and (2) higher ASPs (average selling prices). Our volume assumptions are tweaked to factor in stronger export sales, on continuing diversification to geographies outside Europe, and an expanding range of models, such as the Ritz and the Ertiga.
Potential policy announcements, such as a rollback of the excise duty, as well as a hike in diesel prices and ad valorem tax on diesel vehicles may not be negative for MSIL for the following reasons: (i) narrowing differential in cost of ownership may trigger a revival in petrol cars, as customers become indifferent to the fuel option, and (ii) models with superior franchises, e.g., Swift, Dzire, will be able to mostly pass through this increase with a minimal impact on demand. We continue to value MSIL using the same methodology of price-to-earnings. However, we raise multiple to 16x (times), compared to earlier 15.5x, both being early-cycle
Be the first to comment.