Daiwa Capital Markets
We expect Maruti Suzuki India?s market-share trend to remain healthy, aided possibly by the introduction of a new product in 2HFY14. As the share price has fallen by 22% over the past three months, we believe the stock now presents a good buying opportunity.
Maruti?s market share increased to 40.4% for 4MFY14 versus 39.2% for FY13, despite major launches by competitors over the past few months. Maruti remains guarded about its new model pipeline, but we think it is highly probable that a new product will be introduced in 2H FY14, possibly in the compact SUV segment. Even without a new model launch in 2H, we think Maruti?s sales growth momentum should improve from now on (4M YTD: -4% YoY) as inventory levels appear to be under control (at equivalent to 4.5 weeks of sales), along with the low base effect from August 2012.
Maruti?s currency gains from favourable movements in the JPY:$ exchange rate in 2H FY13 have been significantly negated by adverse movements in the $:R rate over the past couple of months. As such, based on current spot rates, and with 52% of its JPY:$ exposure being hedged, we expect Maruti?s average FY14E JPY:R rate to settle at about the 1QFY14 rate of 0.6.
We are cutting our FY14/15 earnings forecasts by 15.7%/18.2%, respectively, to align our volume forecasts with our now lower PV industry sales forecasts of 1%/14.4%, respectively.
However, despite our earnings cuts, we are upgrading our rating on the stock to Buy from Outperform and we are are cutting our six-month target price to R1,630 from R1,903.ets