This development is likely to give MSIL tough competition, in our view. Next launches are GM Beat (diesel), Honda Brio and Hyundai compact car, which could keep MSILs market share, margin and price performance under pressure. We reiterate reduce rating on MSIL.
Comparing with Toyota, Liva base variant does not offer power steering option. Livas 1.2 litre petrol engine generates 80hp power and provides best-in-class power-to-weight ratio of 9%. Diesel variant of Etios and Liva are likely to be launched by FY13.
Toyota intends to increase localisation content from 70% to 90% by setting up engine plant (capacity: 100,000 units per annum) and transmission plant (capacity: 240,000 per annum) by 2012.
The company has already spent R3,200 crore to set up a capacity of 70,000 units of Etios and Liva.
The company would further spend R300 crore to take the capacity to 130,000 units by H1CY12. For FY12E, the company targets sales of 1,00,000 units (both Etios and Liva).
It has also ramped up the dealer network from 40 to 60 and service points from 82 to 150 in the past two years, thereby covering 85% of addressable towns.
In the next two quarters, we are likely to witness the launch of GM Beat (diesel), Honda Brio and Hyundai compact car.
Coming back to Maruti, weak demand outlook and rising competitive intensity are likely to keep its market share, margin and stock price under pressure.
Target price for the company is of R1,150.