Buy Maruti Suzuki, target of Rs 4,553

Published: January 7, 2015 12:11:50 AM

Maintain buy on Maruti Suzuki (MSIL) with target price of Rs 4,553 per share

Maintain buy on Maruti Suzuki (MSIL) with target price of R4,553 per share. We estimate EPS of R118, R175, R227 for FY15, FY16, and FY17, respecitvely. The stock trades at 28.4x, 19.1x, and 14.7x FY15e, FY16e, and FY17e, respectively, consolidated EPS.

Maruti’s December 2014 sales volumes grew by 21% y-o-y (-0.3% m-o-m) to 1.097 lakh units, driven by 13% growth in domestic volumes and 171% growth in exports. We estimate 12% growth in FY15, implying 8% residual growth or 1.172 lakh units residual run-rate.

Domestic volumes grew 13% y-o-y to 98,109 units. We estimate 12% growth in FY15 in domestic volumes implying 10% residual growth or 1.092 lakh units per month of run-rate. Retails for the month grew 18% y-o-y to 1.57 lakh units, driven by pre-buy in fear of excise duty increase. Compact segment (Alto, Wagon-R, Swift, Celerio, Ritz etc) grew by 10% y-o-y to 60,657 units.

Sedan (A3) segment saw a healthy growth of 33% y-o-y to 20,907 units, driven by 11% growth in Dzire to 17,200. Ciaz volumes at 3,731 units were below estimate of 5,000.

The management has guided for 10% growth for FY15, implying residual volume de-growth of 0.8% or 1.09 lakh units. We believe volume momentum at ground level in short term might be impacted by 4% increase in excise duty. However, MSIL should continue to do out grow industry driven by several new products, including Ciaz, refreshed Swift, Alto K-10 (with AMT) and refreshed Dzire (in Q4FY15).

Motilal Oswal

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