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Maruti Suzuki remains a preferred pick despite note ban

New launches, easing capacity constraints, weakening yen lead to upward revision in estimates

Hamsini Karthik 

Maruti Suzuki remains a preferred pick despite note ban

Maruti Suzuki’s December wholesale volumes were a bit below expectations, but the stock has gained 13 per cent over the last fortnight. Interest in its to-be launched Ignis, and brokerages increasing growth expectations— all go to support the gains. 

Its premium urban compact crossover, Ignis, to be launched on January 13, is said to have a waiting period of 8-12 weeks. Given the success of and Baleno, analysts are confident that Ignis, too, will soar. Nevertheless, the waiting period for and continues to remain at 20-24 weeks, although production constraint could ease off in the ongoing quarter as operations start in Gujarat plant.  

Maruti Suzuki, automobile, FY17, sale volumes, profit margin
Image
With new capacities coming on stream, analysts at Kotak Institutional Equities have hiked sales volume expectation by three-seven per cent for FY17-19. "New launches such as Baleno, Vitara Brezza, and Ignis, will help increase market share in FY18," they say and feel Maruti is on track to report a 10 per cent year-on-year sales volume growth in also, in other words, it will meet its initial target before CLSA is more optimistic: "should deliver 12 per cent volume in FY17-19 driven by new products, easing capacity constraints, and gradual demand normalisation after a demonetisation-driven fall." It sees a profit upgrade in case impact doesn’t turn out that bad. 

But it needs to be seen if operating (underlying) profit margins can be maintained at 15 per cent. Some say ramping up production in Gujarat could be margin-depletive, given the nature of the contract between and parent. There is also a view that cheaper yen could counterbalance these pressures. Products made in Gujarat (the plant belongs to Suzuki) will be sold by Maruti on a 'cost of production plus depreciation' basis, reducing margin spread for the company. Increasing cost of steel and aluminium could also affect operating profit margins. However, if undertakes price hike (underway in the industry) pressures could be eased. Therefore, December quarter results will be critical for clarity on operating

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Maruti Suzuki remains a preferred pick despite note ban

New launches, easing capacity constraints, weakening yen lead to upward revision in estimates

New launches, easing capacity constraints, weakening yen lead to upward revision in estimates
Maruti Suzuki’s December wholesale volumes were a bit below expectations, but the stock has gained 13 per cent over the last fortnight. Interest in its to-be launched Ignis, and brokerages increasing growth expectations— all go to support the gains. 

Its premium urban compact crossover, Ignis, to be launched on January 13, is said to have a waiting period of 8-12 weeks. Given the success of and Baleno, analysts are confident that Ignis, too, will soar. Nevertheless, the waiting period for and continues to remain at 20-24 weeks, although production constraint could ease off in the ongoing quarter as operations start in Gujarat plant.  

Maruti Suzuki, automobile, FY17, sale volumes, profit margin
Image
With new capacities coming on stream, analysts at Kotak Institutional Equities have hiked sales volume expectation by three-seven per cent for FY17-19. "New launches such as Baleno, Vitara Brezza, and Ignis, will help increase market share in FY18," they say and feel Maruti is on track to report a 10 per cent year-on-year sales volume growth in also, in other words, it will meet its initial target before CLSA is more optimistic: "should deliver 12 per cent volume in FY17-19 driven by new products, easing capacity constraints, and gradual demand normalisation after a demonetisation-driven fall." It sees a profit upgrade in case impact doesn’t turn out that bad. 

But it needs to be seen if operating (underlying) profit margins can be maintained at 15 per cent. Some say ramping up production in Gujarat could be margin-depletive, given the nature of the contract between and parent. There is also a view that cheaper yen could counterbalance these pressures. Products made in Gujarat (the plant belongs to Suzuki) will be sold by Maruti on a 'cost of production plus depreciation' basis, reducing margin spread for the company. Increasing cost of steel and aluminium could also affect operating profit margins. However, if undertakes price hike (underway in the industry) pressures could be eased. Therefore, December quarter results will be critical for clarity on operating
image
Business Standard
177 22

Maruti Suzuki remains a preferred pick despite note ban

New launches, easing capacity constraints, weakening yen lead to upward revision in estimates

Maruti Suzuki’s December wholesale volumes were a bit below expectations, but the stock has gained 13 per cent over the last fortnight. Interest in its to-be launched Ignis, and brokerages increasing growth expectations— all go to support the gains. 

Its premium urban compact crossover, Ignis, to be launched on January 13, is said to have a waiting period of 8-12 weeks. Given the success of and Baleno, analysts are confident that Ignis, too, will soar. Nevertheless, the waiting period for and continues to remain at 20-24 weeks, although production constraint could ease off in the ongoing quarter as operations start in Gujarat plant.  

Maruti Suzuki, automobile, FY17, sale volumes, profit margin
Image
With new capacities coming on stream, analysts at Kotak Institutional Equities have hiked sales volume expectation by three-seven per cent for FY17-19. "New launches such as Baleno, Vitara Brezza, and Ignis, will help increase market share in FY18," they say and feel Maruti is on track to report a 10 per cent year-on-year sales volume growth in also, in other words, it will meet its initial target before CLSA is more optimistic: "should deliver 12 per cent volume in FY17-19 driven by new products, easing capacity constraints, and gradual demand normalisation after a demonetisation-driven fall." It sees a profit upgrade in case impact doesn’t turn out that bad. 

But it needs to be seen if operating (underlying) profit margins can be maintained at 15 per cent. Some say ramping up production in Gujarat could be margin-depletive, given the nature of the contract between and parent. There is also a view that cheaper yen could counterbalance these pressures. Products made in Gujarat (the plant belongs to Suzuki) will be sold by Maruti on a 'cost of production plus depreciation' basis, reducing margin spread for the company. Increasing cost of steel and aluminium could also affect operating profit margins. However, if undertakes price hike (underway in the industry) pressures could be eased. Therefore, December quarter results will be critical for clarity on operating

image
Business Standard
177 22