 "Maruti Suzuki: Positives priced in")
The company reported a 3.1% year-on-year (y-o-y) decline in sales during April 2013 and 18.9% as compared to March 2013. Though passenger car sales improved 4.9% y-o-y, they dipped 6.7% over March 2013 with the decline seen in all segments right from mini to compact, super compact, mid-size and executive.
The utility vehicles (UV) sales, too, have declined 4.9% over April 2012, the numbers are 18% lower over the previous month. The impact of global slowdown has also taken a toll with the export sales figures coming in 33.3% lower on y-o-y basis.
The road ahead
Given this background, the demand in the first quarter of FY14 will be watched carefully. Analysts at IDBI in their 26th April 2013 report had observed that their channel checks indicate continued weak demand environment for petrol models, with discounting at elevated levels. In addition, diesel vehicle demand has also seen signs of moderation, with most models across companies available off-the-shelf. Even discounting has started in few diesel models, the phenomenon which was till recently limited to petrol cars.
Most industry participants remain cautious on FY14 demand outlook and are finding it difficult to estimate demand growth in the coming quarters. In this backdrop, they have already given the HOLD rating for the stock.
The company’s performance in the March 2013 quarter had been led by a decline in raw material costs, primarily led by depreciating yen (lowering import costs of components from Japan). Price hikes and better product‐mix with higher contribution of diesel vehicles, too, had resulted in 16.7% y-o-y (2.4% sequential rise) in average realisation per vehicle. However, with the slowdown in demand, further price hikes are ruled out for now, analysts say.
“Maruti would benefit ahead in FY14 from a favourable exchange rate and a low base for its vehicle sales. However, headwinds from curtailed demand for passenger cars and new launches by competitors would be spoilsport in the next two quarters. We now believe that the near-term positives are factored in the price and the stock now trades at fair valuations,” says Rohan Korde, an analyst with Anand Rathi Research in his 29 April report.
R. Murali Krishnan, Head – Institutional Equities at Karvy Research observes that the Yen story for the company has largely played out with not great improvement in fundamentals. There would be marginal gains from here on. In fact, he has recommended his client to shift to another automobile player (Mahindra and Mahindra) for better gains.