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Research
Maruti Suzuki India - Ertiga should lead Maruti's UV market share gain - BRICS
Posted On : 2012-04-20 10:48:36( TIMEZONE : IST )
- We like the look of Maruti's newly launched Ertiga and believe it will sell 30,000 of them in FY13.
- Its plans to export Ertiga to Asia should prove successful.
- Likely to earn better margins than other new launches due to shared platform and components (with Swift and Dzire).
With growth rates for the overall car industry slowing, Maruti has timed its entry into the multi-utility vehicle segment well. In India, this segment is set to witness a slew of launches in 2012 as companies tap into growing consumer need for larger vehicles. Maruti has launched its much awaited Ertiga at an attractive price point of Rs.580,000 for petrol and Rs.730,000 for diesel. It says that it has created a new segment - life utility vehicles - which will take care of the entire family's needs.
The Ertiga is more fuel efficient than MUVs and provides wider seating options (2+3+2) than a sedan. It is more compact than the average MUV making it more maneuverable for city driving and ensuring initial uptake in urban regions. In our opinion, although Ertiga looks compact compared to the average MUV (especially Toyota's Innova, its immediate competitor), it is spacious from the inside. Cargo space is less if one opts for the 7-seater capacity, but we think it will still be able to fulfill its promise as a compact family MPV. We maintain our sales estimates of 30,000 units FY13 for Ertiga (Innova sells 5,500 units per month or 66,000 a year on average) despite the likely launch of M&M's mini Xylo and Toyota's possible competitive response in terms of price cuts etc.
Currently the stock trades at 15x FY13 and 12x FY14 on our estimates. We maintain our target at Rs.1509 based on 14x FY14 EPS (5 year average multiple at 15x). Upcoming triggers such as decline in interest rates, rising per capita income, improving urban infrastructure, low penetration and easy availability of finance should drive passenger car industry growth. Maintain Buy.
