Maruti Suzuki India Ltd. - Q1FY13 - Margin Pressure persists - Way2Wealth

Maruti Suzuki India (MSIL) Q1FY13 topline is above expectations with a 28% YoY growth , which has come on the back of a mere 5% volume growth. Reinforcing factors has been higher average realizations on account of a favourable product mix and improved export realisation. However, margin pressure persists with unfavourable exchange move leading to unremitting costs. This is amidst a falling market, especially when looking into the Passenger Car space and company specific strike magnifying the 'already' sluggish business cycle.

Q1 has highlighted the grave concerns for the company in terms of Market Share in lieu of the changing and evolving Industry. At this point, despite it being on a strong footing in respect to its peers, its sustained vulnerability to Competition, Currency & Consumption has led us to give it an 'UnderPerform' Rating.

Valuations

Q1, though in line with expectations, does not give any reason to ring bells or blow the trumpet and therefore at this point we have a 'Underperform' Rating on the stock.

The stock is quoting at a P/E multiple of ~15.9x its FY13E revised earnings of Rs 71.1, a mere 7% discount to its 5 year average multiple of 17x.

Source : Equity Bulls

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