Hold Maruti - TP Rs.1175 - Geojit BNP Paribas Financial Services

- 1QFY13 revenue increased 26% yoy and in line with market estimates. Performance was aided by low base (due to labor strike last year), higher average price realization from price hikes and a better product mix (higher proportion of premium compacts and MUVs)

- Company surprised on gross margins, which improved 30 bps yoy and 130 bps qoq.

- Overall, the result was marginally negative. While gross margin exceeded estimates, increase in operating expenses surprised negatively.

- Royalty expenses, commodity/ forex losses increased due to weakness of the rupee versus JPY.

- As a result, EBITDA margin contracted 220 bps yoy and PAT declined 23% yoy.

- Although the stock valuation looks attractive, weak fundamentals for the car industry and uncertainty about the resumption of operations at Manesar plant will continue to impact stock performance.

- Faster than expected revival in car demand and rupee appreciation are the upside risks to the target price.

Source : Equity Bulls

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