Sell Maruti Suzuki - Dolat Capital

- The stock has rallied almost 28% in the last three months vs the Nifty movement of 12%. Based on our estimates, the stock currently trades 19.2xFY14E. We reiterate Sell with a target price of Rs1170 (15xFY14E) with a potential downside of 21%.

- We have built in volume growth of 5% in our FY13 estimates and 13% for FY14. We believe this is in itself a fairly optimistic growth, and volumes for FY13 could disappoint as much as to be negative over FY12. We are assuming volumes of 1.19 mn units for FY13, implying an average volume of 110,000 sales per month, which in our opinion shall be challenging in the current environment. The FY14 estimates also stand at risk.

- Further, what we see as a structural change is the loss in market share which may be extremely difficult to gain given the renewed intensity with which new players have targeted the segments where it has been traditionally strong. Notably, we observe that12 out of its 15 existing models have de-grown YoY, irrespective of the labour problems it has faced recently. This in our opinion, is reflective of the tough competition it faces in its key segments.

Source : Equity Bulls

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