MSIL shuts Gurgaon plant for a day to clear inventory of petrol cars - Angel Broking

Maruti Suzuki (MSIL) undertook a one day production shutdown at its Gurgaon facility on March 9, 2013 in an attempt to clear the inventory of its petrol cars amid declining sales. According to the company, the facility will function normally from March 11, 2013. The Gurgaon plant which has a capacity to roll out 3,500 to 4,000 cars a day produces popular models like the M800, Alto series, WagonR, Estillo, and Ertiga.

We are not surprised by the planned shutdown announced by the company considering the current weak demand scenario which has led to continuous decline in sales of petrol cars. This is reflected in the sales of the company's Mini segment which is entirely petrol driven. The sales in the segment are down 12.3% yoy YTD in FY2013 and the volumes continue to struggle despite the launch of the new Alto few months back.

Nonetheless, we expect company's volumes to rebound in FY2014 driven by revival in demand for petrol cars and availability of additional diesel engines. At Rs. 1,428, the stock is trading at 14.6x FY2014 earnings. We maintain our Accumulate rating on the stock with a target price of Rs. 1,563.

Source : Equity Bulls

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