Maruti Suzuki - Mini revival a key relief; domestic trend in-line - ElaraCapital

- Maruti reported in-line domestic volume growth trend in April 2013, with robust growth in its mini segment portfolio and falling compact (diesel models) and UV (again diesel model) sales

- While the overall domestic sales are flat, we cheer the sustenance of demand strength in mini segment sales, which has managed to hold on to ~35k unit levels, a key level if Maruti is to post high single digit volume growth in FY14E

- Compact segment continues to decline as expected as dealers continued to complain this too, about falling enquiries and conversions of diesel model sales since the start of diesel price hikes

- Dzire rose by a healthy 25% and still has bookings, on track to record a 10%-15% growth in FY14E

- Ertiga remained in negative territory again as base rises from hereon, unlikely to be the growth driver for Maruti in this fiscal

- The domestic sales are down only due to high base of MPVs, which accentuated the weakness in the category. The base falls of dramatically from May onwards, hence if the current trend sustains (we hope and pray!), Maruti should report a high single digit growth next month

- Exports slipped into red again, dragging the total volumes down by 3% YoY, but still early days to cut forecast here (expect a 10% growth post two years of declines)

Our view: We maintain our belief that Maruti's volume trend is likely to remain modest over the coming months on the back of high base and weakening diesel car demand, though the reducing gap between petrol and diesel prices is likely to support mini segment growth in H2FY14E. Further, favorable exchange rates are likely to boost margins, while the stock is comfortably pricing the near term demand weakness. Maintain positive stance.

Source : Equity Bulls

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