Buy Maruti Suzuki India - Ventura

We initiate coverage on Maruti Suzuki India Ltd (MSIL) as a BUY with a Price Objective of Rs. 1,664. At the CMP of Rs. 1,380, the stock is trading at 15.3x and 12.4x its estimated earnings for FY14E & FY15E respectively, representing a potential upside of ~21% over a period of 18 months.

We are particularly enthused by the fact that MSIL over the last two years, despite challenging times like the Manesar plant lock out and intense competition across segments, has been able to maintain market share across all segments. We strongly believe that when the auto revival resumes MSIL would be best placed to benefit from this.

In the near term, we expect new models in the compact & hatchback (WagonR Stingray & Swift Sport) and SUV segment (XA Alpha) to drive sales growth. In addition, diesel engine capacity expansion and SPIL merger coupled with increasing localization initiatives (on the input side) will enhance scale of operations and improve operating margins. We forecast revenues and earnings to grow at a CAGR of 8.2% and 18.3% to Rs. 51,048 and Rs. 3,350.2 crore, respectively over FY14-15E.

Source : Equity Bulls

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