Kotak Securities is bullish on Maruti Suzuki India has recommended buy rating on the stock with a target price of Rs 8522 in its research report dated October 15, 2018.
Kotak Securities' research report on Maruti Suzuki India
We believe that slowdown in industry sales to have limited impact on MSIL due to production capacity constraint and market share gains. Domestic passenger vehicle industry grew by ~7% in 1HFY19 (de-grew in 2QFY19). MSIL’s growth during the same period stood at 11%, market share gain of 170bps. In the past nine months, INR has depreciated against JPY by ~12%. Accordingly we expect adverse forex movement to impact MSIL’s EBITDA margin in FY19. In FY20, we expect EBITDA margin to see some improvement on expectation of price hikes, operating leverage and vendor localization at Gujarat plant.
Outlook
In view of adverse forex movement, we cut our EBITDA estimates by 9% for FY19 and 6.7% for FY20. We also lower PE multiple to 23x (from 25x) due to near term slowdown in demand and margin headwinds. We rate the stock as BUY with revised price target of R8,522 (earlier 10,360). Lower than expected volume growth, commodity cost increase and unfavourable currency movement are key risks to our target price.
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