While domestic sales increased 9% m-o-m to 47,704 vehicles, it dipped 11% y-o-y on 60% y-o-y decline in sales of ”M-800” and weak performance of old models in compact segment, which declined by 7% y-o-y.
Midsize segment continued to buck the trend on successful launches of ”SX4” and ”Dzire”. Sales were up 98% y-o-y to 6,524 vehicles.
The company, as a part of its global strategy to export ”A-star” under various brand names to European markets and boost its export sales, has dispatched 1,534 cars on a pilot basis to Europe in January 2009.
We estimate sales will grow by a marginal 2.6% y-o-y in FY10E. However, EPS growth would be 16% y-o-y in FY10E to Rs50.9, largely led by the margin expansion.
At the current price of Rs588, the stock trades at P/E of 11.6x and an EV/EBITDA multiple of 6.2x FY10E earnings, both of which are historical lows.
The company’s liquid investment (net of debt) at book stood at Rs137 per share (25% of Market Cap) in FY08.
Even if we value core FY10E EPS of Rs43.6 at historical low of 10x and FY10E investments (net of debt) at book (Rs202 per share), the value per share of Maruti stands at Rs618 (upside of 6.5%).
In conclusion, we like Maruti and recommend a BUY, as there is adequate margin of safety.