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Company Review: Maruti Suzuki

Company Review: Maruti Suzuki
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First Published: Mon, May 18 2009. 10 07 AM IST
Updated: Mon, May 18 2009. 10 07 AM IST
Maruti Suzuki India Ltd (MSIL) launched its new compact car Ritz, a premium hatchback in India. This is MSIL’s fifth car in the segment (A2 – Zen Estilo, Wagon R, A-Star and Swift).
The car will be powered by the brand new 1.2 litre K12M Petrol engine and the 1.3 DDiS Diesel power plant.
These engines are compliant with BS IV, much ahead of the scheduled date of April 2010. Currently, the company has no plans to export the car.
Pricing
Ritz basic model is priced at Rs405,872 (petrol) and the top variant is costing Rs534,579 (diesel) ex-showroom Mumbai. The pricing is very close to that of MSIL’s top-running model in the compact car segment - Swift.
The comparative price range for Swift is Rs422,859- Rs537,412. MSIL has earmarked current prices of Ritz as introductory, which means possibility of a hike in future.
We believe Ritz would eventually eat up into volumes of Swift. As per the management Ritz would cannibalize 8-9% of Swift’s volumes.
Stiff competition
The car would currently be competing against 10 products in the market – 4 MSIL, 3 Hyundai and one each from Hyundai, GM and Tata.
Over next one year, many companies including Toyota, Honda, Hyundai, Fiat and Volkswagen are launching new compact cars. This would significantly increase competition in the segment.
However, MSIL with its superior brand image, loyalty and wider network of service stations, is better placed to counter the competition.
Outlook
Despite a weakening consumer sentiment owing to lack of credit availability and worsening economic conditions, MSIL has reported strong growth in volumes and significantly outperformed the industry.
During FY09, MSIL’s market share increased by 86bps y-o-y to 52.2% in the passenger car segment. Going ahead, we expect MSIL to report 5.1% CAGR in revenues and 16.4% CAGR in PAT during FY09-11E.
However, at P/E of 14.1x FY11E earnings of Rs59.7, we don’t foresee any major upsides. We downgrade the stock to MARKET PERFORMER.
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First Published: Mon, May 18 2009. 10 07 AM IST
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