Maruti Suzuki: Anticipate ~30% quantity progress in FY22E


Demand for passenger autos was stronger than anticipated as soon as Covid-related lockdown restrictions have been lifted on account of shift in desire in direction of private mobility.

Product life cycle to enhance: Levers for margin restoration in place. The MSIL inventory has underperformed (27% v/s Nifty and 23% v/s NSE Auto Index) within the final six months, impacted by market share/loss and stress on margin, regardless of a powerful quantity restoration. We see each these considerations abating as product life cycle improves, and worth improve/low cost moderation drives a restoration in profitability. We count on ~30% quantity progress in FY22E and constructive evolution of margin. We see 27% upside at our TP of Rs 8,700/share. MSIL is our prime auto decide.

Demand for passenger autos was stronger than anticipated as soon as Covid-related lockdown restrictions have been lifted on account of shift in desire in direction of private mobility. This was mirrored in robust demand with first-time purchaser (FTB) share growing to 50% in FY21 YTD (from 45% in FY20) of home volumes. Home volumes for the business have been greater than FY19 ranges (earlier peak) since Sep’20 onwards. Restoration within the PV demand would have been higher, however for a pointy rise in gas costs (~30% improve within the final eight months). This, resulted in a rise in gross sales of CNG autos.

Vital gas worth inflation resulted in prospects preferring CNG autos on account of considerably decrease operating prices (Rs 1.5/km v/s Rs 4.5/km for WagonR CNG v/s petrol). MSIL enjoys a considerable benefit in CNG because it gives manufacturing facility fitted CNG in eight fashions. MSIL’s CNG car gross sales are anticipated to develop by 47%/59% in FY21E/FY22E. MSIL gained essentially the most on account of improve in demand from first-time consumers, pushed by its stronghold within the mini-segment (the place its market share elevated by ~5pp in FY21 YTD to ~84). Whereas we count on FTB share to normalise over the following six-nine months, new launches would offset any impression of this.

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