Maruti Suzuki Score: Purchase; HSBC says market share loss in FY21 was contained


A optimistic for Maruti is that competitors has peaked of late and we expect it’s unlikely to extend additional materially.

Maruti Suzuki ended the yr on a powerful observe with a wholesale determine of 168K in March, resulting in a full-year quantity decline of seven%. Nevertheless, in our view, Retail volumes had been almost flat y-o-y, regardless of the lockdown. Stock stays extraordinarily low and we proceed to anticipate a powerful FY22, with quantity rising c30% y-o-y. When it comes to wholesale market share, MSIL ended at 46% in each March and in This autumn, with 48% in FY21. Nevertheless, adjusted for the decline in stock and gross sales to Toyota, the market share decline is below 100bps (MSIL entered the yr with respectable stock as a result of early BS VI transition). A optimistic for Maruti is that competitors has peaked of late and we expect it’s unlikely to extend additional materially. All the important thing opponents TTMT, M&M, Renault, Kia, Nissan and Hyundai have had sturdy latest launches.

New launches are key now for MSIL: MSIL efficiently restricted its market share loss in FY21, because of the sturdy model, distribution and advertising and marketing. Nevertheless, margins proceed to trace a lot decrease than on the final peak (10% vs 15%). For margins to return to the 12-13% vary (avenue expectation), new launches stay the important thing. New launches result in increased volumes, however extra importantly pricing energy and a greater variant combine. The final upcycle in margins (FY15/16) for MSIL coincided with a powerful launch pipeline as effectively.

So, we expect it’s logical to imagine some main product motion from Maruti within the coming months/quarters. An upgraded Brezza, Baleno, Jimny and a big SUV are a few of the potential merchandise that would assist volumes, margins and sentiment within the inventory over the subsequent 12-24 months.

Margins prone to stay weak in Q4FY21: MSIL raised costs in January (common of c1.5%) and we anticipate it to take action once more in April (2-3%). Nevertheless, commodity headwinds are enormous and the dearth of recent product launches is all the time a constraint on profitability. On a optimistic observe, the JPY has depreciated and reductions have diminished. Factoring in all this, we reduce our margin estimates for Q4FY21 and FY22. We nonetheless anticipate Ebitda margins to develop to c13% in FY23, on new launches and working leverage. We retain Purchase ranking and Rs 8,400 TP.

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