With a revive in car sales, better realisation from the recent price hikes and with production losses being a thing of the past, Maruti Suzuki is in for some good times. Moreover as RBI hints at further rate cuts by March and inflation beginning to moderate, car sales are likely to see a revival of demand.
•HSBC Global Research is bullish on Maruti Suzuki with a target price of Rs 1,405 per share. The stock is currently trading at Rs 1,241, indicating a growth of 13 percent.
HSBC expects Maruti to regain its market share in the year ending March 2013 on the back of moderating competition, a decline in raw material costs, Japanese yen depreciation, an improved product line and the likelihood of softening interest rates.
Better realsations and favourable exchange rates are likely to boost sales. Reuters
Also, the recent 5.2 percent jump in monthly sales in January is another reason to be upbeat on the car maker. Maruti saw huge interest in its diesel cars with nearly 90,000 bookings for its Swift model. Rural demand also continues to be robust, with sales up nearly 15 percent from the year ago.
Even Bank of America Merrill Lynch expects new products like Swift, Dzire and Ertiga to drive sales and expects a sharp rebound in margins.Now that that strikes at Manesar and the company’s skewed petrol portfolio have been resolved, the brokerage expecs the company to surge ahead of its peers in the next year. “We expect interest rate cuts and fuel price adjustments to revive demandfor petrol cars as well.”
In order to boost its diesel car production, Maruti is contemplating setting up a new diesel plant at Gurgaon. The brokerage has a buy rating on Maruti on expectation of a strong rebound in Maruti’s EPS, driven by improved sales and margin recovery.
In order to boost its diesel car production, Maruti is contemplating setting up a new diesel plant at Gurgaon. According to a report in the Business Standard, “A ramp up of production at the second line in Manesar too will improve availability of the Swift and Dzire and help cut down on the current four-five month waiting period.” Moreover, in order to source additional engines, recently Maruti tied up with Fiat for sourcing one lakh engines per annum for the next three years.
Meanwhile…………
•Daiwa Capital Markets continues to maintain its ‘buy’ rating on Power Finance Corp with a buy target of Rs 230 per share compared with the company’s current price of Rs 193 per share, reflecting a growth of 19 percent.
While power projects continue to be plagued by coal supply issues, Daiwa believes these issues are slowly getting resolved as Coal India has been asked to sign fuel security agreements (FSA) with power producers. Also, an improved macro environment coupled with a fall in the cost of funding could lead to an expansion in interest spreads.
For the year ended March 2012, the company is expected to report a 13 percent growth in net profit.
•Barclay Capital continues to remain overweight on Jindal Steel & Power with a price target of Rs 612 per share. The stock is currently trading at Rs 582.3 per share, indicating potential gains of 5 percent. With projection execution hurdles coming to an end, investor focus will shift back to growth.
The key trigger will be the commissioning of the Angul B1 Block, which is expected to generate one of the best RoCE ( profits that shareholders earn from investing in the business) among ongoing steel expansions in India. Overall, the brokerage expects the company to clock a growth of 20 percent (compounded annual growth rate) in EBIDTA (operating profit) between financial years ending March 2011 and March 2014.
•Standard Chartered has downgraded Glaxo SmithKline Consumer Healthcare to ‘in line’ from ‘outperform’ earlier. According to the report, rich valuations and the poor performance of its non-core business are the key reasons for the downgrade.
In the past four months, the stock has outperformed the FMCG (fast-moving consumer goods) index and the Sensex by 14 percent and 12 percent, respectively, thereby leading to an increase in its valuations.
Also, the poor performance of its non-core business continues to remain low as sales contribution was around 6-7 percent. The company has not seen too much success in its new categories and has either withdrawn or is re-working brands such as Nutribar, Foodles, etc. For the year ended March 2012, the company is expected to incur a net profit of 23 percent.