Maruti Suzuki reported strong Q2FY2017 numbers with expansion in margins. We assume double digit revenue growth in our forecast
over strong demand in domestic markets and high production abilities after
commissioning of Gujarat plant in Q4FY2017E. Given the new launches, lower
petrol prices and its strong brand, MSIL is expected to gain market share due to
product mix favoring Petrol as fuel. However, MSIL’s margins are likely to show
some weakness in next two years due to the higher fixed costs arising after
commissioning of Gujarat plant as well as logistics expenses as its vendors are yet
to move to Gujarat. Rising commodity prices are also expected to show some
negative effects on its margins. At CMP, MSIL is trading at P/E of 27x and 22x its
FY2017E and FY2018E earnings respectively. We value MSIL on 23x of its
FY2018E EPS of `261 with a target price of Rs6,006 with Accumulate rating on the

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