For 1QFY2020, Maruti Suzuki India (MSIL) posted below expectation results both
on top-line and bottom-line fronts. MSIL’s standalone top-line registered a decline
of ~12% yoy to `19,720cr on the back of volume de-growth of 18%. Moreover,
the company’s operating margins contracted by 454bps yoy. On the standalone
bottom-line front, MSIL reported de-growth of ~27% yoy to `1,436cr on the back
of lower sales and poor operating performance.
Outlook and Valuation: During the last four quarters, the company’s volume
growth has remained subdued mainly due to overall slowdown in economy, which
affected the buying sentiment. However, we believe that any revival in auto industry
would benefit Maruti on the back of its leadership position, diversified portfolio and
strong brand & distribution network. Considering the above factors, we maintain
our Buy recommendation on MSIL with Target Price of `7,783.

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