Have very low inventory at dealerships Maruti Suzuki

Have very low inventory at dealerships Maruti Suzuki

Update on Indian Equity Market:

The markets closed the weekly expiry day on a positive note as Nifty ended the day 0.5% higher at 15,179. Within the index, HINDALCO (5.4%), RELIANCE (4.2%), and ADANIPORTS (2.6%) were the highest gainers while EICHERMOT (-3.0%), TITAN (-2.5%), and LT (-1.4%) were the laggards. Among the sectoral indices, FMCG (0.8%), METAL (0.8%), and IT (0.6%) led the gainers while PSU BANK (-1.3%), AUTO (-0.5%), and REALITY (-0.3%) were the losing sectors.

Excerpts of an interview with Mr. Shashank Srivastava, Executive Director, Marketing & Sales- Maruti Suzuki India Ltd (Maruti) with CNBC TV18 dated 11th February 2021:

  • Mr. Srivastava mentioned that the Vaahan data comes with a lag. In October-November, it was said that the dealers are carrying very high inventories based on the Vaahan data which on the ground was incorrect.
  • The states like Telangana and Andhra Pradesh, which contribute about 12% to the sales are not part of Vaahan numbers. About 14% of the RTOs (Regional Transport Office) are not part of the data issued by Vaahan.
  • The company is currently not facing any difficulty caused by a global shortage of semiconductor chips. Production was normal in January and continues to be so in February.
  • The auto sales recovery has continued. The company is now only 15% below last year’s volume levels. The same number was -78% and -34% during 1QFY21 and 1HFY21 respectively.
  • The company has kept very low inventory levels at dealerships. He said that the company needs to undertake extra production to fill the inventory levels.
  • Price rise in precious metals leading to input cost inflation for the auto sector. He mentioned that one has to take a hit on the bottom-line to protect the top-line.

Consensus Estimate: (Source: market screener)
•The closing price of Maruti was ₹ 7,665/- as of 11-February-2021. It traded at 49x/ 31x/ 24x the consensus earnings estimate of ₹ 156/ 245/ 313 for FY21E/FY22E/23E respectively.
• The consensus price target of ₹ 7,620/- implied a PE multiple 24x of FY23E EPS estimate of ₹313/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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