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MOSL: MARUTI SUZUKI (Buy)-Annual Report-Strategy for net zero emissions needs to be India focused

(MSIL IN, Mkt Cap USD27.8b, CMP INR6848, TP INR8200, 20% Upside, Buy)

 

 

MSIL’s FY21 annual report highlights the initiatives (digitization, online financing, subscription service, etc.) it took to emerge stronger from the COVID-19 pandemic. The management has shared its thought process on the path to attaining net zero emissions. It lays down the strategy to meet CAFÉ-2 norms from Apr’22. Key highlights from the annual report:

• Net zero emissions – many paths to green mobility: MSIL believes that its strategy of moving towards net zero emissions has to be consistent with the economic and infrastructure conditions prevailing in India. Per capita income at 5% of a large part of the developed market reduces the ability of a large number of people to buy expensive electric Cars. Some customers can only afford small Cars as only 5% of the Cars sold in India are priced over INR1.5m. It is focused on CNG and Hybrids to reduce emissions. These two technologies, coupled with biofuels, offer a means of moving towards its goal of net zero emissions. It also sees hydrogen as an interesting alternative to reduce dependence on importing Lithium.
• CNG/Hybrid to help in complying with CAFÉ-2 norms: Phase II of Corporate Average Fuel Efficiency (CAFE) norms to reduce the carbon footprint of the Automobile industry is applicable from Apr’22. In Phase I (Apr’17 onwards), MSIL had the least CO2 emissions per vehicle in the industry. CAFÉ-2 norms will need MSIL to reduce its fleet emission to 113gm of CO2/km at 1,145kg of fleet weight (from 130g CO2/km in Phase I). For further reduction in CO2 emissions, it is adopting a mix of powertrain technologies based on electrification and CNG. Suzuki’s JV with Toshiba and Denso for a Li-ion battery will support MSIL’s Hybrid plans.