MOSL: MARUTI SUZUKI (ANNUAL REPORT) (Buy)-Preparing to stay ahead in the race; Initiatives on EV
Maruti Suzuki (Annual REport): Preparing to stay ahead in the race; Initiatives on EV, network expansion/transformation and cost to help sustain its lead
(MSIL IN, Mkt Cap USD40.7b, CMP INR9287, TP INR10805, 16% Upside, Buy)
We delved into Maruti Suzuki's (MSIL) FY18 annual report to get insights into: (a) the demand environment and outlook, (b) the initiatives to strengthen its network moat, (c) the strategy to comply with future regulatory norms and (d) Gujarat plant cost structure. Key highlights:
- MSIL expects double-digit growth in FY19, driven by continued strength in the rural markets.
- The company remains fully committed to launch a full electric vehicle (EV) in India in 2020, supported by access to technology from Toyota. In the interim, it will launch a strong hybrid vehicle.
- MSIL is at various stages of preparedness for the upcoming regulatory norms like crash test and corporate average fuel economy (CAFE). While nine of its models already comply with crash test norms, it is preparing for CAFE phase-2 norms (applicable from Apr-22) after complying with phase-1.
- The company continues expanding its network, adding ~315 sales outlets in FY18. It now has ~2,627 outlets in 1,735 cities. Also, MSIL is at various stages of acquiring land at ~370 locations in top 10 cities.
- It is taking several initiatives to reduce JPY exposure, including development of a local source for high tensile steel and enhanced procurement from the Japanese suppliers' transplants in the ASEAN region.
Maruti Suzuki India is engaged in manufacturing, purchasing, and selling motor vehicles, components, and spare parts in India, Europe, Africa, Asia, Oceania, and Latin America. Co. offers 14 brands and approximately 150 variants of passenger cars, multi utility vehicles, and multi-purpose vehicles under the Alto 800, Alto K10, Wagon R, Celerio, StingRay, Ritz, Swift, DZire, SX4, Ertiga, Omni, Eeco, Gypsy, and Grand Vitara brands. Co. is involved in the facilitation of pre-owned car sales, fleet management, and car financing. In addition, it provides motor insurance products, accessories, auto card, and driving school services.
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