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MOSL: Morning India (19/June/18): 1. Maruti Suzuki (See through the noise); 2. EcoScope (Long US Dollar? Not so quick!); 3. Metals Weekly (Domestic steel prices stable)

MOrning India (19/June/18): 1. Maruti Suzuki (See through the noise); 2. EcoScope (Long US Dollar? Not so quick!); 3. Metals Weekly (Domestic steel prices stable)

 

Today’s top research idea

Maruti Suzuki: See through the noise; Negligible impact of higher fuel prices; RM inflation mitigated by price hike

• Maruti Suzuki's stock has underperformed the broader markets (by ~8% v/s BSE Sensex). We attempt to address investors' concern on impact on demand due to higher fuel prices, cost inflation impact on margins and slower-than-expected progress so far in parent Suzuki's alliance with Toyota.
• Historically, domestic PV demand has moderated only for a limited period of 3-6 months during the fuel price inflationary periods and remained resilient.
• Based on the current key commodity prices, we estimate a further impact of ~130bp in 1HFY19 (after ~150bp increase in FY18) to be partially offset by 2% price increase in Jun-18.
• Suzuki's partnership with Toyota is evolving gradually. This partnership will provide MSIL with much-needed access to Toyota's EV technology - an area where Suzuki was lacking expertise.
• MSIL's EBIT margin to expand by 200bp to ~14% in FY20 due to continued mix improvement, discount reduction, lower royalty, ramp-up of Gujarat plant and operating leverage.

Piping hot news

Chanda Kochhar goes on leave, ICICI Bank names Sandeep Bakhshi as COO

• The ICICI Bank board, in its meeting on Monday, appointed ICICI Prudential Life Insurance CEO Sandeep Bakhshi as whole-time director and chief operating officer (COO), creating a new top position at India’s second largest private bank, to steer all its businesses.