‘Neutral’ on Maruti Suzuki, concerns over margins remain: JP Morgan

Maruti’s sales are lower by 1% y-o-y at 117,451 units in February. Dispatches were impacted due to production shortage (state of Haryana witnessed disruption due to protests, which impacted production of OEMs). The production loss was 10,000 units. We are currently Neutral on Maruti Suzuki while the stock has corrected from peak levels, the concerns around margins remain against the backdrop of a weakening rupee.

The government announced a 1-4% levy as an infra cess on passenger cars (including on petrol, Diesel, CNG and LPG vehicles). The cess though has not been levied on three-wheelers, electric vehicles, hybrid vehicles, and vehicles registered as taxis.

Maruti derives 14% of sales from above 4m cars – models include the Ciaz, the Ertiga S Cross, etc. The diesel variants of the Ertiga and the Ciaz are mild hybrids and hence will be exempt from the cess.

The recent fall in the INR will be a near-term concern for margins – the cross currency rate has fallen by 15% from peak levels as the rupee has weakened vs the dollar (since July, the rupee has depreciated 8% vs the dollar).

Maruti Suzuki India Limited