Kotak puts ‘Buy’ rating on Maruti Suzuki shares; target price Rs 6, 300

Maruti Suzuki launched its new compact SUV Ignis which we believe is likely to be another winner due to its superior features, performance and higher fuel efficiency than its competition. Our analysis suggests that at the introductory launch price for Ignis, profitability of the car will be significantly lower than for Maruti Swift and we expect the company to raise prices after assessing the order book. Maintain Buy with an unchanged target price of R6,300.

We estimate the company will make a blended EBIT of ~R44,000-69,000/vehicle on Ignis Delta/Zeta variants versus ~R75,000 for Maruti Swift once Ignis achieves cumulative 200,000 volumes. Maruti Ignis will compete with Hyundai Grand i10 and is priced competitively but has superior features, better power and fuel efficiency than the Hyundai fare.

The company has also provided ABS + EBD and dual air bags as standard form the base variant itself in Ignis which will significantly improve the safety of the car which is not a standard fitment in Swift or Grand i10. We believe on paper, Ignis seems to score over Maruti Swift and Hyundai Grand i10, but compact SUVs appeal more to the younger generation than middle /older generation.

Also the stability of compact SUVs has not been tested as yet as it is a relatively new development in India given the small wheelbase as compared to larger SUVs.

Maruti Suzuki India Limited