Maruti all geared to hitch a smooth ride in 2015

Analysts expect Maruti to report robust sales in 2015.

Maruti Suzuki scrip recouped some of the losses it had sustained over the last week on better than expected sales volumes in December.

The stock was trading weak earlier due to expectations of a price hike and the decision to pass the impact of excise duty hikes to the consumer.

Given muted demand, the moves are expected to negatively impact the company in the near term.

For December, the company posted a strong 21% growth year-on-year in December 2014.

Gains were driven by a 13% improvement in domestic sales and a 171% gain in exports while expectations were for about 8-9% domestic growth and nearly doubling of export volumes.

Analysts believe that the likely implementation of price hikes from January 1, 2015, rollback of excise duties and higher discounts has led to the spurt in sales.

Volumes in the current month would convey whether the higher sales were one-off or can sustain going ahead.

While analysts say that the near term outlook is muted there are multiple tailwinds which could boost volumes.

Ambit's Ashvin Shetty believes that economic revival, lower fuel prices and softening interest rates would likely drive healthy demand from FY16 with passenger vehicles segment growing at 15%.

Further, as first time buyers come back into the market, Maruti is expected to score over its rivals given a larger petrol portfolio.

The company is expected to improve its 52% market size in the small car segment.

Its new launches such as the Ciaz and the Celerio have had some success with the former which was launched in October grossing about 5,000 units a month.

Success of the new products, a strong launch pipeline will add to its overall market share.

The company is expected to launch a crossover, a mini SUV and a small commercial vehicle in FY16.

The scrip has been one of the major outperformers in CY14 giving nearly 90% returns.

At the current price of Rs 3,341 the stock is trading at 18 times its FY16 estimates.

80% of the analysts covering the stock according to Bloomberg have a buy on the scrip with a consensus target price of Rs 3,632 which translates into an upside of 9%.

While the company's long term prospects are strong and it has scored over its rivals on the market share front, investors given the stock's sharp run up could look at accumulating it on dips.

Photograph: Courtesy, Maruti