Maruti Suzuki India Ltd
WE THINK MSIL’s valuations will continue to re-rate going into FY19 as concerns on capacity constraints/margins hit on Gujarat plant are likely to be underwhelmed and PV market should recover back to double-digit growth over next two years. Model cycle at Maruti remains powerful with c35% of the portfolio refreshed thus far and this will get a boost post the launch of new Swift (4Q18) , followed by a new compact SUV and high-volume models Alto/WagonR in late 2018/early 2019. This should continue to drive portfolio premiumization for the next three years. We think MSIL has enough levers to offset commodity cost increases and hence expect cycle high margins of 11.5% and market share of ~50% to sustain over the next two years.