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Sharekhan
Maruti Suzuki (Hold)
CMP: Rs 1,158
Target: Rs 1,316
Maruti Suzuki unveiled its most prestigious launch, the new Swift, at an introductory price of Rs 5.17 lakh, ex-showroom Delhi, for the base diesel variant. The new Swift is dearer by Rs 13,000-23,000 as compared to the outgoing version. The stress in the petrol variant can be judged from the fact that the company was giving a whopping discount of Rs 40,000 on the Alto and Wagon R, and has now extended the offer to A-Star as well. Maruti Suzuki is contemplating a five per cent production cut for its largest selling model, Alto, even as it continues to offer higher discounts on the other petrol models to combat the demand slowdown. Based on the current demand dynamics, the company is facing aggressive headwinds in its petrol portfolio. However, it can stage a remarkable bounce-back as it expands its diesel portfolio (a revamped Dzire expected).
Standard Chartered
IGL (Outperform)
CMP: Rs 417
Target: (not given)
Our interaction with the CNG retrofitters suggests that discretionary vehicle conversion momentum remains strong, led by rising prices of competing fuel, i.e., petrol, and faster payback of 4-7 months. With imported CNG kit priced around Rs 25,000-30,000 and 50-100 km of average distance travelled/ day for private vehicles and taxis, better economics mean faster payback of 4-7months. Even as leading auto manufacturers (Maruti, Hyundai, GM, etc,) launch their own CNG car variants to capitalise on rising demand, existing car owners are also increasingly shifting to CNG. IGL's CNG volume will also be supported by the Delhi government's decision to set up private bus clusters where 4,500 buses will be added over the next two years to replace 2,000-bus blue line network.
Tata Motors (Outperform)
CMP: Rs 753
Target: Rs 1,269
The stock has corrected 35 per cent in the past six months on fears slowing US/Europe would impact JLR earnings. The current price factors in a pessimistic scenario: standalone business (lacklustre volume + lower margin) and JLR (flat volume + significant margin erosion). We, on the contrary, expect standalone margin to be maintained and JLR to post 12 per cent volume CAGR over FY11-13E (focus on emerging markets + new launches). We lower FY12/13E earnings by seven per cent to factor in slowdown in US/Europe and reduce PT to Rs 1,269 (Rs 1,500 earlier).
IDBI Capital
Mercator Lines (Buy)
CMP: Rs 23
Target: Rs 33
Mercator Lines (MRLN) recorded better than expected results and managed to record adjusted PAT of Rs 14.7 crore (76 per cent Y-o-Y fall) for the quarter against our estimate of a loss. The tanker and dry-bulk fleet charter rates, though under pressure, have coverage of 60 per cent on tonnage basis which provides visibility for debt repayment. MRLN plans to expand its presence in the Dredging segment where it is receiving better demand signals. The current order book for Dredging stands at Rs 300 crore. The coal mining output is expected to increase significantly. We believe that MRLN will increase dependence upon the non-core revenue for profitability.
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