Maruti Suzuki: Recommendation Review

We had recommended Maruti Suzuki in DSIJ Issue No. 18 (dated August 26, 2012), when it was trading at Rs 1140. We had recommended the scrip as it was available at a lower valuation, particularly after the price took a hit due to the lock-out in the company's Manesar plant. Maruti’s excellent brand recall and quality products were among the key reasons why we recommended this scrip, along with expectations that any positive move on the Manesar plant front will see the stock spurt up.

After our recommendation, the stock moved up, helping investors create wealth. At that point, we had recommended though our ‘Book Profit’ SMS service that they should book profits at Rs 1467, which translated into a handsome return of 29 per cent in less than three months.

For the September 2012 quarter, the net sales of the company increased by 8.53 per cent to Rs 8070 crore, while the net profit declined by 5.41 per cent to Rs 227 crore. Though there has been a softening in global commodity prices, its margins were severely affected due to higher spending on sales promotion, lower non-operating income, adverse currency movements and greater depreciation. For the month of October 2012, the company sold a total of 103108 units (including 7106 units for exports), which was almost in line with the street’s expectations. Given the current volatile market environment, we at DSIJ believe that it is advisable to book profits on the counter, which is yielding an attractive return.