Maruti Suzuki has benefited from robust industry growth over the year, we believe that growth rates will ease (from a high base) over FY10-12E as 1) domestic demand moderates: as stimulus measures are phased out (as announced in the budget), product prices are likely to rise on emission related upgrade costs / higher input costs and interest rates are likely to firm up, 2) exports should stagnate: given a likely decline in W. European car sales, 3) competition should increase as global OEMs launch 5-6 new small cars over the year.
Post strong growth over the year, we believe that Maruti’s earnings growth will likely moderate from hereon, given normalizing industry growth, rising competition as well as tapering EBITDA margins.