Target of Maruti Suzuki India with report

Keep buying on Maruti for target Rs.940, Current market price-Rs.752
Merrill Lynch has downgraded Maruti Suzuki India to ‘sell’, driven by sharp lowering of forecasts on competitive and cost concerns. Post-revision, the foreign brokerage expects a flattish FY09 EPS apart from substantial downgrades, leading to stock de-rating closer to historic lows.
Merrill Lynch has cut its EPS estimates by 2.2% in FY08, 12.5% in FY09, and 10.5% in FY10, driven mainly by lower volumes on increased competitive intensity.
“We also factor higher steel and aluminium prices which, we believe, cannot be fully passed on, and adverse JPY (yen) to USD (dollar), which will show up on newer import contracts,” it adds.
According to the report, the first half of the current financial year is expected to be particularly weak for the auto major, both on volumes (loss of share) and margins (higher costs). We estimate around 6% EBITDA and double digit net profit decline in the first half of the fiscal, the report adds.

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