>MARUTI SUZUKI- Domestic Growth Trajectory Improves (CITI)

Buy: Aug09 – Domestic Growth Trajectory Improves

■ What's New? — MSIL reported solid domestic sales growth over the month (+29% y/y, substantially above expectations) driven by the A2 segment (+c39% Y/Y) and the A3 segment, which continued its solid growth streak – up 44% y/y, though MoM sales reported a decline.

■ Domestic Volumes Guidance Revised Upwards for FY10 — to 10%, from earlier guidance of 5%. Management notes that both footfalls to showrooms and customer inquiries remain healthy. We factor 10% for FY10 but believe there are upside risks to these estimates.

■ Model Mix Continues to Improve — The model/revenue mix is increasingly tilted toward fresher/younger products. Management noted that while models < 5 years are now just < 40% of volumes, from a revenue perspective these account for 60-67% of revenues, underscoring that the realisation mix continues to improve.

■ Exports strong, but growth rate not sustainable — The growth this month is accentuated by a low base. Management also noted that export volumes are being stimulated by the fiscal incentives in Europe – the probability of volume growth decelerating from this monthly trend rate is somewhat low.

■ Mixed Impact of Festive Seasons — Growth in the domestic market is also slightly accentuated because in Aug08, the period of 'Shraddh' had occurred – a period when buyers typically eschew purchases. This year, Shraadh will occur in the month of Sept, but mgmt doesn’t expect it to impact volume growth as it will be offset by the "Navraatra" festival, an auspicious period when buying revives. Maintain Buy (1L).

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