Maruti down 1% on CLSA downgrade, margin pressure likely in FY17

CLSA downgraded Maruti Suzuki   , the country's largest car manufacturer, to outperform from buy and slashed target price to Rs 4,150 (from Rs 4,220 earlier), citing likely pressure on operating profit margin in next financial year. The stock declined 1 percent intraday Thursday. The brokerage says outlook on Maruti’s volumes and margins has weakened, with softening passenger vehicle (PV) demand, hike in auto taxes, strengthening Yen and likely rise in auto steel contract prices. CLSA likes Maruti on a 2-3-year view given its strong franchise, product cycle and likelihood of a strong demand revival but expects modest stock returns on a 12-month view. PV demand momentum has softened in Q1CY16 and outlook for FY17 has also weakened post.

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