Motilal Oswal Securities has maintained ‘buy’ on Maruti Suzuki. The company reported growth of 1.3 per cent in February 2008 sales to 63,822 units. Domestic volume growth was flat at 0.4 per cent; volumes were 59,311 units. However, export growth momentum remained robust, as sales increased 15.5 per cent year on year to 4,511 units.

During February 2008, sales growth in most segments was negative, except for the volume driver A2 segment (plus 2.7 per cent year on year) and the A3 segment (plus 8.9 per cent year on year). Motilal believes that the lower domestic growth was due to postponement of purchases following expectations of excise duty reduction in Budget 2008. The brokerage expects strong volume growth from March 2008 onwards, boosted by the excise duty reduction from 16 per cent to 12 per cent on small cars (constituting 77 per cent of MSIL’s product portfolio).

Motilal believes that the reduction in the excise duty may lead to volume upgrades due to robust domestic demand. Currently, the brokerage expects MSIL to register volume growth of 16.1 per cent in 2008-09 and 16.5 per cent in 2009-10. The stock trades at 13.1x FY08E EPS of Rs 66.7, 11.4x