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New model Scorpio-N unveiled at competitive pricing

* We attended the unveiling ceremony of Scorpio-N, which is targeted at upmarket urban customers. This model is superior to existing Scorpio Classic in terms of power and ridehandling, and sports an all-new design with comprehensive safety/connectivity features.

* Scorpio-N is developed with an investment of Rs16bn and has a production capacity of 6,000 units per month. It would compete with models like Tata Safari, Toyota Innova, Hyundai Alcazar, etc. Similar to XUV700, it will be launched at a competitive price, which will be applicable to the first 25,000 units.

* MM’s order book stands at ~170,000 units, and the Scorpio-N launch on July 30 will further support bookings. Considering expectations of a staggered improvement in chip supplies and a large order book, we raise volume estimates by ~3% each for FY23 and FY24. We increase our FY23/FY24 EPS estimates by 6% due to an increase in margin assumptions.

* We have a Buy rating with a TP of Rs1,250 (Rs1,150 earlier), based on 16x core Jun’24E EPS (DCF-based) and the value of investments at Rs482/share. We increase the valuation multiple to 16x from 14x, factoring in higher revenue growth and margin assumptions in our DCF model.

Key highlights of Scorpio-N unveiling ceremony

* Scorpio-N manual transmission is priced competitively at Rs1.2-1.9mn for petrol versions and Rs1.25-1.95mn for diesel versions.

* It is built on the new 3rd generation body-on-frame platform and has no carryover components from Scorpio Classic. The petrol engine generates 149KW of power and 380NM of torque. The diesel engine produces 129KW of power and 400NM of torque. It scores over its peers on power (Exhibit 4).

* It features terrain management technology, which allows better ride-handling and allows shifting to a 4-wheel drive easily. It features multiple driving models. Suspension systems are better, supported by the usage of FDD (Frequency Dependent Damping) and MTV CL (Multi-tuned valve central land) systems.

* Relevant models compare favorably with Tata Safari (Exhibit 5) and Toyota Innova (Exhibit 6). Similar to XUV700, the introductory prices are applicable only for the first 25,000 bookings.

* The production capacity stands at 6,000 units per month, and deliveries are expected to commence in the festive season. Scorpio-N will be assembled at the Chakan plant in the newly setup line. The existing Scorpio Classic will be assembled at the Nashik plant.

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