IGI Logo

Tank-Up; UV segment set for a makeover

Lack of contemporary features, limited UV portfolio and absence of diesel variants have been the key voids in case of MSIL. Whether hybrid technology introduction will address the diesel conundrum or not will be seen over time However, if one looks closely at Baleno 2022, it does gives a glimpse of what to expect from the new MSIL product cycle. In this report, we have outlined the number of UV launches (basis the available information) and studied Baleno 2022 as a benchmark to gauge if MSIL is tweaking its DNA and addressing some of the long standing voids. Just like this time round, before the commencement of the previous product cycle in FY'14, the asks included successful transition to INR10Lakhs+ segment, introduction of a Compact SUV and a winning mid-size sedan. Was the company successful in addressing those challenges then? Yes, MSIL ticked all the boxes. MSIL launched five products back-to-back, including Ertiga, Ciaz, Brezza, Baleno and S-Cross, with the success ratio was well over 80%. The previous product cycle played out effectively on both the crucial parameters of market share and margins. Visiting the features list in the Baleno 2022, we derive the same comfort today and reiterate our BUY stance on MSIL. We ascribe 25x PE to arrive at Mar’23 fair value of INR 9,500.

New product cycle is all about UVs: MSIL’s market share in the Passenger Vehicle segment has dwindled from over 50% to 43.5% during 9MFY22. One of the key reasons for this loss in market share has been its inability to make timely additions to its existing UV portfolio. The segment share of UVs has swelled from 21% in FY15 to 48% in 9MFY22, while MSIL’s market share in the segment has slipped 700bps from 28% in FY19 to 21% in FY22E. In the past 3 years, there have been 23 new SUV launches, of which only one was by MSIL - XL6 in Apr’19. However, it appears that the company is taking corrective measures and planning a slew of UV launches in upcoming product cycle. As per various media reports, MSIL is expected to debut at least one new product in all the key subsegments of SUVs. The current models are expected to be fully refreshed and supported by four new SUVs in Compact/Mid/Premium segments. With these launches, the total UVs in MSIL’s portfolio could more than double to 10 (7SUVs + 2-3MUVs) in the course of the next 2-3 years. While MSIL aced the previous product cycle between FY'14 to FY'19, the question once again is can we expect a repeat this time? Assessing each new launch, starting with Baleno 2022 will, we believe, give us some clues.

Baleno 2022 - A complete package?: MSIL’s traditional strength has been fuel efficiency. However, with the passage of time, being ‘fuel efficient’ and ‘utilitarian’ is not sufficient. A growing segment of customers demand new-age features, safety, etc. In a nutshell, a ‘complete package’. With the Baleno 2022, MSIL seems to have reworked its DNA and becoming fit for young buyers. In addition to high fuel-efficiency (Baleno 2022 is at least 10% more fuel-efficient than the nearest competition), Baleno incorporates class-leading features both in comfort and safety, while maintaining its competitive edge on price. The new, leading features include a) infotainment system with 9inch display, b) 360 degree camera, c) heads-up display and d) 6 airbags (Refer exhibit 7). Over a period, competition found new USPs to appeal to the customers. Some focused on features, others on safety

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at https://www.jmfl.com/disclaimer

SEBI Registration Number is INM000010361

Above views are of the author and not of the website kindly read disclaimer