Buoyed by Maruti Suzuki India Limited's (MSIL) "premiumisation theme" after the carmaker launched the new Ignis, brokerage Nomura reiterated its Buy call on MSIL with a target price of Rs 6,576, which marks a 14 percent upside from its current price of Rs 5,777. 

Also read: Maruti Suzuki Ignis logs over 6000 bookings in 2 weeks; waiting period goes up to 2 months

Last week, MSIL unveiled the Ignis in the premium affordable hatchback segment at a very attractive price, starting at Rs 4.59 lakh.

Nomura said in a research report that the pricing of the petrol variant is likely to provide stiff competition to the KUV100/Grand i10, while the diesel variant is priced at a 10% premium to similar variants. The pricing (excluding the base petrol variant) makes it sit at a 5% premium to Swift but below Baleno. 

Maruti Suzuki Ignis

The brokerage highlighted that MSIL is targeting the new millennials (consumers aged under 29), who are willing to pay more for premium features. Apart from meeting the domestic demand, the car has a potential for exports to South Asia and South-East Asia later, it highlighted. However, in the short term, production constraints could limit material market share gains for MSIL.

Nomura analysts factored in nominal volumes in FY17 and about 5,000 units of incremental Ignis sales per month in FY18 but said there can be upside given the attractive pricing. The segment size is about 55,000 units per month. 

Following the aggressive pricing of Ignis, the analysts said there could be some impact on Swift. However, as MSIL is rumoured to introduce a new Swift in 2017 based on a completely new rigid and lighter platform (like the Baleno), that should address the decline.

"Overall, we have built in ~3% volume growth in FY17F and ~15% CAGR for MSIL over FY18-19F," Nomura analysts said in the research note.

"Management indicated that impact of demonetisation has been limited and targets double-digit growth in FY17. Thus, we believe there can be further upside to our volume estimates for MSIL, and maintain it as our top pick," they added. 

Maruti Suzuki Ignis feature