Positives factored in. While Maruti Suzuki India (MSIL) would see robust volume growth in FY11, the lower EBITDA margin would wipe out such gains. Though capacity ramp-up would help counter production constraints by FY12-13, near-term production appears to have reached peak levels. On fair valuations, we maintain Sell.

n Market-share gain despite intense competition. MSIL's 27.4% volume growth in 2QFY11 enabled the company to improve its passenger vehicle (PV) market share to 43%. This marks a second successive quarter of improving market share for MSIL.

n EBITDA improves qoq. MSIL's adjusted EBITDA margin rose 130bp qoq on lower raw material-to-sales, which was 30bp more than expected. The higher royalty outflow (now a permanent feature of operating expenses) at 5.3% of net sales was 30bp higher than expected on unfavourable currency movement.

n Lower estimates; introduce FY13e. We lower our FY11 earnings estimate 11.7% (and that for FY12 by 6.1%) on lower other income and provisioning for higher royalty payout. Also, we introduce FY13e EPS at `124 (a 20.9% yoy rise).

n Valuation and risks. We retain our Sell rating based on fair valuations. We revise our target price to `1,539 from `1,375, based on target PE of 15x FY12e, an 11% premium to the past five-year average one-year-forward PE. Risks: Better car demand and sharp decline in commodity costs.