Notwithstanding the miss, domestic brokerages remain gung-ho about the prospects of the country’s bellwether carmaker and expect a market share gain, going ahead. They recommend a ‘Buy’ on the counter with an estimated 13-16% upside.
Automaker Maruti Suzuki’s net profit for the quarter ended June 2023 surged more than 2-fold YoY to Rs 2,485 crore, and was slightly higher than the ET Now poll estimate of Rs 2,444 crore. The revenue from operations rose 22% on year to Rs 32,327 crore and was higher than the estimated Rs 31,778 crore. India’s largest automaker sold 498,030 units during the quarter, which was 6.4% higher than the year-ago period.
Here’s what brokerages recommend on the stock:
CLSA: Sell | Target: Rs 8,796
CLSA said higher staff costs and other expenses led to lower-than-estimated EBITDA, which was a dampener in June quarter earnings. It recommended a ‘Sell’ on the stock. The brokerage sees a 10% downside in the counter with the current volume run-rate running lower than its estimated run-rate.
If Maruti pays cash for the acquisition of the Gujarat plant, it could lead to a Rs 900 crore decline in other income and a 5.7% dilution in EPS in CLSA’s opinion. The Return on Equity (ROE) will also likely see a decline, CLSA said in a note.
Nuvama: Buy | Target: Rs 11,400
Nuvama remains upbeat on the prospects of Maruti Suzuki share and recommends a ‘Buy’ for a price target of Rs 11,400. The brokerage called Q1 earnings strong for the largest passenger car maker and said that the stock was on track to see an upside from the current levels.
The volume performance is likely to find support in new products, greater replacement demand, buoyant economic activity and ample finance availability, it said, adding that MSIL is most likely to increase its PV market share to 46% from the current 43%.
Maruti remains an undisputed passenger vehicle maker in the domestic market with a 68% market share in non-SUV space while accelerating its presence in the SUV segment. An amalgamation of Suzuki Motor Gujarat with itself should lead to simplification of structure and provide cost synergies, it said.
Motilal Oswal: Buy | Target: Rs 11,150
Motilal expects Maruti to gain market share in FY24 and recommends a ‘Buy’ for a price target of Rs 11,150. The domestic brokerage expects MSIL to outperform underlying industry growth of 6-8% in FY24, resulting in market share gains and margin recovery. “We expect market share gains and margin recovery in FY24, led by an improvement in supplies, a favourable product lifecycle, mix and operating leverage,” it said.
Recounting the negatives for the reported quarter, it said that the Q1FY24 EBIT miss was on account of high employee costs.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)