Shares of Maruti Suzuki India, the country's largest automaker, are on a bull run, on the back of a drop in commodity prices, rising demand, and a weaker yen. From a low of ₹6,769.05 in March 2022, the stock soared to the current level of ₹9,042.50 apiece, producing a return of nearly 33.60%.
The Japanese yen has fallen 21.56% against the US dollar so far this year, which is expected to help Maruti Suzuki reduce sourcing costs for parts imported from Japan.
According to projections made by the global brokerage firm, UBS, the stock still has a lot of room to rise from hereon. The brokerage has a "buy" call on the stock with a target price of ₹12,000, indicating an upside potential of 32% from the stock's current market price, reported by Business Today.
UBS said Maruti will emerge as the biggest winner as diesel vehicles go off the road. Real-world driving Emission (RDE) norms will go live on April 1, 2023.
More stringent norms will follow and are expected to further increase the relative cost of diesel cars in India, the brokerage said, adding that diesel vehicles account for 33% of the industry's demand.
UBS noted that the company has almost zero exposure to diesel vehicles, and the expected shift away from the diesel segment will be a big positive.
Earlier, domestic brokerage firm Edelweiss Securities upgraded the rating on Maruti Suzuki from "Hold" to "Buy." The brokerage has a 12-month target price of Rs. 10,685 on the stock, and it raised its EPS forecast by 5% and 11% for FY22 and FY23, respectively.
The brokerage expects Maruti Suzuki to benefit in the coming quarters due to a rise in demand, and a drop in commodity prices. It said that MSIL's demand outlook remains healthy with an order book of 400,000 units ex-Grand Vitara. As of now, there is no on-ground indication that demand is slowing down.
Edelweiss also anticipates that Maruti Suzuki will begin to regain market share as a result of the company's strong franchise, the benefit of a new product cycle with its entry into the UV segment, and general recovery in the compact PV market following three years of inflationary pressure.
Maruti Suzuki reported a 26% increase in its domestic sales to 1,47,072 units in October as against 1,17,013 units in the year-ago period, according to industry data.
The company's sales of mini-segment cars, comprising Alto and S-Presso, grew to 24,936 units in the last month as against 21,831 units in October 2021. In addition, sales of compact cars rose to 73,685 units last month compared to 48,690 units in the year-ago month.
Meanwhile, Maruti Suzuki expects a substantial increase in its market share in the sports utility vehicle (SUV) segment this fiscal year, with the new Brezza and Grand Vitara receiving a robust response, Maruti Suzuki India (MSI) Senior Executive Officer Marketing & Sales Shashank Srivastava told PTI in an interaction.
"In July, we were at 7.1 percent (market share) in the SUV segment; now it has moved to 10.8 percent in August, 13.01 percent in September, and 14.4 percent in October. "So it is showing an increasing trend," he said.
He noted that the gain would help it regain market share in the overall passenger vehicle segment.
"Strengthening the SUV segment is an important part of our strategy to regain the overall market share that we lost due to our non-presence in the SUV segment," Srivastava added.
According to company CFO Ajay Seth, Maruti Suzuki India plans to invest over ₹7,000 crore this year on various initiatives, including the construction work of its new plant in Haryana and new model launches, PTI reported.
For the September-ending quarter, Maruti Suzuki reported a four-fold jump in its net profit to ₹2,112.5 crore as against a net profit of ₹486.9 crore in the year-ago period. Revenue from operations increased by 45% to ₹29,942.5 crore in the current fiscal quarter, compared to ₹20,550.9 crore in the previous fiscal quarter.
The company said it sold a total of 5,17,395 vehicles during the quarter, its highest ever in any quarter.
An average of 46 analysts polled by MintGenie have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.