Edelweiss Securities has upgraded the rating on Maruti Suzuki from 'Hold' to 'Buy'.
The brokerage has a 12-month target price of ₹10,685 on the stock, which hints toward an upside of 23% from its latest close. Additionally, for FY22 and FY23, it increased its EPS forecasts by 5% and 11%.
The brokerage firm expects Maruti Suzuki to benefit in the coming quarters due to a rise in demand, a drop in commodity prices, and a weaker Yen. Edelweiss says 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, it says.
On the margin side, the brokerage firm said there are tailwinds of currency, commodity and operating leverage that would support margins here. At the same time, there would be higher marketing spending as well as travel spending. MSIL aims to improve margins from current levels, it added.
In addition, commodity benefits have not been retained by the industry to the desired levels. For MSIL, margins would remain lower than in previous cycles due to higher outsourcing and contract manufacturing. "We estimate the company will report an FY24 EBIT margin of 8%," said Edelweiss.
Edelweiss 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.
Last week, Maruti Suzuki reported a 135% increase in passenger vehicle sales to 1,48,380 units in September as against 63,111 units in September 2021. In addition to this, Maruti Suzuki India also reported an over two-fold rise in its vehicle production at 1,77,468 units in September 2022. The company produced a total of 81,278 units in the same month last year, according to the data from FADA.
Maruti Suzuki's Wagnor emerged as the best-selling car in India for the first six months of the current financial year.
Shares of Maruti Suzuki have risen 4% in the last three months. Further, over the last six months, the market price of the stock has increased by 13% to ₹8,687.45.
The company reported a 118% surge in net profit to ₹1,036.2 crore for the quarter ended June, as against a net profit of ₹475 crore in the year-ago period. In Q1FY23, the operating profit increased to ₹1,914.9 crore from ₹818.9.
Revenue from operations increased by 45% to ₹26,592.7 crore in the current fiscal quarter, compared to ₹18,284.3 crore in the previous fiscal quarter.
Maruti Suzuki (MSIL) is India’s largest passenger vehicle (PV) manufacturer with a market share of about 45%. It is a key player in the mini and compact car segments with a dominant market share and has enjoyed success in the executive segment on the back of the Ciaz and Brezza launches. Suzuki Motor Corporation (Suzuki) of Japan holds a 56% stake in the company. MSIL offers the widest product range of passenger cars in India, with a particular focus on the entry segment.
An average of 45 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.
