Maruti Suzuki stock check: Up 23% in last 6 months, is it still worth buying?

Despite the recent volatility in the Indian markets, auto major Maruti Suzuki has given consistent returns to its investors. However, in the last 1 year as well as in 2023 YTD, the stock has underperformed its benchmark index.

The stock rose 14.5 percent in the last 1 year versus a 22 percent rise in Nifty Auto. Meanwhile, in 2023 YTD, the stock has advanced 21.6 percent as against a 26.5 percent rise in Nifty Auto.

The stock has added 2 percent in September so far, extending gains for the 6th straight month since April. In the 6 months between April and Sept, the stock added 23 percent. However, it was in the red in March and February, down 3-4 percent each month. But in January, the stock jumped 6 percent.

According to a MintGenie poll of 40 analysts, 17 have a ‘strong buy’ call on the stock, 12 have 'buy', 7 have ‘hold’, 1 has 'sell' and 2 have ‘strong sell’ recommendations.

Earlier this week (September 4), the stock hit its record high of ₹10,465. Currently trading at around ₹10,201.10, the stock has gained 26.3 percent from its 52-week low of ₹8,076.65, hit in December 2022.

Earnings

In the June quarter, Maruti reported a massive 145.31 percent jump in its net profit to ₹2,485 crore as compared to ₹1,013 crore last year. Its revenue from operations jumped 21.99 percent to ₹32,327 crore in Q1 FY24 as against ₹26,500 crore in the year-ago period.

The company sold a total of 4,98,030 vehicles during the quarter, higher by 6.4 percent compared to the same period the previous year. During the quarter, the company registered the highest-ever quarterly net sales of ₹30,845.2 crore as against ₹25,286.3 crore in Q1 FY23. Meanwhile, in July, Maruti Suzuki recorded sales of 1,81,630 units, up from 1,75,916 units sold in July 2022.

Meanwhile, in the previous month, the auto major reported its highest-ever cumulative monthly sales volume, with a total of 189,082 units sold. Of this, 1,58,678 units were sold in the domestic market while exports stood at 24,614 units. The carmaker also reported sales of 5,790 units to other OEMs (original equipment manufacturers).

Total domestic passenger vehicle sales for the financial year stood at 7,22,296 units as of August 2023 - up from 6,46,170 units. Total sales meanwhile stood at 8,68,742 units as against 8,09,020 units sold in the April to August window last year.

MintGenie collated views of brokerage firms and technical analysts to understand whether the stock is a ‘buy’ at this juncture or not. Let's take a look:

Fundamental Views

Akshay Tiwari - Fundamental Analyst, Religare Broking: In the auto sector, the demand for passenger vehicle looks strong, mainly driven by demand for utility vehicles. Similarly, the companies within this space are strategically placed and have a wide range of product offerings for customers. For Maruti, the participation of UVs is seeing a continuous uptrend in its volumes (at 25.4 percent as of Q1FY24) and this trend is expected to continue in the coming quarter which would eventually aid in better revenue, realisations and margin expansion, it said.

HDFC Securities: The brokerage maintains a BUY call on the stock with a revised target price of ₹10,920 (from ₹10,214 earlier), indicating an upside of over 7 percent.

Maruti's Q1FY24 PAT was ahead of estimates even as a lower-than-expected margin was offset by higher-than-expected other income. Over the last three quarters, MSIL has been on an aggressive launch spree, having launched four new models in a bid to recover its lost share in UVs, which has now recovered to 23 percent in Q1. MSIL is now again the market leader in the UV segment. The recent success of GV and the higher-than-expected order bookings for Invicto are a case in point; customers are considering Maruti’s products as 'worthy contenders' even in the ₹15 lakh segment, where few investors were so far doubting the company’s 'right to win', it said.

Nirmal Bang: The brokerage also retained its bullish view on the stock with a target price of ₹11,503, indicating an upside of around 13 percent.

MSIL’s 1QFY24 results were broadly in line with our estimates. PAT came in 12 percent above our estimate due to other income being higher than our estimate. MSIL’s plan to expand production will help it to increase its overall market share and the rising share of SUVs in its overall portfolio will boost margins. It expects the sales momentum to continue in the coming quarters and SUV market share to increase, it said. The brokerage remains positive on MSIL and expects an 8 percent volume CAGR over FY23-FY25E, led by new model launches and market share gains. The company is doing very well in the UV segment and had a 23 percent market share in 1QFY24, it added. It expects the momentum to continue in the coming quarters.

Motilal Oswal: The brokerage also has a ‘buy’ call on the stock with a target price of ₹11,150, implying an over 9 percent potential upside.

MSIL is expected to outperform underlying industry growth of 6-8 percent in FY24, resulting in market share gains and margin recovery. This should be further supported by easing supply challenges, said the brokerage. Stable growth in domestic PVs and a favorable product lifecycle augur well for MSIL, it added. It expects market share gains and margin recovery in FY24, led by an improvement in supplies, a favorable product lifecycle, mix and operating leverage. MOSL increased its FY24E EPS by 3 percent to factor in better ASPs and higher other income. However, it cut FY25E EPS by 1 percent, as the benefits of higher ASP and higher other income are more than offset by the SMG acquisition, added MOSL.

Technical views

Aditya Gaggar, Director of Progressive Shares

Index heavyweight Maruti Suzuki has given a breakout from the Cup and Handle Formation (Monthly chart) which is a continuation pattern and at the same time, the auto sector has also given a breakout from a Bullish Flag and Pole Formation which is then resulted in a joint breakout. Momentum and trend-following indicators also support price activity. As per the pattern, the target is ₹14,900, said Gaggar.

Rohan Shah - Technical Analyst, Religare Broking

The auto index has been inching higher for the last 5 months and is currently trading around record highs. Maruti is trading in sync with the index. The stock has been gradually inching higher from the last few months, where the price rallied from 8150 to 10450 odd levels. The recent vertical surge in stock has led to resolute a breakout from the Bullish Cup and Handle price pattern with noticeable volumes which hints at a bullish sign for medium-term trend, said Shah. “However, in the near term, after a sharp surge in price, we believe the price to witness a breather now towards a support area which could be a fresh buying opportunity. Maruti has strong support placed around the 10000-9900 zone and is expected to scale higher towards 10600-10800 levels,” he added.

Gaurav Bissa, VP, InCred Equities

Maruti was one of the very few auto names that failed to bank on the strong upside enjoyed by the auto space. However, this is expected to change, and the stock is likely to witness a period of strong upside as well as outperformance. The stock has been trading in a 17-year ascending channel pattern and witnessed a strong bounce from its channel support in 2020. Since then, it has been trading in a range with multiple attempts to break above 9800. The stock has finally seen a 7-year resistance breakout on the weekly charts above 9800 which can push the stock price higher. The stock has also seen a buy signal getting generated in the ichimoku system which usually results in the start of a fresh uptrend. The stock is on the verge of witnessing a breakout in RSI which once crosses 75 will give an additional thrust to the stock price. The stock has a cluster target of 11200 on point and figure charts which makes it a very lucrative buy at current levels, said Bissa.

Ashwin Ramani, Derivatives Analyst, SAMCO Securities

The auto major had a phenomenal run during the 28th August-1st September week, where the price rose 8.68 percent to close at ₹10,331. In the process, the price gave a breakout from its major resistance and closed above the previous highs of ₹9,996 made in December 2017, ₹9,929 made in July 2018, and ₹10,037 made in July 2023. The stock is also moving in a higher high-higher low formation since the low of ₹4,001 made in March 2020. A Cup and Handle pattern is visible on the weekly chart of Maruti Suzuki. A breakout and a close above the high of the handle, which is placed at 10,398, can drive a further rally in the stock, for a likely upside target of ₹12,040 levels. Alternatively, the stock can test its previous resistance level of ₹9,936, which can act as a good level to enter into the stock.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie. We advise investors to check with certified experts before taking any investment decisions.