Shares of Maruti Suzuki India rallied nearly 6 percent, to ₹8,271, on the BSE in Thursday's trade. The stock has risen 10 percent in the last three months. Further, over the last six months, the market price of the stock has increased by 13.47 percent.
The stock's 52-week high and low levels were Rs. 6,536.55 apiece and Rs. 9,050.00 apiece, respectively. Taking the current price into account, the stock has risen 26.54 percent from its 52-week low.
In passenger vehicles, Maruti Suzuki held 43 percent market share, followed by Hyundai Motors with 14.6 percent and Tata Motors with a share of 13.4 percent in May 2022, according to data from FADA.
Auto shares on Thursday's trade surged due to a decline in global commodities. The Nifty Auto index jumped 3.82 percent emerging as the top sector gainer on Thursday.
High raw material prices, such as steel and aluminium, as well as a semiconductor shortage, have recently harmed automakers' margins.
Due to high input costs, original equipment manufacturers (OEMs) in the domestic market have already hiked the prices of their vehicles at least once in 2022.
According to media reports, Maruti Suzuki has taken four price hikes totalling almost 9% due to a rise in input costs since January.
High input costs led to a sharp erosion of Maruti's gross margins (610 basis points) and EBIT margin (570 basis points) from FY19 to FY22.
On May 22, the government imposed a 15% export duty on a range of finished steel products. In other steel categories, an export duty of 15% has also been levied on pig iron. On the raw material side, the government has increased the export duty by 58% and above Fe grade iron ore fines and lumps from 30% to 50%.
As a result of the export duty, domestic hot-rolled coil (HRC) steel prices fell by around ₹10,000 in the last one month. The prices have fallen about 14 percent since the announcement.
As per a recent report by Motilal Oswal, Indian steel prices had corrected from the peak of ₹75,000 per tonne to ₹61,500 in the trade market. It is also expected that with the imposition of a 15 per cent export duty and a consequent crash in domestic steel prices, the automotive industry in India may negotiate hard to bring down the contracted price for 1Q FY23.
The report says there is likely to be another round of correction in steel prices in India in the next quarter as well.
Since the announcement of the export duty hike, the Nifty auto index rallied 3 percent from 11,115 points to 11,589.
Meanwhile, the Japanese yen has fallen to a 24-year low against the US dollar, which is expected to help Maruti Suzuki reduce sourcing costs for parts imported from Japan. The company pays for the material it imports in yen, which amounts to 7-8% of the company's annual revenue and close to 15-16% of the company's raw material cost, Times now reported
In a report last week, Motilal Oswal Financial Services said Maruti Suzuki's product pipeline has just kick-started with upgrades of key models and it is on the cusp of launching new models. While the return of the product lifecycle will drive market share recovery, strong demand, improving supplies, and stable commodity prices will propel EBIT margin improvement for MSIL.
"The market share in the PV segment are very highly correlated with the product lifecycles." MSIL benefits from its favourable product pipeline over FY14-19 with a market share improvement of 9pp to 51%, benefitting from the launches of Celerio, Ciaz, S-Cross, Baleno, Brezza, Ignis, XL6 and Espresso. "Subsequently, the lack of MSIL’s product launches coupled with substantial product launches from competition led to a declining market share of 8pp to 43.4% over FY19-22 for MSIL," said Motilal Oswal.
The brokerage firm has given a "BUY" rating to Maruti Suzuki with a target price of Rs. 10,000/share, implying an upside potential of 20.79 per cent from the current market price.
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.