Brokerage firm Motilal Oswal Financial Services has a 'buy' call on the stock of Maruti Suzuki (MSIL) with a target price of ₹10,000, implying a 28 percent upside.
The brokerage firm highlighted that after a gap of almost three years, MSIL’s product pipeline has just kickstarted with an exciting line-up of launches over the next 2-2.5 years. It has launched upgraded Celerio, and mid-cycle refresh of Baleno as well as XL6.
As per the brokerage firm, going forward, MSIL would be launching: new models (four SUVs), platform upgrade (Alto) and mid-cycle refresh (Brezza).
"Four new SUV brands are lined up for launch over the next couple of years to plug-in the gaps in its portfolio. Based on our channel checks, MSIL is planning to replicate its highly successful product laddering strategy in the SUV segment, thereby giving customers an option of an SUV at every price point," said the brokerage firm.
Motilal Oswal believes that the market shares in the PV segment are very highly correlated with the product lifecycles. MSIL benefits from its favourable product pipeline over FY14-19 with market share improvement of nearly 9pp to nearly 51 percent, 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 percent over FY19-22 for MSIL.
Demand for PVs remains robust with healthy traction in inquiries and bookings. In the domestic market, the unfulfilled order book has increased to nearly 295k units as of May’22 (of which 130k was CNG) and has consistently remained above nearly 200k units since Q3FY21 due to healthy demand and chip shortages.
"Strong demand, improving chip supplies, moderating commodity inflation and favourable Fx would support margin recovery. Robust demand coupled with strong recoveries in both market share (+600bp) and margins (+550bp) over FY22-24E, would drive 66 percent CAGR in EPS. The stock trades at 34.1 times/22 times FY23E/FY24E consolidated EPS," said Motilal Oswal.
Disclaimer: The views and recommendations made above are those of the broking firm and not of MintGenie.
