scorecardresearchWhat should investors do with Maruti Suzuki post results? Buy, sell, or hold?
The country's largest passenger car maker, Maruti Suzuki India Limited, on Friday reported a profit after tax of  <span class='webrupee'>₹</span>1838.9 crore in the March quarter.
The country's largest passenger car maker, Maruti Suzuki India Limited, on Friday reported a profit after tax of  <span class='webrupee'>₹</span>1838.9 crore in the March quarter.

What should investors do with Maruti Suzuki post results? Buy, sell, or hold?

Updated: 02 May 2022, 03:15 PM IST
TL;DR.

Maruti Suzuki India Limited reported a profit after tax of 1838.9 crore in the March quarter. During the quarter, the company sold 488,830 vehicles, a 0.7% decrease from the same period last year.

Shares of Maruti Suzuki India Limited were trading lower by half a percent on Monday's trade, despite the company's 58% rise in year-on-year profit after tax. 

The country's largest passenger car maker on Friday reported a profit after tax of 1838.9 crore in the March quarter, up from 1,166.10 crore in the corresponding quarter last year, nearly 58 per cent rise year-on-year. The rise came on the back of price hikes and lower sales promotion costs.

Net sales increased 11.1 percent year on year to 25,514 crore, up from 22,958.60 crore in the previous quarter.

The operating earning before interest and tax (EBIT) margin was 7%, up from 5.4% in the year ago quarter and up 160 basis points year on year.

Maruti Suzuki sold 4,88,830 vehicles during the quarter, a 0.7% decrease from the same period last year. The sales in the domestic market stood at 4,20,376 units, a decline of 8% over that in Q4FY21. While sales in the export market were at 68,454 units, which is the highest ever in any quarter.

"The prices of commodities such as steel, aluminium, and precious metals witnessed an unprecedented increase during this year." The company was forced to increase the prices of vehicles to partially offset this impact. The company continued to work on cost reduction efforts to minimise the impact on customers," Maruti said.

Last month, Maruti said it would increase the prices of its entire model range due to a rise in input costs. The company has taken four price hikes totalling almost 9% since January 2021.

The corporation declared a dividend of 60 per share. This compares to a dividend of 45 per share for fiscal year 21.

The numbers

Variance analysis ( Cr)Q4FY22Q4FY22EQ4FY21YoY (Chg %)Q3FY22QoQ (Chg %)
 Total Operating Income26,74026,93724,02411.323,24615.0
Raw Material Exp19,66720,26417,75110.817,50312.4
Employee Expenses1,0261,02690013.99705.8
EBITDA2,4271,9911,99121.91,55955.7
EBITDA Margin (%)9.17.48.379 bps6.7237 bps
Other Income47448090428.332844.6
Depreciation647692741-12.76401.1
Interest56213272.825122.2
Total Tax359.1395.3141.4154.0210.570.6
PAT1,8391,3621,16657.71,01181.8
EPS (Rs)60.9 45.138.657.733.581.8
Key Metrics      
 ASP (Rs)5,21,9405,24,8034,66,41511.95,15,1901.3
Discounts (Rs)11,13015,00016,600-33.015,200-26.8
Source: ICICI Direct Research       

What the future holds? 

ICICI Securities has maintained its 'hold' rating on Maruti Suzuki, citing good demand projections that are limited by the company's conservative approach to electrification.

The brokerage house raised its target price for Maruti Suzuki from 7,750/share to 8,545/share, implying an upside of 10% from the current CMP, and valued Maruti Suzuki at 30x P/E based on FY24E EPS of 285/share.

The report also stated that Maruti Suzuki's share prices have grown at a 3.9 per cent CAGR from April 2017, beating the Nifty Auto Index during this period.

Share price movement of Maruti Suzuki
Share price movement of Maruti Suzuki

According to the report, MSIL is riding on pent-up demand and exciting product launches. “MSIL demand remained strong with the introduction of new products such as the Wagnor (refresh), Dzire (CNG), new Celerio, and new age Baleno, all of which included first-in-class features such as a heads-up display and a 360-degree camera," the report stated.

HDFC Securities, on the other hand, said that a recovery in the economy is expected to restore discretionary consumption for the middle-to-low income class, and MSIL is expected to be the key beneficiary.

The brokerage expect the company will gradually regain its lost market share with a strong product pipeline in utility vehicles (UVs).

MSIL continues to strengthen its foothold in the car industry, with its market share has risen to 63.6% in FY22, up from 52.2% in FY17, the report added.

"We believe that concerns over market share loss in UVs are overstated, as MSIL has often proven its mettle in the past, and we expect it to bounce back this time as well," said the report.

"It has the lowest tailpipe emissions, and its strategy of working on several solutions to achieve emission compliance seems to be the ideal method for India," it further said.

HDFC Securities keeps its "add" rating with a target price of INR 8,412/share, implying an upside of 8.7% from the current 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.

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First Published: 02 May 2022, 03:15 PM IST