Maruti Suzuki India Ltd (MSIL) could emerge as the biggest beneficiary of demand recovery in the post-Covid period, said brokerage house Axis Securities. In its note, 'top pick of the week, the brokerage stated that Maruti's stronghold in the entry-level segment and a favourable product lifecycle will be extremely beneficial for the firm.
The brokerage has a Buy rating on Maruti Suzuki shares with a target price of ₹8,500. The auto major has risen around 5 in 2022 (YTD) and 16 percent in the last 1 year.
According to Axis, new launches are being rightly targeted at filling the gaps in its portfolio, and would likely improve the overall product mix moving forward. Moreover, the company would gain further market share, driven by an expected shift towards petrol and CNG vehicles, it added.
The brokerage expects the auto major's volumes to witness a strong growth compound annual growth rate (CAGR) of 16 percent over FY22-24E and also expects margins to be supported by strong demand, softening commodity inflation, and improving chip shortages.
“We expect a recovery of both market share and margin in FY23 and FY24, led by a favourable product lifecycle, operating leverage, and product mix as well as price action/cost-cutting," Axis Securities said.
It further noted that though June quarter (Q1FY23) margins will be lower quarter-on-quarter (QoQ) due to the rise in steel, aluminium and copper prices, it will normalize from H2FY23E onwards and resume its uptrend.
“MSIL’s export volumes was the highest ever in FY22. This growth has been driven by the usage of Toyota’s international network, the introduction of more products, expanding reach, and the implementation of innovative selling practices. The opportunity in the export market continues to be lucrative and the company’s renewed efforts are working out very well," said the brokerage.
It also believes that Maruti's product pipeline would remain strong in FY23E with several new launches, refreshes and increasing CNG options in other models. Its current order book of 325K units strengthens our faith in MSIL’s ability and success to win customers, noted Axis.
Maruti Suzuki India is the market leader in the domestic passenger car industry commanding a market share of 45 percent. Suzuki Motor Corporation (SMC) currently holds 56.4 percent of its equity stake. The company has two state-of-the-art manufacturing facilities located in Gurugram and Manesar (Haryana), having a production capacity of around 1.5 million units per annum.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
