Shares of India's largest automaker Maruti Suzuki India Limited were trading lower on Monday as the company reported a slump of 5.6 per cent in its total sales to 150,661 units in April. The firm had sold 159,691 units in April last year.
On Friday, Maruti Suzuki posted a 57.7 per cent jump in quarterly profit as price hikes and lower sales promotion costs helped the country's top carmaker outweigh the impact of high raw material costs and global semiconductor shortages.
The stock opened a tad lower at Rs 7,670 against the previous close of Rs 7,732.75 on BSE. With a market capitalisation of more than Rs 2,30,000 crore, the shares stand higher than 200 day moving averages but lower than 5 day, 20 day, 50 day and 100 day moving averages.
The company reported Rs 1,839 crore standalone net profit for the quarter ended March 2022 as compared with Rs 1,166 crore for the year-ago period.
During the quarter, Maruti registered net sales of Rs 25,514 crore, an increase of 11.1 per cent compared to the same period of the previous year.
On Sunday, Maruti Suzuki also reported that its production volume dipped slightly to 157,392 units in April compared to 159,955 units in the same month last year.
The production volume of its passenger vehicles slumped to 152,954 units last month compared to 157,585 units during April last year. While production of light commercial vehicles jumped to 4,438 units compared to 2,370 units in April 2021.
Brokerage house Motilal Oswal noted that strong demand and favorable product lifecycle for Maruti augurs well for market share and margin. We expect a recovery in market share and margin in 2HFY23, led by an improvement in supplies, favorable product lifecycle, mix, price action/cost-cutting, and operating leverage, it said.
"The stock trades at 33.7x/21.8x FY23E/FY24E consolidated EPS. We maintain our 'Buy' rating, with a target price of Rs 10,000/share (27x Jun’24E consolidated EPS)," it added.
According to HDFC Securities, a gradual recovery in the economy is expected to restore discretionary consumption for the middle to low-income class and Maruti Suzuki is expected to be the key beneficiary. With a strong product pipeline in UVs, we expect the company to gradually regain its lost market share, it said.
"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. 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. We maintain 'Add' with a target price of Rs 8,412 per share," the brokerage firm added.
IDBI Capital highlighted the robust pending order-booking, easing of semiconductors supply constraints, planned new launches in the Mid SUV segment in FY23 and booming exports to drive double-digit volume growth over FY22-24E for Maruti Suzuki.
It noted that the benefit of price hikes, stabilizing of metals prices and operating leverage will result in sharp improvement in profitability. Also, the company is set to report all-time high profits in FY23 and FY24. The growth outlook for the company remains bright aided by domestic and export markets.
"Over FY22-24, MSIL’s Sales and PAT are expected to grow at 19.8 per cent and 68.5 per CAGR respectively. We have retained our FY24 PAT estimates wherein MSIL is expected to report EPS of Rs 354 in FY24E. We remain bullish on Maruti and recommend 'Buy' with an unchanged price target of Rs 10,627," it said.
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