Maruti Suzuki shares up 1% post Q4; here’s what brokerages say

Shares of Maruti Suzuki India climbed over 1% in early trade on Thursday after the country’s largest automobile company reported better-than-expected earnings in the fourth quarter ended March 31, 2023. Post Q4 results, most brokerages have maintained “Buy” ratings on the auto heavyweight with an average target price of ₹9,509, a potential upside of nearly 12% from Wednesday’s closing level.

Extending gains for the third straight session, Maruti Suzuki shares opened at ₹8,563, up 0.7% against the previous closing price of ₹8,503.15 on the BSE. In the first two hours of trade so far, the auto major gained as much as 1.1% to ₹8,600 with 4,887 shares changing hands over the counter on the BSE as compared to the two-week average volume of 18,000 shares.

With a market capitalisation of ₹2.57 lakh crore, the blue chip stock trades 12% lower than its 52-week high of ₹9,768.65 touched on October 31, 2022, while it climbed 22% against its 52-week low of ₹7,062.65 hit on May 13, 2022.

In the last one year, Maruti Suzuki share price delivered 9% returns to its shareholders, whereas it fell nearly 6% in the past six months. In the calendar year 2023, the counter has risen over 1%, while it added nearly 3% in a month. In the last one week, the largecap stock has lost nearly 2%.

For January-March quarter of 2023, Maruti Suzuki India posted a net profit of ₹2,623.6 crore, up 42.7% against the same period the previous year. The net sales grew 20.8% YoY to ₹30,821.8 crore, while the operating profit stood at ₹2,611.1 crore, a growth of 46.7% over that of Q4 FY22 on the account of higher sales volume, improved realisation from the market, and favourable forex movement. The board of the company also announced the highest-ever dividend of ₹90 per share (face value of ₹5 per share) compared to ₹60 per share in FY 2021-22.

On sales front, the company sold a total of 5,14,927 vehicles during the quarter, higher by 5.3% compared to the same period the previous year. The sales in the domestic market stood at 450,208 units, up by 7.1% over that in Q4FY22, while the sales in the export market were at 64,719 units as compared to 68,454 units in the same period last fiscal.

Analysts view on Maruti Suzuki Q4 results

As many as 17 analysts have offered average target price of ₹9,509 for long term with mostly ‘buy’ ratings. The consensus estimate represents an upside of 12% from the current market price.

Prabhudas Lilladher has reiterated ‘BUY’ on the stock, but cut target price marginally to ₹10,300 from ₹10,600 earlier. The brokerage has cut FY24/25 EPS (earnings per share) estimates by 3% each, to factor in flattish volume guidance for entry segment cars. “Chip shortage continued to impact Q4 and led to sales of lower varients, thereby, impacting realisation. Going ahead, MSIL hopes to outgrow PV industry’s growth led by its SUV portfolio, increased traction from CNG models and servicing stronger order book,” it said.

Analysts at LKP Research maintained a “Buy” rating on Maruti with FY25E target of ₹10,034 per share, citing that robust demand, new launches, and new capacities will propel the company to next orbit. “With monsoon expected to be within normal range (with little impact of El Nino), we believe rural markets (>40% of volumes for MSIL in Q4) to perform even better. Reviving economy as well should fuel demand for 4 wheelers whose penetration in India is just 3%,” it said. The only concern which has been persisting since a year now is the supply side issue which is expected to settle down in the short-mid term, it added.

JM Financial has also maintained “Buy” rating with a revised price target of ₹11,200 from ₹12,000 estimated earlier, saying that the company’s market share is recovering, after two consecutive years of losses, led by new launches. “Healthy order book and operating leverage tailwinds will further support strong performance going ahead. We ascribe 25x PE to arrive at Mar’24 fair value of INR 11,200. Maintain BUY,” it said.

Maruti has outlaid a plan for capacity expansion in the coming quarters anticipating robust demand and quick catering to the burgeoning order book. The company has already started expansion at their Manesar (Haryana) plant. The total capacity collectively at Haryana and Gujarat now stands at 22.5 lakh units, which is to be further increased by 1 lakh units at Haryana plant immediately and 2.5 lakh units at their upcoming plant in Karnataka (first phase in H1 CY25). The total capex is planned at ₹10,500 crore over the next couple of years. Out of this, ₹8,000 crore will be done in FY24 alone. Additionally, another massive expansion of 10 lakh units shall take place through internal accruals in the coming years to accommodate anticipated robust demand.

Recently introduced Jimny and Fronx have received good customer response. Share of bookings for the GV (strong hybrid) variant stands at 20%. Backed by recent SUV launches, the company aims to regain leadership position in SUV segment in FY24. First EV launch is expected in FY25, which will feature 550 km range, 60 kwh battery and a competitive charge time. The company also plans to introduce strong hybrid technology in other models.