Maruti target revved up by brokerages as car maker quadruples profit

Maruti Suzuki’s standalone net profit increased to Rs 2,061.5 crore for the quarter, up from Rs 475.3 crore logged in the same period last year

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Brokerages are upbeat on Maruti Suzuki India, after the country’s largest car maker on October 28 reported a massive 334 percent year-on-year growth in its standalone net profit for the quarter ended September on a low base.

The standalone profit jumped to Rs 2,061.5 crore for the quarter, from Rs 475.3 crore logged in the same period last year. Standalone revenue from operations surged 46 percent YoY to Rs 29,931 crore.

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Higher commodity prices and chip shortage concerns had impacted earnings in the year-ago period.

Maruti Suzuki sold a total of 5.17 lakh vehicles during the quarter ended September FY23, the highest ever in any quarter, increasing 36 percent YoY.

Brokerages cheer

With a Buy call on the stock, global brokerage firm Jefferies has raised its target price to Rs 12,000 per share. “Q2 EBITDA rose 45 percent quarter-on-quarter to 16-quarter high. As the company provided positive commentary on customer response for its new SUV, we see demand, product and margin cycles aligning favourably,” it noted. Jefferies’ analysts have raised FY23-25 earnings per share (EPS) estimates by 3-8 percent.

Citi, too, has raised its target price on the stock to Rs 12,500 from Rs 10,300 per share. Its analysts have increased volume estimates by 3 percent over FY23-25 and EBITDA estimate by 6 percent. On the back of better ASP (average selling price) and strong SUV comeback, UBS also has a Buy call on the stock with a target of Rs 12,000 apiece.

With a Neutral call, JPMorgan has upped its target to Rs 8,700 from Rs 8,400 per share. “Stock is pricing in continued margin expansion. We increase FY23-25 EPS estimates by 3-4 percent to factor slightly higher margin,” it noted.

Contrarian view

Meanwhile, CLSA and Kotak Institutional Equities have a Sell call on Maruti Suzuki with targets of Rs 7,597 and Rs 8,150 respectively.

CLSA expects growth in passenger vehicle industry to be slow in FY24. It is also bearish because the company does not expect any major commodity cost savings in H2FY23.

KIE believes it will be challenging for the company to cross 45 percent market share, due to which EBITDA margin might remain below 12 percent in FY24-25.

On Friday, soon after the Q2FY23 numbers were announced, the stock gained 5.6 percent to close at Rs 9,548. In 2022 so far, the share price has advanced close to 27 percent.

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