Maruti a ‘sell’, and so too Tata Motors now, says Kotak Institutional

Kotak has revised target price on Maruti to Rs 8150 from Rs 7850 a share while for Tata Motors its revised target price to Rs 550 from Rs 530 a share.

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Kotak Institutional Equities has retained the ‘sell’ rating on Maruti Suzuki India Ltd and downgraded Tata Motors Ltd to ‘sell’ from ‘reduce’ after the recent rally in the stocks. The brokerage house also said that the muted trend in the passenger vehicle segment remains a cause for concern.

Since the start of April, Maruti Suzuki India zoomed 18 percent, while Tata Motors surged over 52 percent.

Kotak has revised the target price on Maruti to Rs 8,150 from Rs 7,850 a share, while for Tata Motors, it has revised the revised target price to Rs 550 from Rs 530 a share.

The broker predicts that Maruti Suzuki’s market share will stay at 41.5-42 percent, even with the launch of SUV and MUV models. It anticipates the company’s market share to remain stable in the hatchback and sedan segments, while showing a slight decrease in the MUV segment.

“In the SUV segment, we expect the company’s market share to improve to 18 percent in FY2024 from 12 percent a year ago, led by market share gain in the micro-SUV (Fronx), mid-size SUV (Grand Vitara) and large SUV segments (Jimny). However, we expect the company’s market share to decline 50-60 bps over FY2025-26, mainly owing to the competition in the SUV segment. Despite gain in the SUV segment, Maruti Suzuki’s market share is expected to remain flat due to a decline in the hatchback segment’s mix, where Maruti Suzuki has above 70 percent market share,” the Kotak report said.

Kotak forecasts that Tata Motors’ market share will decrease by 50 basis points (bps) year-on-year in FY2024, primarily because of heightened competition in the micro-SUV segment, where Maruti Suzuki Fronx and Hyundai Exter are expected to intensify the competition. However, this decline will partly be offset by gains in the hatchback segment, resulting from the introduction of CNG and EV trims for existing models.

In FY2024, Mahindra & Mahindra (M&M) is likely to experience a 60 basis points (bps) on-year improvement in market share, reaching 9.8 percent. This growth is attributed to the company’s robust order backlog and the limited competition it faces in the large SUV segment, which contributes significantly to its overall volumes. On the other hand, Hyundai Motors is expected to witness a slight increase in market share from FY2023 to FY2026. This growth will be driven primarily by the launch of the micro-SUV Exter at a competitive price point, helping the company to strengthen its position in the market, the Kotak report added.

Kotak anticipates a 4 percent year-on-year growth in the domestic passenger vehicle (PV) industry volumes for FY2024. This growth will be driven by persistent weakness in the entry-level car segment and a decline in pent-up demand.

The brokerage house forecasts that market shares of passenger vehicle industry players will remain stable from FY2024 to FY2026. This steadiness is attributed to the introduction of new models in fast-growing segments such as SUVs, CNG, and EVs, enabling the companies to maintain their position in the market.