Maruti Suzuki hits record high, J P Morgan puts stock on positive watch: ‘May outperform’

Shares of Maruti Suzuki India Limited darted up over 2 percent to Rs 10,043 on August 31, the highest since its listing, ahead of the release of monthly sales figures. Investors also cheered global brokerage J.P. Morgan’s analysis that placed India’s leading automobile manufacturer on the positive catalyst watch.

As many as 8 lakh shares changed hands which is above the 5 lakh month average.

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Here’s why J.P. Morgan is bullish on the company

Analysts tracking the sector believe that consensus is baking in optimistic scenarios such as sustenance of market share improvement and an improvement in margins even against the backdrop of rising discounts and inventory. “We see potential for the stock to outperform the broader market,” the brokerage’s August 30 report added.

Adding to that, channel checks suggest wholesale volume prints should be strong and lead to market share improvement from the 43 percent seen in August. Furthermore, sports utility vehicles (SUVs) will likely lead to a margin increase in the second quarter of the current financial year.

Also read: Can Maruti’ SUV drive trigger renewed optimism in the stock

“Our Japan Auto team is also highlighting that Suzuki Motor, the parent company of Maruti, will be able to achieve volume growth in excess of the sector average due to ongoing new-model launches in India.”

Watch rear view mirror, competition may catch up

Despite the near-term assessment of the company, J.P Morgan has highlighted that after the festive season, the firm remains a bit cautious about Maruti Suzuki. Other companies might release new cars, and if Maruti Suzuki’s actual sales to customers don’t match their sales to dealers by November, they might have to give more discounts, which could potentially affect their profits when they announce their results in December. The company currently holds a neutral rating on the stock with a target price of Rs 8,800.

In the annual general meeting, the WagonR-maker said it plans to double its production capacity to 4 million over the next eight years. Maruti intends to bank on its existing cash reserves of Rs 45,000 crore to hit a cumulative production of 4 million cars by fiscal 2030-31, the company stated at its AGM.

India’s leading car manufacturer, by sales, also projects its export volumes to touch 800,000 cars by fiscal 2031, Maruti Suzuki Chairman RC Bhargava stated during the meeting.

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