What should Maruti Suzuki investors do after Q3 results: buy, sell or hold?

What should Maruti Suzuki investors do after Q3 results: buy, sell or hold?

The company’s net profit stood at Rs 475 crore in the previous quarter. Standalone revenues for the Gurgaon-based carmaker stood at Rs 23,246 crore, down 1 percent, compared to Rs 23,458 crore reported a year ago. The preceding quarter saw the topline at Rs 20,538 crore. Research house Credit Suisse has kept an outperform call on the stock on the back of healthy demand, strong new model cycle and margin normalization.

Maruti Suzuki’s stock fell more than 1% in early trade on January 27 after the company disclosed a 48% drop in its standalone profit for the quarter ended December 2021. Maruti Suzuki India, the country’s largest carmaker, recorded a standalone net profit of Rs 1,011 crore for the third quarter ended December 31, 2021, compared to Rs 1,941 crore a year ago.

It raised the target price to Rs 10,389 from Rs 8,759 and also raised FY23-24 EPS estimates by 3-4%. The research house sees supply picking up, a return of replacement demand and market share gaining, going ahead. The valuations of the stock, too, look benign at the current levels. Brokerage firm has remained overweight and raised the target price to Rs 10,600 as it expect prudent price hikes & leverage gains to drive EBIT/unit.

The low inventory, strong orderbook & new model cycle to drive volume growth. Morgan Stanley raised FY24 EPS estimate by 11%, driven by increased ASP & margin estimates.

Broking firm has kept outperform call and raised the target to Rs 9,753. The solid 3Q earnings beat led by QoQ gross & EBITDA margin expansion, while cyclical demand recovery & margin tailwinds improve earnings visibility. Brokerage firm has maintained buy rating on the stock and raised the target price to Rs 10,000 from Rs 9,500 after strong Q3 with significant beats at EBITDA, EBIT & profit levels. The demand trends are encouraging and cost pressures are somewhat ebbing. The pricing environment is healthy & chip supply is improving.

Research firm has maintained buy rating with target at Rs 10,100 as company reported a beat in Q3. The margin beat is led by a combination of expense control, consistent price hikes. The company expects margin to improve further in Q4 if moderation in steel prices continues. Little visibility on when company will get back to 100% normal production run rates. Goldman Sachs like company’s new product pipeline (8 potential new launches or upgrades over next 18 months).

CLSA has maintained sell rating on the stock with a target price at Rs 6,440 as the Q3 results were better than forecast due to lower-than expected raw material cost pressure. The near-term volume trajectory to improve on its pending orderbook & chip shortages easing, while weaker positioning in the SUV segment will impact market share. Also, tighter safety norm headwinds may hurt market share in H2FY23/FY24.

The brokerage firm has maintained sell rating with a target at Rs 7,800. The Q3 EBITDA was 16% above expectations due to cost-reduction efforts. It expect company to gain 200-250 bps market share over next 2-3 years. It will be challenging for company to reach >50% market share.

At CMP, stock is already pricing in strong recovery in volumes & margin. The company is expected to witness a recovery in domestic demand with sales volumes sustaining growth, despite the near-term challenges of electronic component shortage. Sales enquiries remain strong with order book currently at more than 2.4 lakh units. We expect growth momentum to continue in FY23E, driven by normalisation of economic activity. Margins are expected to improve from 7.5% in FY2021 to 10.8% in FY2024E, driven by operating leverage benefits and cost-control measures. We remain positive on the company led by its structural growth outlook (which remains intact), healthy balance sheet, and comfortable valuations. The stock is trading at P/E of 33.1x and EV/EBITDA of 24.4x its FY2023E estimates. We retain a buy rating on stock with a revised price target of Rs 9,820.

Strong demand, softening commodity inflation, and improving semiconductor shortage will support a recovery in margin. We expect a recovery in 2HCY22 in both market share and margin, led by an improvement in supplies, favorable product lifecycle, and mix, as well as price action/cost-cutting and operating leverage. We maintain our buy rating, with a target price of Rs 10,300/share (27x Mar’24E consolidated EPS). At 09:17 hrs Maruti Suzuki India was quoting at Rs 8,544.95, down Rs 55.65, or 0.65 percent on the BSE.

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