Maruti Suzuki Q1 Results Review - Ride On Premiumisation: Dolat Capital

Dolat Capital Report

Maruti Suzuki India Ltd.’s Q1 Ebitda margin was affected by one time employee retention cost (excluding one off of 80 basis points, adjusted margin stood at 9.7%).

Expect strong numbers in next two quarters led by channel filling and festive season demand. Order backlog stands at ~3.55 lakh while Inventory level stands at 1.25 lakh (four weeks). Dealers are anticipating strong festive season demand.

Entry-level car demand is expected to be flattish in FY24, leading to high discounts. However, SUV segment is showing strong growth led by new launches, SUV market share improved to 23% in Q1 FY24.

We continue to maintain a positive view on Maruti Suzuki given its unique moats and intrinsic strength like a broad based product portfolio, dealership strength and strong rural presence.

We estimate 21% earnings per share compound annual growth rate over FY23- 25E.

Given the strong volume growth momentum in SUV/premium segment, we increase target multiple from 25 times to 27 times and value the stock Rs 10,619. Recommend 'Accumulate'.

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