Grand Vitara To Help Maruti Suzuki Gain Market Share, Say Analysts

Shares of Maruti Suzuki India Ltd. gained on Tuesday after brokerages said the launch of the Grand Vitara hybrid SUV would help the country’s largest carmaker gain market share.

The automaker started the retail sales of its flagship sports utility vehicle, jointly developed by Toyota and Suzuki, on Monday.

The car's hybrid variants are priced between Rs 10 lakh and Rs 17 lakh, while the strong hybrids are priced between Rs 18 lakh and Rs 20 lakh. The pricing announcement from the company came more than two months after the SUV was unveiled.

Shares of the company gained in early trade but ended 0.7% lower on Tuesday. Of the 54 analysts tracking the company, 39 maintain a ‘buy’, eight suggest a ‘hold’ and seven recommend a ‘sell’, according to Bloomberg data. The 12-month consensus price target implies a 10.3% upside.

Brokerages' take on Maruti Suzuki Grand Vitara:

• Maintains 'neutral' rating at a target price of Rs 8,970, implying a potential upside of 1.5%.

• Bookings are already underway, with the company having reported bookings of more than 57,000 units, so far.

• Vitara targets the highly competitive mid-size SUV segment that consists of models like Hyundai Creta, Kia Seltos, Toyota Hyryder, MG Astor, and Škoda Kushaq. Sales in this segment have averaged around 32,000 units per month year-to-date amid strong demand from consumer.

• When compared with its sister offering, Toyota Hyryder, the top-end Grand Vitara mild hybrid variant comes in at a discount of Rs 20,000, while the strong hybrid variants are costly by Rs 50,000.

• Maruti will find it difficult to price Grand Vitara at a discount following the aggressive pricing of Toyota Hyryder.

• The more aggressive pricing of the hybrid variants by Toyota Motor Corp. is aimed at complying with the upcoming, more stringent Corporate Average Fuel Economy norms. We think Maruti Suzuki will easily meet these norms due to its high amount of CNG vehicle sales.

• Expect Toyota to get the lions share of the strong hybrid variant sales, while Maruti Suzuki will likely focus on getting a higher share of the mild hybrid variants. Expect overall volume potential for the model to be between 10,000 and 15,000 units per month.

• Expect Mahindra & Mahindra Ltd.'s recently unveiled XUV400 to be priced close to the hybrid variants of the Hyryder, mainly due to the tax advantage enjoyed by EVs.

• Customers with access to a charging network will prefer EVs like the XUV400 and as such prefers Mahindra stock in the sector.

• Maintains 'overweight' rating with a target price of Rs 9,839, implying a potential upside of 11%.

• Grand Vitara prices are largely in line with street expectations.

• Checks indicate that a large portion of customers have shown interest in the higher-end variants of Grand Vitara and 43% bookings are for strong hybrid variants. Maruti's orderbook for Grand Vitara is already at 57,000 units and current waiting period for the delivery stands at four to six months depending on the variant. We expect Maruti's market share to inch up as deliveries of the model start.

• Yen denominated costs are 8% of the top line for Maruti and at depreciated spot prices, this can provide a 100 basis points margin cushion to Maruti Suzuki.

• Business is recovering from volume, margin and model cycle trough. As such, FY24 PE multiple at 25x looks attractive.