Maruti Suzuki India Ltd. will increase its market share in the sport utility vehicle segment with new launches, boosting margins, analysts said.
The company has launched the Grand Vitara, Jimny, Fronx and now the Invicto in a span of a year to gain back the market share lost due to its limited presence in the SUV segment.
The rising share of SUVs in overall sales has pushed the average selling price to over Rs 5 lakh per unit, leading to a surge in profit in the June quarter amid a low base.
"The company's passenger vehicle market share slipped from 51% in FY20 to 41% in FY23, led by a demand shift to SUVs. With an expanded portfolio, its SUV market share has improved from 18% in FY23 to 23% in 1QFY24," Jefferies said in a report.
Maruti Suzuki Q1 FY24 Highlights (Standalone, YoY)
Revenue rose 22% to Rs 32,327 crore. (Bloomberg estimate: Rs 31,833 crore).
Ebitda rose 56% to Rs 2,983 crore. (Bloomberg estimate: Rs 3,241 crore).
Ebitda margin was 9.2% versus 7.2% last year. (Bloomberg estimate: 10.2%).
Net profit rose 145% to Rs 2,485 crore. (Bloomberg estimate: Rs 2,466 crore).
The company also announced that it will acquire the Gujarat manufacturing plant from its Japanese parent, Suzuki Motor Corp., at book value.
The book value stood at Rs 12,700 crore as of March 31, but the amount is likely to change at the time of acquisition, analysts said.
However, brokerages lowered earnings-per-share estimates for Maruti Suzuki due to the limited efficiency benefits of the takeover.
Here's what brokerages made of Maruti Suzuki's performance in the first quarter:
Jefferies
Maintain 'buy' with a target price of Rs 11,500 a share, implying an upside of 17%.
An expanded portfolio is helping regain market share in SUVs.
Sees demand, product, and margin cycles favourably aligned for volume growth.
The acquisition of the Suzuki Gujarat plant may result in a 3-4% downside to earnings per share estimates for FY25–FY26.
Nomura
Remain 'neutral' with a higher target price of Rs 10,422 per share, a potential upside of 6.1%.
Expect overall market share to be stable at 42% as SUV gains may offset weakness in small cars.
As industry inventory rises and growth slows, a rise in advertising and promotional spends may offset operating leverage and commodity benefits.
Dilution of nearly 4% was factored into the valuation due to the Gujarat plant acquisition.
Motilal Oswal
Maintain 'buy' with a target price of Rs 11,150 a share, implying a potential profit of 14%.
Maruti Suzuki will outperform the industry with new launches leading to market share gains and margin recovery.
Stable growth in domestic PVs and a favourable product lifecycle augur well for Maruti Suzuki.
Cut FY25 earnings per share estimates by 1%, as the benefits of a higher average selling price and higher other income are more than offset by the SMG acquisition.
Nirmal Bang
Reiterate 'buy' with a target price of Rs 11,503 per share, implying an upside of 17%.
Production expansion to increase market share and increase SUV share to boost margins.
Expect sales momentum to continue in the coming quarters and SUV market share to increase.
Gujarat plant acquisitions will happen at book value, which as of March 2023 stood at Rs 12,700 crore and may vary at the time of acquisition.
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