Brokerages maintained their bullish investment recommendation on Maruti Suzuki India Ltd. as the nation's largest carmaker beat estimates in the June quarter despite a fall in sales amid a slowdown in consumption.
The upbeat stance also comes on the back of the automaker's transition capabilities to the new emission standards, according to the analysts, even as concerns over lower margin and higher inventory remain.
Maruti Suzuki's net profit fell 27 percent year-on-year to Rs 1,436 crore in Q1. That beat the Rs 1,340-crore consensus estimate of analysts tracked by Bloomberg. The profit was aided by a threefold jump in other income at Rs 836 crore.
Here's what the brokerages have to say about Maruti Suzuki Q1 Results 2019-20:
Nomura
- Maintains ‘Neutral' but cuts target price to Rs 6,290 from Rs 6,717 apiece.
- Demand conditions remain tough, regulatory costs adding to margin pressure.
- Higher sales promotions and discounts impacted margins in the first quarter.
- Maruti Suzuki did not give any volume guidance due to uncertainties ahead.
Goldman Sachs
- Maintains ‘Buy' with a target price of Rs 7,210 a share.
- Maruti reported fourth straight quarter of profit decline as car demand slowed.
- Cost reduction efforts helped the company to hold Ebitda margin at 10.4 percent.
- Sees Ebitda margin to have bottomed out on expectations of volume improvement.
- Maruti Suzuki remains the best positioned stock going into BS-VI transition.
Citi
- Maintains ‘Buy' with a target price of Rs 7,400 apiece.
- Gross margin declined 80 basis points, but were ahead of estimates.
- Industry petrol-diesel mix was 66-34 in the first quarter of FY20.
- Gujarat plant capacity utilisation was at 80 percent, with volumes of 96,623 in the first quarter.
- Maruti Suzuki may outperform given its sustained market share.
- The company is well positioned to navigate through the changes in emission norms.
UBS Group
- Maintains ‘Sell' with a target of Rs 5,800 apiece.
- Outlook remains weak, with a sharp decline in both rural and urban markets.
- Weak footfalls and tightening finance availability to impact demand.
- Pressure on margin due to lower utilisation are not being priced in by consensus.
Motilal Oswal
- Maintains ‘Buy' with a target price of Rs 6,950 apiece.
- Maruti Suzuki is best placed in the entire original equipment manufacturer space to tackle current industry headwinds.
- Cuts FY20 and FY21 earnings estimates by 5 percent each.
- Cut in earnings per share due to lower volumes, higher depreciation impact.
- Inventory is over one month at dealer level.
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