Maruti Suzuki Q4 Results: A Bull Vs A Bear Case
The net profit of the Indian unit of Japan's Suzuki Motor Corp. rose 43% year-on-year to Rs 2,623.6 crore in Q4 FY23.
After Maruti Suzuki India Ltd. reported a 43% year-on-year increase in its fourth quarter net profit, analysts came through with different perspectives on its future prospects.
The net profit of the Indian unit of Japan's Suzuki Motor Corp. rose in the fourth quarter on higher sales and a rising share of sports utility vehicles. The net profit rose 43% year-on-year to Rs 2,623.6 crore in the quarter ended March, according to its exchange filing. That compares with the Rs 2,565 crore consensus forecast of analysts tracked by Bloomberg.
Maruti Suzuki Q4 FY23 Highlights (YoY):
Revenue rose 20% to Rs 32,048 crore vs. Rs 26,740 crore (Bloomberg Estimate: Rs 32,365 crore).
Net profit rose 43% to Rs 2,623.6 crore vs. Rs 1,839 crore (Bloomberg Estimate: Rs 2,565 crore).
Ebitda rose 38% to Rs 3,350.3 crore vs. Rs 2,426.8 crore (Bloomberg Estimate: Rs 3,418 crore).
Ebitda margin stood at 10.5% vs. 9.1% (Bloomberg Estimate: 10.6%).
"Fiscal 2023 Q4 EBIT margin of 8.1% was the highest in 18 quarters," Morgan Stanley pointed out in its investor note dated April 26. "We expect MSIL (Maruti Suzuki) to grow ahead of the market in fiscal 2024. Further, leverage and mix gains could drive margin expansion," the brokerage said.
According to CLSA, even though Maruti should grow ahead of the industry, its share price will remain limited on a low base. It expects a marginal improvement in gross margin over fiscal 2024–2025.
Shares of the carmaker closed 0.42% higher at Rs 8,542.95, compared with a 0.57% gain in the benchmark Nifty 50.
Out of the 41 analysts tracking the company, 28 maintain a 'buy' rating, five recommend a 'hold,' and five suggest a 'sell' on the stock, according to Cogencis data.
Morgan Stanley: Bullish Stance
Kept its 'overweight' rating on the stock with a price target of Rs 11,155 per share, implying a potential upside of 31%.
Expects Maruti Suzuki to grow ahead of the market at 12% year-on-year vs. 8% for the industry in fiscal 2024.
Expect market share and mix improvement to drive stock.
Expects mix to improve as the carmaker scales up its sports utility vehicle portfolio.
Ebit margin could rise from 8.1% in Q4FY23 to 8.8% in fiscal 2025.
Says leverage and mix gains could drive margin expansion.
CLSA: Bearish Stance
Reiterated its 'sell' call on the stock and cut the target price to Rs 8,373 from Rs 8,438 per share, a potential downside of 2%.
Lowered fiscal 2024 earnings estimates by 4% on lower margin assumptions.
Volume target of 4,75,000 sports utility vehicles in fiscal 2024 is far-fetched.
A chip shortage could derail the target of selling 4,75,000 SUVs in fiscal 2024.
Expects Maruti to deliver 3,86,000 units in FY24 and 4,67,000 units in FY25 in the segment.
Says deteriorating mix offsets benefits from lower discounts and price hikes.
Maruti should grow ahead of the industry, but its share price remains limited on a low base.
Builds 12% year-on-year growth in Maruti's passenger vehicle volumes and expects market share to improve by 200 basis points.
Expects marginal improvement in gross margin over fiscal 2024–2025.
Estimates Ebitda margin to improve from 9.4% in fiscal 2023 to 11% in fiscal 2025, driven by a richer mix and operating leverage.
