Maruti Suzuki India Ltd. shares fell as much as 2% to Rs 13,901, snapping a six-day gaining streak, as investors weighed a decline in June-quarter profit and operating margin against higher July vehicle sales.

The carmaker's first-quarter revenue rose 35.9% year on year to Rs 52,456 crore from Rs 38,593 crore. However, net profit declined 10.8% to Rs 3,352 crore from Rs 3,758 crore.

Operating performance also weakened during the quarter. Earnings before interest, tax, depreciation and amortisation fell 14.5% to Rs 4,312 crore from Rs 5,043 crore. Ebitda margin narrowed to 8.2% from 13.1%.

The cost of materials rose 46% year on year to Rs 32,000 crore.

Brokerages flagged commodity costs and other expenses as factors behind the margin pressure, even as some raised their target prices following the quarterly results. The company also reported higher July sales, led by domestic volumes.

Citi Cuts Target Price

Citi maintained its 'Buy' rating on Maruti Suzuki but cut its target price to Rs 16,500 from Rs 18,500.

The brokerage said the margin pressure was partly due to the timing of supplier settlements after the company shifted from quarterly to monthly settlements.

Maruti Suzuki reiterated its FY27 volume growth guidance of 10%, according to Citi. The company also plans to introduce seven new models by FY30.

BofA, Nomura Raise Target Prices

BofA reiterated its 'Neutral' rating and raised its price objective to Rs 14,700 from Rs 14,000.

The brokerage attributed the margin miss to commodity costs, expenses related to a new plant and bonus payouts. It said Maruti Suzuki's order backlog stood at 1.30 lakh units, while channel inventory was at 13 days.

BofA sees an upside risk to the company's 10% volume growth guidance.

Nomura maintained its 'Neutral' rating and raised its target price to Rs 14,071 from Rs 13,435. The brokerage said monthly commodity settlements reduced margins by 110 basis points during the quarter.

Management expects to reach full capacity utilisation in four to five months, according to Nomura. The brokerage prefers M&M and Hyundai among four-wheeler original equipment manufacturers.

July Sales Rise

Maruti Suzuki's July sales rose 33.4% year on year to 2.41 lakh units.

Domestic sales increased 42% to 2.11 lakh units, while exports rose 5.3% to 30,056 units.

Of the 48 analysts tracking Maruti Suzuki, 43 have a 'Buy' rating, three recommend 'Hold' and two have a 'Sell' rating, according to Bloomberg data.

The consensus 12-month target price stands at Rs 15,959, implying a potential return of 13% from the last regular trade.

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