shares of maruti suzuki India (MSIL), India’s largest passenger vehicle maker, edged higher at Rs 8,319.80 in intraday trade before closing 6.33 per cent higher at Rs 8,274.6 on the BSE in the previous session. This is the highest level since February 28 this year. The stock has gained 25 per cent from its 52-week low of Rs 6,540 in March this year.
auto share A rally on Thursday on the back of recent declines in global commodities, including metals, prompted investors to adopt some battered names. BSE auto On Thursday, the index jumped 4.4 per cent to emerge as the top sector gainer.
MSIL’s profitability has been adversely impacted over the past three years by a weak product lifecycle, unprecedented commodity cost inflation in base commodities and precious metals, and multiple headwinds to volumes, resulting in an operating leverage.
This has resulted in a sharp decline in its Gross Margin (~610bp) and Ebit Margin (~570bp) during FY19-FY22. However, the gains of stable commodity cost and pricing action during Q4FY22 were reflected in Ebit correction of 180bp and 270bp QoQ in Q4FY22 respectively, Motilal Oswal Financial Services said in a stock update.
Motilal Oswal Financial Services in a report last week said that Maruti Suzuki’s product pipeline has started with upgrades to key models and it is on the verge of launching new models. It added that the return of the product life cycle will lead to an improvement in market share, strong demand, improving supply and stable commodity prices will drive the improvement in EBIT margins. The research and brokerage firm has given a ‘buy’ rating to the stock with a price target of Rs 10,000, which means there is a 22 per cent chance of a rise from the current levels. It added that strong demand, improving chip supply, moderating commodity inflation and favorable FX margins will support the recovery.
Meanwhile, MSIL said the contribution of sales from non-urban markets increased to 43.6 per cent in the total sales in FY 2011-22. In the month of March, MISL’s parent company Suzuki Motor Corporation through its subsidiary Suzuki Motor Gujarat signed an MoU with the Gujarat government to invest Rs 10,400 crore in Battery Electric Vehicle (BEV) batteries and BEV manufacturing capacity. . This investment will go a long way in localizing EV manufacturing and help the company accelerate and expand its BEV product portfolio in India. The company said that the company plans to introduce its first BEV by 2025.
According to analysts at Emkay Global Financial Services, the upcoming products within the next 18 months, which include >4m compact SUVs, off-roaders (Jimny), mid-size SUVs and <4m crossovers, will see major vacancies in the company's product portfolio. The space should be filled. Also, the launch of feature-rich new generation models of Baleno, Celerio, Brezza, Ertiga, XL6 and S-Cross should support the volume. The brokerage firm said the market share of MSIL should increase from 45 per cent in FY22 to 46 per cent in FY24E.
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