Maruti Suzuki dips on Jefferies downgrade

The stock dipped 4% to Rs 4,389 on BSE after Jefferies downgraded the stock to "underperform" from "buy" and cut its target price to Rs 3,952.

Maruti Suzuki India today dipped 4% to Rs 4,389 on the BSE in an otherwise firm market after global investment bank Jefferies downgraded the stock to "underperform" from "buy", and cut its target price to Rs 3,952.

Jefferies  said the company is "stepping out of areas of core competence - focusing on larger cars, outsourcing manufacturing but raising investment in research & development (R&D), land and parallel distribution - with risks associated", Govindarajan Chellappa and Apurva Kumar, analysts at Jefferies, said in a report dated October 5, 2015.

The near-term outlook is very strong but we think is in the price. Our FY16-18E estimates are 1-16% below consensus. The stock trades at all-time high multiples on peak profitability, the report added.

Thus far in 2015, the stock outperformed the market by gaining 38% compared with 5% decline in the Sensex till October 1.

Meanwhile, the company’s board has approved a contract manufacturing agreement for a period of up to 30 years proposed to be signed with an arm of parent Suzuki Motor Corp (SMC) for the upcoming plant in Gujarat.

"The board of directors of the company at its meeting held on October 1, 2015, has approved the contract manufacturing agreement and the lease deed proposed to be signed by the company with Suzuki Motor Gujarat (P) Ltd subject to this arrangement being approved by the minority shareholders of Maruti Suzuki India and regulatory approvals, if any," Maruti Suzuki India said in a BSE filing. CLICK HERE TO READ FULL REPORT.

At 01:13 pm, the stock was down 3.7% at Rs 4,412 on the BSE. A combined 1.43 million shares changed hands on the counter on the BSE and NSE.