Maruti Suzuki gains 3% as it sells 5,000 cars after relaxation in lockdown

Shares of Maruti Suzuki, India's largest car maker, surged 3.45 per cent to Rs 4,886.55 on the BSE on Tuesday after the company said it has sold over 5,000 cars in the past few days. 

At 10:14 am, the stock was ruling 2.94 per cent higher at Rs 4,862 apiece on the BSE and was among the top gainers on the index. In comparison, the benchmark S&P BSE Sensex was at 30,543.41 level, up 514.43 points or 1.71 per cent. A combined 0.72 million shares have changed hands on the NSE and BSE till the time of writing of this report.

According to the company's recent business update, Maruti Suzuki India Limited has delivered over 5,000 cars in the past few days, and has over 1,350 showrooms operational across the country, Besides, it has over 300 Maruti Suzuki True Value outlets operational at the moment. READ STATEMENT HERE

"The Company has put in place comprehensive standard operating procedures (SoPs) for its dealerships across the country. These SoPs ensure highest level of hygiene and sanitization across all its showrooms for the safety of its customers and employees. With the SoPs in place over 1,350 Maruti Suzuki showrooms and over 300 True Value outlets are operational post lockdown 4," the company said in a statement.

According to analysts at JM Financial, people are likely to prefer personal mobility owing to Covid-19. As walk-in enquiries may remain depressed, the company has scaled up digital initiatives to promote sales. Production facilities are re-opening and ramp-up is likely to be gradual, they say.

"We expect gradual recovery by end of CY20. We estimate revenue / EPS CAGR of 4% / 15% over FY20-22 and maintain BUY with revised Mar’21 target price of Rs 5,200 (21x forward earnings)," they said in a recent report.

On Monday, the car manufacturer resumed operations at its Gurugram plant in Haryana after about 55 days of closure because of the coronavirus-led lockdown. On May 12, the company had partially begun operations at Manesar plant. 

According to the new SoPs, factory floors have been divided into mini-zones, with six-feet high partitions acting as dividers between workers. Many of them have been instructed to remain inside marked zones that define the permissible area for their movement.

 

The workers at these plants are being transported by a fleet of buses — 10 workers to a vehicle — and they undergo two rounds of temperature checks, once inside the bus and then at the entrance to the factory. The workers also have to don face shields, masks and gloves once they cross the gate.

For the Marcch qurater of FY20, Maruti Suzuki reported 27.7 per cent year-on-year fall in consolidated profit at Rs 1,322.3 crore while revenue dipped 15.2 per cent to Rs 18,207.7 crore. The company had posted revenue of Rs 21,473.1 crore and profit of Rs 1,830.8 crore in the corresponding quarter of last year. Besides, Maruti's Q4 earnings before interest, tax, depreciation, and ammortisation (Ebitda) came in at Rs 1,546.4 crore while Ebitda margin stood at 8.5 per cent.

During the quarter, Maruti sold a total of 385,025 vehicles, lower by 16 per cent over the same period previous year. In domestic market, the company sold 360,428 vehicles, down 16 per cent YoY. Exports were at 24,597 vehicles, down 16.9 per cent over the same period previous year.

"MSIL has retained its market leadership with 51% market share in passenger vehicle category (FY20). It also possesses healthy balance sheet with net cash on books less than Rs 35,000 crore with core average RoIC placed at healthy 22 per cent. Prevailing valuations, however, provide little comfort with MSIL currently trading at ~26x P/E on FY22E numbers," said analysts at ICICI Securities in a result review note. They have reduce rating on the stock with a target price of Rs 4,650.