Maruti sales engine to keep humming through FY27 on strong demand

Capacity additions and healthy demand should fuel volume growth even as cost pressures weigh on margins

The country’s largest passenger vehicle maker, Maruti Suzuki India (MSIL), posted a mixed performance in the first quarter (April-June/Q1) of 2026-27 (FY27). While revenue growth, driven by its highest-ever quarterly sales, was strong, operating performance remained below expectations as higher commodity and other costs weighed on margins.

 

Brokerages expect the company to maintain its sales growth in the current year, supported by its launch pipeline and robust demand momentum. At the current price, the stock, which has gained about 13.7 per cent over the past year, is trading at 21x its 2027-28 earnings estimates. Further gains will depend on the sales trajectory, market-share gains, and the company’s ability to sustain margins.

 

The company reported record quarterly volumes of 682,724 units in Q1, up 29.3 per cent year-on-year (Y-o-Y). This was led by domestic sales of 557,988 units, up 29.5 per cent Y-o-Y, and exports of 124,736 units, which rose 28.6 per cent. Export growth came despite geopolitical disruptions, with MSIL accounting for 55 per cent of the country’s vehicle exports during the quarter. Its presence across 120 countries helped offset regional disruptions. Key export markets include South Africa, Japan, and Europe.

 

Net sales jumped 35.9 per cent, driven by strong volume growth and a 5 per cent increase in realisations. Domestic demand received a boost from the goods and services tax (GST) cut, with the small-car segment growing 34 per cent and the sport utility vehicle segment expanding 44.6 per cent. Strong volumes helped MSIL increase its market share by 230 basis points (bps) Y-o-Y to 41.2 per cent. Sales in July also remained robust, rising 33.4 per cent Y-o-Y. The company expects demand to remain strong and has maintained its guidance of 10 per cent domestic volume growth for FY27.

 

The company continues to face supply-side constraints, with a pending order book of 130,000 units. It expanded its manufacturing footprint by commissioning the second plant at Kharkhoda, Haryana (250,000 units), in May and the fourth manufacturing line at Hansalpur, Gujarat (250,000 units), in July. These additions have increased annual installed capacity by 500,000 units. With this expansion, the company’s total annual production capacity has risen to 2.9 million units, with both facilities expected to ramp up over the next four to six months. The added capacity is expected to support growth in both domestic and export markets.

 

Analysts Subhash Gate and Heet Chheda of Choice Institutional Equities expect the company to deliver steady growth, driven by GST benefits, launches, and strong exports, supporting volume and revenue visibility. While the brokerage has lowered its FY27 estimates to factor in the impact of commodity inflation, it has retained its ‘add’ rating and raised its target price to ₹15,350.

 

Motilal Oswal Research is positive on the company and expects MSIL to sustain its outperformance in FY27, aided by a healthy launch pipeline, a revival in car demand, lean inventory, and the rampup of its two new facilities. A sustained recovery in market share is likely to drive a rerating of the stock, analysts led by Aniket Mhatre said. They also expect margins to normalise after a relatively weak Q1, supported by moderating raw material costs and steady volume growth.

 

Even though the top-line performance was strong, the operating profit margin contracted 380 bps Y-o-Y to 8.2 per cent, coming in below estimates. Margin pressure was primarily due to commodity headwinds, which impacted margins by 300 bps, followed by higher employee costs (40 bps), fixed costs related to inventory depletion (30 bps), higher gas costs (20 bps), and foreign exchange impact. This was partially offset by lower other expenses (30 bps) and higher other operating income (30 bps).

 

Emkay Research has cut its earnings estimates for FY27. It has also downgraded the stock, citing expectations of a sharp moderation in growth in the second half (H2) of FY27 as the base effect catches up — it expects flat volumes compared with H2 of 2025-26 — and only a gradual improvement in margins from Q1 because of limited pricing power. The brokerage has an ‘add’ rating with a target price of ₹15,500.