 "Maruti Suzuki Nexa")
Shares of Maruti Suzuki India (MSIL) hit a new high of Rs 11,936.35, gaining 3 per cent on the BSE in Wednesday's intraday trade, in an otherwise subdued market on a healthy business outlook. The stock of automobile major surpassed its previous high of Rs 11,725, touched on March 5, 2024. In comparison, the S&P BSE Sensex was down 0.17 per cent at 71,884 at 10:12 AM.
Global brokerage CLSA, on Wednesday, said Maruti Suzuki could be among the key beneficiaries of increasing adoption of CNG vehicles in India.
"CNG passenger vehicle sales are on a rise. The market share of CNG PVs is expected to rise from 15 per cent in FY24 to 22 per cent in FY30 aided by lower running costs. We expect Maruti Suzuki to benefit from intorduction of new models," it said in a Auto sector report.
Meanwhile, in the past two months, MSIL has outperformed the market by surging 20 per cent as the company reported a healthy 30 per cent year-on-year (Y-o-Y) growth in net profit at Rs 3,130 crore for the December quarter (Q3FY24). This was on account of higher sales volume, cost reduction efforts, favorable commodity prices and higher non-operating income.
The company sold a total of 501,207 vehicles during the quarter, against 465,911 total vehicles sold in the previous year quarter. Growth in net sales outpaced the growth in sales volume due to a higher contribution of utility vehicles to total sales volume.
Moreover, the company is on course to start production of battery electric vehicles in 2024. In addition to serving the domestic market, this mid - SUV segment product will be exported to developed markets such as Japan and Europe, MSIL said.
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MSIL's manufacturing unit in Kharkhoda (Haryana) with a capacity of 0.25 million vehicles a year is due to become operational in CY25 and its Manesar plant expansion of 0.1 million units is scheduled to start by Mar’24.
The acquisition of contract manufacturing partner SMG's plant at Gujarat has received shareholder approval. The company has also signed an MoU with the Gujarat government for setting up a 1 million-unit plant in the state by FY29.
The passenger vehicle (PV) industry growth is likely to be muted in CY24E on a high base. However, MSIL is likely to see better growth due to a strong order book, low inventory levels and continued demand for the SUV segment, according to analysts at KRChoksey Shares and Securities.
Increasing penetration of CNG vehicles will also lead to an increase in volumes for MSIL, the brokerage added. Export sales are also on a strong trajectory. Over the medium-term, new product launches and possible recovery in the small cars segment will contribute to growth for MSIL, it said.
MSIL is operating at high utilisation levels and will see an increase in production capacity over the next few years. As a result, the brokerage firm expects Ebitda margins to remain steady over the next 2 years as the new capacities will take some time to ramp up and will largely offset the improvement in margins due to higher realisation, better mix and cost reduction. MSIL's entry into the EV segment in CY24E with a premium offering for domestic and export markets is an event to look forward to, analysts said.
Given an upbeat growth outlook backed by MSIL’s focus on premiumisation, healthy capex and thrust on EVs, the brokerage firm BOBCAPS has upgraded its 'HOLD' rating to 'BUY'. The brokerage firm had raised target price to Rs 12,234 from Rs 11,562 earlier.
