Maruti Suzuki drives bullish stock calls, analysts see better margins after robust Q3

Shares of Maruti Suzuki India Limited gained 1 percent to Rs 10,286, extending gains for the second session in a row on February 1 after multiple brokerage firms cheered the company’s robust October-December earnings.

On January 31, the stock ended at Rs 10,187, up 2 percent from the previous close on the NSE. In the last three months, the counter has declined nearly 2 percent.

In the third quarter, the company reported a net profit of Rs 3,130 crore, a 33 percent increase from the year-ago period, beating estimates of a net profit of Rs 2,838 crore. The country’s largest carmaker’s revenue increased 15 percent to Rs 33,309.7 crore from Rs 29,044.3 crore in the year-ago period.

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Its earnings before interest, tax, depreciation and amortisation (EBITDA) increased 38 percent on-year to Rs 3,909 crore from Rs 2,833 crore on-year.

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Its EBITDA margin improved by 190 basis points (bps) to 11.7 percent from 9.8 percent on-year due to softening of commodity prices, improved capacity utilisation, cost reduction efforts and improved realisation.

Stock call: should you buy, hold, or sell?

HSBC has issued a ‘buy’ call on the counter and assigned a target price of Rs 12,500 apiece, implying an upside of 23 percent from the previous close of Rs 10,187. “The company performed well in a seasonally weak quarter, and margins should improve with better operating leverage and few discounts,” the brokerage said.

Morgan Stanley is also bullish on the stock with an ‘overweight’ call. With a target price of Rs 11,228, the broking firm believes that the hatchback and utility vehicles segment is still running below FY19 levels.

Nomura, on the other hand, has a ‘neutral’ recommendation. It said that the market share could potentially face risk in FY25-26 while strong margin tailwinds should sustain the in the near term.

MSIL stated that it sold a total of 501,207 vehicles during the quarter, a growth of 7.57 percent from 465,911 units sold during the same quarter last year.

The company reported its highest-ever exports in any quarter during Q3FY24 at 71,785 units, up by 15.8 percent from 61,982 units on-year, company data showed.

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