Buy This Auto Stock For 1200% Dividend & With A Target Price of Rs: 9,800

Maruti Suzuki India has announced a cash dividend of 1200.00 per cent, or Rs 60 per share (Face value INR 5.00 per share), for the fiscal year ending March 2022. The dividend will be paid on September 8, 2022, subject to shareholder approval at the upcoming annual general meeting. Following the announcement of Q4FY22 results, brokerage company Axis Securities has issued a buy call on the stock with a target price of Rs 9,800 per share.

Q4FY22 results

The brokerage has said "Maruti Suzuki India Ltd (MSIL) Q4FY22 performance came in ahead of our expectations on the margin front, aided by operating leverage benefits, lower discounts, and price hikes. Improvement in the average realization by 12% YoY helped MSIL report flat revenue growth. MSIL's revenue stood at Rs 26,740 Cr in Q4FY22 (Our estimate - Rs 26,840 Cr). Reported EBITDA came in at Rs 2,427 Cr (our estimate - Rs 2,198 Cr), a 22% YoY improvement (Rs 1,991 Cr in Q4FY21). MSIL reported EBITDA margin of 9.1%, a 237bps QoQ expansion (our estimate - 8.2%)."

According to Axis Securities "The beat on margins was on account of operating leverage benefits, favourable product mix, lower discounts, and price hikes. MSIL reported PAT of Rs 1,839 Cr (Our estimate - Rs 1,532 Cr), a growth of 56% YoY. With low inventory and a large order book, we expect MSIL to come back strongly in terms of profitability along with volume recovery. Going forward, near-term headwinds of chip shortages weighing on production and commodity cost pressures will weigh on MSIL's financial performance."

Buy for a target price of Rs 9,800

The brokerage has claimed that "The demand environment for the PV industry remains resilient despite the Covid-19 headwinds and we expect the industry to report robust volume growth, driven by high aspirations, improving affordability, and lower penetration. MSIL could emerge as the biggest beneficiary of demand recovery in the post-Covid period, considering its stronghold in the Entry-Level segment and a favourable upcoming product lifecycle. New launches, targeted to fill the portfolio gaps are likely to improve the overall product mix. Strong demand, softening commodity inflation, and improving semiconductor shortage will support a recovery in the margin. The company would gain further market share, driven by an expected shift towards petrol and CNG vehicles."

"Going forward, we expect new product launches to resume with a mix of product upgrades and new model launches. This will help MSIL drive volumes and recover its market share. We expect the company's volumes to witness a strong growth CAGR of 16% over FY22-24E. We expect margins to be supported by strong demand, softening commodity inflation, and improving chip shortages. We expect a recovery of both market share and margin in FY23 and FY24, led by a favourable product lifecycle, operating leverage, and product mix as well as price action/cost-cutting. We maintain our BUY rating on the stock with an unchanged TP of Rs 9,800 valuing the stock at 27x its FY24E EPS," Axis Securities has said.

Disclaimer

The stock has been picked from the brokerage report of Axis Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.