This Auto Stock Is A Buy On New Launches, Easing Supply & Stable Material Prices

Brokerage firm, Motilal Oswal has recommended buying the stock of Maruti Suzuki India on the back of promising product pipeline and easing raw material prices.

Higher target price of Rs 10,300 on the stock of Maruti Suzuki

Current market price	Target price
Rs 8746	Rs 10,300

"After a lackluster last two years, Maruti Suzuki India's product pipeline looks far more promising, with several launches lined up for the next two years, with a mixture of new model launches [four SUVs] and full upgrades to four existing models. Hence, we estimate Maruti Suzuki India to witness recovery in market share by 550pp to 49% by FY25E (the first full-year benefit of all its product launches)," the brokerage has said.

Improving product mix, stable commodity prices to help the company

According to Motilal Oswal, while the electric vehicle disruption is a risk, it sees an inflection point for e-PVs to be back-ended and Maruti Suzuki India to launch its EVs just in time by CY25E.

"Good demand for PVs in domestic market, ramping-up exports and easing supply side issues will driving strong volume growth of 15% CAGR over FY21-24E.

Improving supplies, the product mix, and stable commodity prices would drive margin recovery; we expect EBITDA/EBIT margins to improve 590bp/690bp to 12.1%/9.8% over FY22-24E. Maruti Suzuki India is our top pick in Autos. We maintain a Buy on the stock, with target price of Rs 10,300 (27 times Mar'24E consolidated EPS)," the brokerage has said.

Promising product pipeline

According to Motilal Oswal, after a lackluster last two years, Maruti Suzuki India product pipeline looks far more promising, with several launches lined up for the next two years, with a mixture of new model launches [four SUVs] and full upgrades to four existing models. "These launches are not only focused on SUVs (all the new models and the updated Brezza) but would also address other key models such as Baleno and Alto. Hence, we estimate MSIL to witness recovery in market share by 550bp to 49% by FY25E (the first full-year benefit of all its product launches)," the brokerage has said.

Disclaimer

Investing in equities is risky and investors must therefore understand the risk. The author and Greynium Information Technologies Pvt Ltd would not be responsible for any losses caused based on the article. The author and his family do not hold shares of Maruti Suzuki India. Investors should exercise caution on account of heightened volatility in the markets currently.