Prabhudas Lilladher has given Buy recommendation for Maruti Suzuki with a target price of Rs. 9000 in its research report issued on May 01, 2022

Prabhudas Lilladher’s research report on Maruti Suzuki

Maruti’s 4QFY22 EBITDA margin at 9.1% (+240bps QoQ, PLe: 7.7%) surprised positively led by benign RM costs and operating leverage coming from recovering volumes. Current order book stands at ~320k units of which 40% is for CNG models. Newly launched Baleno has order book of ~80k units since Feb22 and we believe this could add incremental volumes over the year. However, chip shortage situation remains dynamic along with commodity inflation which will restrict volumes and margins in the near-term. Since FY20 Maruti’s market share contracted by 800bps to 43% currently. Nevertheless management highlighted that 2022 will be a strong year in terms of new launches (half of which are expected to be in the SUV space) and this will address gaps in its product portfolio.

Outlook

We raise our revenue estimates by 4/5% for FY23/24E to factor in volume growth led by new model launches. But our margin estimate contracts by 50/100bps for FY23/24E, considering commodity inflation after the Russia-Ukraine war. Maintain ‘BUY’ with target price of Rs 9,000 at 28x FY24E EPS.

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