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Hold Maruti Suzuki, target price Rs 4,800: ICICI Direct

For Maruti Suzuki, the brokerage has a -13 per cent, flat, 10.8 per cent year-on-year volume trajectory in FY20E, FY21E, FY22E, respectively.

Last Updated: Mar 31, 2020, 12.22 PM IST
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ICICI Direct has given a “hold” rating to Maruti Suzuki India Ltd with a target price of Rs 4,800, a downside of 4 per cent over the CMP of Rs 5,000.

India's largest passenger vehicle (PV) maker has been consistently outperforming not just its segment but the wider automotive industry as well on the volume front over the past six months. The company's proactiveness in introduction of BS-VI models well in advance of the mandated switchover has been key to its resilience, with popular models retaining their consumer appeal even in the upgraded versions. Maruti Suzuki has closed all plant activities in Manesar and Gurugram (Haryana) until further government notice, with Suzuki Motor Gujarat production halted till April 14.

The company’s share price moved up by 0.08 per cent from its previous close of Rs 4,328.45. The last traded price is Rs 4,331.95. Incorporated in 1981, Maruti Suzuki India has a market cap of Rs 131139.00 crore.

Investment Rationale
In the present times of despair and unprecedented economic slowdown due to a Black Swan event like Covid-19 outbreak, the brokerage has reiterated its preference for business models that are capital efficient in nature (RoE, RoCE >15 per cent), possess healthy balance sheet (debt: equity < 0.5 times) and are more domestic (India) centric in nature.

While plant and showroom closures due to Covid-19 lockdown would affect March, April and possibly May performance, the brokerage believes the company is best placed to stage a faster recovery than most other OEMs courtesy no unsold BS-IV stock on books and demonstrated acceptance of BS-VI models on the ground.

For Maruti Suzuki, the brokerage has a -13 per cent, flat, 10.8 per cent year-on-year volume trajectory in FY20E, FY21E, FY22E, respectively. Upgrading the stock to “hold”, the brokerage values it at Rs 4,800 i.e. 20 times P/E on FY22E EPS of Rs 240/share.


For the quarter ended December 31, 2019, the company reported consolidated sales of Rs 19655.50 crore, up 21.91 per cent from last quarter sales of Rs 16123.20 crore and up 3.83 per cent from last year same quarter sales of Rs 18930.70 crore. The company reported net profit after tax of Rs 1568.70 crore in the latest quarter.

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