Buy Stock Of Maruti Suzuki For High Returns, Supply Constraints To Fall: Top Brokerage

Top brokerage firm KR Choksey recommends investors to buy the stock of Maruti Suzuki. The brokerage firm thinks that the favourable movement of JPY vs INR and softening of commodities are expected to improve profitability in the coming quarters.

Stock To Buy: Target Price

The Current Market Price (CMP) of Maruti Suzuki (MSIL) is Rs. 8950. KR Choksey has estimated a Target Price for the stock at Rs. 10585. This stock has the potential to give an 18.3% return, in the upcoming 1 year. It is a large-cap stock with a market capitalization of around Rs. 269,686 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 8950
Target Price	Rs. 10585
Potential 1 year return	18.30%
52 week high share price	Rs. 9,233.65
52 week low share price	Rs. 6,536.55

Financials

The company's revenue in FY22 was recorded at Rs. 8,83,298 mn, which is expected to be at Rs. 11,57,344 mn in FY23. Their EBITDA in FY22 stood at Rs. 55,617 mn, which is expected to be at Rs. 1,04,802 mn in FY23. The company's PAT in FY22 was recorded at Rs. 38,795 mn, which is expected to be at Rs. 73,483 mn in FY23.

Supply constraints to fall gradually

Due to the shortage of electronic components, MSIL's production was affected to the tune of 0.3 mn vehicles in FY22, and about 51,000 units in Q1FY23. In the recently released monthly data for August 2022, MSIL stated that the impact of the shortage of electronic components on production was minor. As the supply conditions improve further, we expect stronger traction in sales, especially in the domestic segment. The supply side constraints did not affect exports as much and MSIL saw the highest ever exports in Q1FY23 and expects to see continued traction in exports.

New launches to aid demand

Maruti Suzuki's market share suffered in FY22 due to Maruti Suzuki's lack of models in the fast-growing SUV space. Its market share declined from 47.7% in FY21 to 43.4% in FY22 and 40.5% in Q1FY23. MSIL is working toward regaining market share to 50.0% levels by expanding the product portfolio, and introducing new age features and fuel-efficient technologies. MSIL has addressed the situation by launching models such as the new Brezza and Grand Vitara, which have seen strong customer demand. The total order book stood at 3,50,000 units at the end of Q1FY23, out of which 70,000 bookings were for the Brezza. MSIL has a pipeline of additional new launches planned for this year.

Stock Advantages: KR Choksey

"With improvement in the supply of electronic components, continued demand traction in exports, and improvement in domestic demand, we expect MSIL to perform well on the topline. FX benefit, lower commodity costs, and overall operating leverage due to an increase in volumes will aid MSIL's profitability. We expect a Revenue/ EBITDA/ PAT CAGR of 23.4%/ 64.7%/ 71.5%, respectively over FY22 to FY24E, on a covid impacted base of FY22. We have assigned a P/E multiple of 28.0x on FY24E EPS of Rs. 378.0 to arrive at a revised target price of Rs. 10,585/share (an earlier target of Rs. 10,122/share). The target price implies a potential upside of 18.3% from the current market price. Accordingly, we maintain our buy rating on the shares of Maruti Suzuki India Ltd," the brokerage firm thinks.

Company Portfolio:

Maruti Suzuki India Limited (MSIL) is a subsidiary of Suzuki Motor Corporation, Japan and India's largest passenger car maker. Maruti Suzuki has a vast portfolio of 16 car models with over 150 variants. It is present in the Mini, Compact, Mid-size, Utility vehicles, and Vans segments within passenger vehicles segment. MSIL also manufactures LCVs.

Disclaimer

The above stock was picked from the brokerage report of KR Choksey. 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.