Stock To Buy: Exports grew 148% YOY In FY22, Sharekhan Reiterates "Buy" Stock For Robust Returns

Leading Brokerage firm Sharekhan in its recent report reiterates its "Buy" rating on Maruti Suzuki India Limited (MSIL) with an unchanged PT of Rs. 10,965, factoring gains in market shares through refreshed and new launches. According to the target price, if the stock is purchased at the current market price, it could give up to 23% returns.

Maruti Suzuki India Limited is one of the leading car manufacturers in India. The company accounts for over 50% of the domestic car market. This company is a subsidiary of Suzuki Motor Corporation, the Japanese car and bike manufacturing giant. It is a large-cap auto sector company having a market capitalisation of Rs 2,71,746 crore.

Stock Outlook & Returns

The current market price (CMP) of the Maruti Suzuki stock on NSE is Rs 8,955.50 apiece, trading at 0.33% down compared to its previous close. The stock has recently touched its52 week high of Rs 9,769. While the stock's 652 week low is Rs 6,536.55.

It has given a positive return of 0.96% in the past 1 week, and 5.62% in the past 1 month, respectively. It has given 1.41% positive return in the past 3 months and 12.73% in the past 6 months, respectively. Over the past 1 year, the stock has given 25.31% positive return, 23.65% in 3 years, and 3.32% in 5 years, respectively.

MSIL bets on new launches and strengthening distribution network for regaining market share

MSIL's recent launches of Brezza and Grand Vitara are gaining strong traction among the buyers, with pending orders of ~73,000 units of Brezza and ~56,000 units of Grand Vitara as on October-end. MSIL has built a strong portfolio of CNG variants, now contributing to ~30% of the orderbook.

Well positioned to execute its green mobility roadmap

Maruti has a strong balance sheet with cash reserves more than Rs. 30,000 crores. "We expect MSIL is well positioned to expedite its electric vehicle (EV) plans with the internal accrual itself. The management is working on green mobility road map, which comprises of electric vehicles, hydrogen fuel cell vehicles, flexi fuel vehicles and CNG. The company has indicated strengthening its hybrid models and expects to launch EVs by 2025," the brokerage has said.

Exports well poised to grow strongly

Exports to be a long-term key growth driver for the company, especially in Africa. Exports grew 148% y-o-y in FY22 25% in H1FY23. Management expects export volumes to maintain its positive traction, also supported by collaboration with Toyota.

 

Sharekhan Maintain Buy with an unchanged PT of Rs. 10,965

MSIL is expected to witness a recovery in domestic demand with sales volume sustaining growth, despite near-term challenges of electronic component shortage. Sales enquiries remain strong with order book currently at more than 3.9 lakh units, of which ~30% is CNG variants and ~33% is SUVs. "We expect growth momentum to continue in FY2023E, driven by the normalisation of economic activity and improving rural sentiments. Margins are expected to improve from 6.4% in FY2022 to 11.1% in FY2024E, driven by better product mix, operating leverage benefits, and cost-control measures. We stay positive on the company, led by its structural growth outlook, healthy balance sheet, and comfortable valuations," the brokerage has said.

It added, "The stock is trading at a P/E of 26.8x and EV/EBITDA of 19.6x on FY2024E earnings estimates. We reiterate our Buy rating on the stock with a revised price target (PT) of Rs. 10,965, factoring gains in market shares through refreshed and new launches."

According to the brokerage, the key risks to the buy call would be a significant delay in the improvement of chips shortage could affect our volume estimates. Moreover, failure of new launches and increasing CNG prices could affect our volume estimates.

 

Disclaimer

The stock has been picked from the brokerage report of Sharekhan. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.