This Automobile Stock Has Good Potential To Grow In Short-term: Emkay Global

The automobile industry was one of the largest affected industries during the first two waves of the covid. However, the industry is not gaining some momentum after the relation in lockdown norms and the government's focus. Brokerage firm Emkay Global has recommended buying the stocks of Maruti Suzuki (MSIL) for a 14.5% upside.

Target Price

The Current Market Price (CMP) of Maruti Suzuki is Rs. 8603. Emkay Global has estimated a Target Price for the stock at Rs. 9850. The company is expected to offer a 14.50% upside, in 1 year.

Stock Outlook
Current Market Price (CMP)	Rs. 8603
Target Price	Rs. 9850
1 year return	14.50%

Company performance

Q3FY22 EBITDA declined by 30% yoy to Rs. 15.6bn but came in 10% above our estimate of Rs. 14.2bn on lower sales promotion expenses and cost savings. Revenue was marginally lower by 1% yoy to Rs. 232bn, 2% below our estimate of Rs. 238bn. Volume declined by 13% while realization grew by 14%. As per the company, around 90,000 units could not be produced due to chip shortages. The pending order book is large at ~264,000 units. Driven by a sales upcycle and new products, we expect a 19% volume CAGR in FY22-24E. In the next two years, major launches could include an above-4m SUV, below-4m SUV, large SUV and an off-roader.

Comments by Emkay Global

Maintaining a buy rating, Emkay Global said, "We reduce FY22 EPS forecast by 7% and FY23/24 forecast by 2% each due to lower other income. Excluding other income, our FY23E/24E Core EPS estimates increase by 6-7% on higher EBITDA and lower depreciation assumptions. We build in a strong revenue/earnings CAGR of 23%/70% over FY22-24E. Our positive view is underpinned by expectations of a cyclical upturn and market share recovery. Reaffirm Buy. MSIL is likely to initiate an aggressive model action plan in the next two years to fill up the white-spaces in its product range."

About the company

Maruti Suzuki India Limited (MSIL) is involved in the manufacturing, trading of automobiles and related components. They also consist of assist in pre-owned car sales, car financing, etc. Maruti Suzuki sells Maruti 800, Alto 800, Alto K10, A-star, Estilo, WagonR, Ritz, Swift, Swift DZire, SX4, Omni, Celerio, Eeco, etc. The Company's services include Finance, Insurance, Maruti Genuine Accessories, Maruti Original Parts, Maruti Driving School, etc. Maruti Suzuki has around 3.5k exclusive showrooms.

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Disclaimer

The above stock was picked from the brokerage report of Emkay Global. 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.