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Maruti Suzuki Q1 Review: Carmaker Well-Placed To Gain Market Share With New Launches, Say Analysts

Street expresses confidence on Maruti Suzuki's ability to gain back market share with new car launches.

<div class="paragraphs"><p>The new Maruti Suzuki Grand Vitara. (Photo: Vinay Khulbe/BQ Prime)</p></div>
The new Maruti Suzuki Grand Vitara. (Photo: Vinay Khulbe/BQ Prime)

Maruti Suzuki India is well-placed to claw back market share from peers, powered by new launches to fill gaps in its utility vehicle portfolio, analysts said.

Strong demand and favourable product lifecycle augurs well for India's largest carmaker to improve market share and margins, Motilal Oswal Financial Services said in a report. It expects a recovery in both market share and margins in the second half of the current fiscal, aided by an improvement in supply of semiconductors and better product mix.

The market share of the company that sells one out of every two cars in India fell to 42.75% in the year ended March 2022 from 48.71% in the previous fiscal, data from the Federation of Automobile Dealers Associations showed.

The maker of the WagonR and Alto lost market share in the fast-growing SUV segment, where its share is 17% compared with 62% in the non-SUV category, Dolat Capital said in a report. The brokerage sees strong demand for passenger vehicles to continue for the next two years, led by recovery in the economy, a pick-up in replacement demand, long waiting periods for cars and low inventory.

To shore up its volumes, Maruti Suzuki has launched the Grand Vitara, and upgraded the Vitara Brezza, Ertiga and XL6 in a span of four months. The demand for its vehicles is reflected in the 350,000 pending bookings, including 70,000 orders for the Brezza and 20,000 for the Grand Vitara.

Analysts said chip shortage may ease in the coming months, allowing Maruti Suzuki to clear its order book rapidly. The company said it couldn’t produce 51,000 vehicles in quarter ended June due to the chip crunch.

“We believe the chip shortage issue to get resolved well by Q3 FY23, therefore fulfilment of this order book may surely lead to a surge in H2 FY23 and FY24 volumes,” LKP Securities said.

Supply shortages and input cost pressure persisted in the first quarter as Maruti Suzuki's net profit rose 130% year-on-year but missed estimates.

Shares of Maruti Suzuki rose as much as 1.3% to Rs 8,770.15 apiece in morning trading on Thursday and the stock is on course to gain for the second straight day.

Of the 53 analysts tracking the company, 40 maintain 'buy', six suggest 'hold' and seven recommend 'sell', according to Bloomberg data. The average of target prices suggests an upside potential of 7.3%.

Here's what analysts made of Maruti Suzuki's Q1 FY23 results:

Motilal Oswal

  • Moderating commodity prices and favourable movement in currency will boost margins.

  • Benefit of a favourable movement in Japanese Yen expected to accrue in the quarter ending September.

  • Retain “Buy” rating with a target price of Rs 10,700, an implied return potential of nearly 23%.

Dolat Capital

  • Increasing share of SUVs and drop in commodity prices to add nearly 100-150 basis points to gross margins in coming quarters.

  • Cooling commodity prices are expected to aid improvement in underlying margins but situation is very volatile due to geopolitical issues.

  • Dealership network strength to ensure better performance than competitors on all fronts.

  • Recommend “accumulate” with target price of 9,564 with an upside of 10%.

Jefferies

  • New feature-rich models should appeal to consumers and help revive market share.

  • Improvement in margins expected as price hikes outpace incremental rise in commodity costs

  • Retain “Buy” with Rs 10,250-target price, an implied return of nearly 18%.