Rates ‘buy’ with a target price of Rs 10,250, implying a potential upside of 18%.
Indian passenger vehicle industry had already suffered its worst downturn before Covid, and is witnessing a strong revival from this low base. Expect demand to remain strong led by low penetration, replacement cycle amid rising age of cars in operation, and shift from shared to personal mobility. Expect 24%/14% industry growth in FY23/FY24.
Maruti Suzuki also has an order book of about 3,50,000, which provides about 2 month of volume visibility. MSIL’s exports have risen sharply from monthly runrate of 8,000-9,000 in FY19-21 to 20,000 in FY22 and 23,000 in Q1, which is further boosting volumes.
Maruti Suzuki’s new models are featurerich, which should appeal to consumers and help revive market share. On a 3 to 5-year view, MSIL’s SUV and electrification strategy would be key for its franchise.
MSIL’s Ebitda margins were in a 10-15% band for most of FY05-20 but fell to an historical low of 6.5% in FY22, partly due to by a sharp metal price rally. With commodity cost pressures behind, Jefferies factors Ebitda margins recovering to 10.1%/11.8% in second half of FY23/FY24.
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