Comfortable valuations, aggressive EV plans make Maruti Suzuki stock a good play in long-term, says analyst

Shares of Maruti Suzuki India have performed sluggishly in the past one year, generating a mere 7% return as on March 24. Maruti Suzuki, which touched 52-week high value of Rs 9,022 a share on the BSE on February 10, has corrected significantly amid volatility and chip shortage in the last two months. As auto sector remains under pressure, brokerages and analyst are bullish on shares of Japanese car maker in the long-run.  

Brokerage house IIFL has given a buy call on Maruti Suzuki India with a target price of Rs 9,500. IIFL expects PV industry volumes to grow 17% YoY inFY23, followed by 11% growth in FY24.

See Zee Business Live TV Streaming Below:

Similarly, UBS maintained its buy rating on Maruti Suzuki with a target price of Rs 10300.  

Earlier, ICICI Securities has slashed target price of Maruti Suzuki from Rs 9,382 to Rs 8,745. ", we restrict earnings cut to ~4% for FY24E vs ~15% for FY23E. Due to the recent price correction, we upgrade the stock to buy," it had said in its report.  

Suzuki plans to invest over Rs.100bn towards electrification in India.    

Suzuki Motor plans to invest 104.4 billion rupees ($1.37 billion) in its India factory to produce electric vehicles (EVs) and batteries, Maruti Suzuki India, majority-owned by the Japanese carmaker, said on Sunday.   

As part of the arrangement, Suzuki Motor Gujarat Private will invest 31 billion rupees by 2025 for increasing production capacity for battery EV manufacturing and 73 billion rupees for construction of plant vehicle batteries, the company had said.   

"This is an important step for Maruti Suzuki as this will allow it to enter the EV market. However, the company has been late to join the EV bandwagon and the competitors are way ahead in this area. The company hasn’t changed the timeline to launch the EV and still plans to launch EVs in 2025. Thus, there won’t be an immediate impact on its earnings," said Santosh Meena, Head of Research, Swastika Investmart Ltd.   

Nevertheless, this will act as a catalyst to solidify its EV plans and reduce the EV-disruption overhang on the stock, said Meena.   

He said the company could be potentially impacted by both chip shortages as well as a rise in commodity-led raw material prices leading to downward sales volume as well as margins in the short to medium term.   

The company has been losing market share since 2019 due to a lack of new product launches, especially in the fast-growing UV segment, he said.   

"However, the next 2 years look promising as the company will launch new products in the SUV segment and update its existing lineup of cars. The valuations are comfortable as the stock didn't perform for the last four years. Hence, we are neutral on Maruti Suzuki for the medium term, but the long-term fundamentals are still intact," Meena added.

Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision