Maruti’s Q3 EBITDA came in 7% above estimates of IIFL Securities, due to better-than-expected realizations and margins. Management mentioned that overall demand environment and outstanding order-book (363k vehicles) are healthy. It expects Maruti to outperform the industry, as multiple new models launched in the past six months should help improve its SUV market-share. Coming to margins, Q3 results reflected almost all the benefit from fall in commodity prices and favorable exchange rate (weak JPY).
Analysts at IIFL Securities believe there is a risk of these becoming headwinds from Q1FY24 as Commodities have started inching up and JPY has bounced back. Despite the Q3 beat, analysts at IIFL Securities largely maintain their FY24/FY25 EPS estimates, as their FY24 estimates already bake in a strong 11% volume growth and substantial margin improvement. Stock performance from here would depend on achievement of volume expectations, which in turn, relies on success of Maruti’s new models. With multiple new launches (Grand Vitara, Jimny, Fronx), there is a case for Maruti to regain some market-share in the SUV segment and hence, overall PVs.
The Target Price of Rs10,300 is based on 25x December 2024 estimated EPS.
