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Maruti Suzuki stock vrooms to its all-time high

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The stock of Maruti Suzuki India Ltd (MSIL) touched a new peak of ₹10,390 on the BSE, driven by the August sales numbers. On Friday, Maruti Suzuki shares were up three per cent from ₹10,007, as the auto major reported sales of 1,89,082 units in August — its highest-ever monthly sales volume.

According to the company’s filing on the BSE, its total sales for the April-August period were 8,68,742 units in FY24 vs 8,09,020 units in FY23. These numbers resulted in over 300-point (over three per cent) increase for the MSIL stock. The stock closed at ₹10,331.80. MSIL’s market cap was at ₹3.12-lakh crore.

Bullish run

The stock has been on a good run and hit a new high on Thursday, on the back of the company Chairman RC Bhargava announcing at its AGM that MSIL will add two million units in the next eight years, “while also more than doubling the turnover as part of its third phase of journey”, and MSIL declaring its highest-ever dividend of ₹90/share.

“MSIL is gearing up with its new models, such as Vitara, Jimmy Fronx and Invicto, which is reflected in the August volume numbers. The company has increased its market share in its SUV category from 18 per cent to 23 per cent in Q1-FY24. The cost of owning a compact car has gone up substantially compared with segmental class income, which constitutes 60 per cent of overall volume. Consequently, we expect the full recovery in the category to be delayed due to income disparity,” Saji John, Research analyst at Geojit Financial Services, told businessline.

The company’s acquisition of the SMG plant, which will largely cater to multiple powertrain technologies, would help doubling its capacity, he explained, adding that the brokerage maintained its Buy rating on the stock.

The August monthly sales numbers are significant given that the MSIL has had a challenging time in the past few years. “After struggling the most among peers with supply constraints over the last couple of years, which also exacerbated its market-share loss, MSIL is bouncing back with an aggressive production ramp-up plan,” said BNP Paribas in its recent report.

The brokerage had upgraded MSIL stock to Buy three years ago expecting demand trends — PV penetration had stagnated and PVs’ share of household expenditure had fallen to 2009 levels then. “Both have reversed since then,” the report noted, which has retained its rating on the stock, with a target price of ₹12,700.

According to JPMorgan, “We have been cautious on Maruti Suzuki from a medium-term view, as we believe consensus is baking in optimistic scenarios around: sustenance of market share improvement; and margin improvement against the backdrop of rising discounts/inventory.”

However, in the near term (till festive period starts (September-October), the global brokerage sees potential for the stock to outperform the broader market.

CFO appointment

What also augurs well for the company is the appointment of Arnab Roy as the new CFO.

In its recent report, Prabhudas Lilladher termed it “a positive development for Maruti,” adding that his vast experience spanning 25 years and expertise in managing operations of large MNCs “will be crucial in steering Maruti Suzuki towards a path of sustained growth and success as it seeks to strengthen its position in the evolving automotive landscape.”





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