Brokerages mixed on Maruti Suzuki after Q1 results

Mumbai: Brokerages have a mixed view on Maruti Suzuki India after the car maker reported a net loss of Rs 249.4 crore for the June quarter-its first loss in 17 years.

Antique, CLSA, and Kotak Institutional Equities maintained sell rating on Maruti, while Investec downgraded the stock to sell. Nomura has maintained hold recommendation. Emkay Global and Jefferies have maintained buy and Morgan Stanley has an overweight recommendation.

Many brokerages have revised target price higher but the revision is mostly due to rolling forward of estimates.

“Maruti’s 1QFY21 (June quarter) results were significantly below consensus…We expect a collective resurgence in new launches by the competition and Maruti’s model cycle has already peaked. This should lead to a de-rating of the stock from current level,” said CLSA.

Investec said valuation at 40 times FY22 estimated core EPS does not give comfort. Kotak Institutional Equities expects passenger vehicle industry volumes to remain under pressure in FY21 given economic uncertainty and tight financial conditions.

While others expect Maruti to face headwinds going ahead, Jefferies expects a strong earnings rebound in FY22-FY23 period and believes the company’s operational performance should improve sequentially.

Emkay Global expects volume performance of Maruti to improve going ahead on a low base, pent-up demand and positive rural sentiment.





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