Maruti Suzuki shares up 2% despite brokerages flagging demand concerns for entry-level cars

Maruti Suzuki shares have tanked 18 percent in the past 1 month.

Shares of Maruti Suzuki’s gained over 2 precent to Rs 11,394 in the morning trade on October 29 despite a weaker-than-expected second quarter, prompting brokerages to stir up mixed reactions. Most of them have adjusted their expectations for the stock while remaining cautious about future prospects.

This comes after the company reported a 17 percent year-on-year drop in net profit to Rs 3,103 crore, falling short of analysts’ predictions, while its revenue from operations rose marginally to Rs 37,449 crore. India's largest carmaker's latest quarterly net profit was hit by a deferred tax liability of Rs 1,018 crore, which was partially driven by regulatory changes impacting indexation benefits and tax rates on capital gains from debt mutual funds.

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Should you buy, sell, or hold the Maruti Suzuki stock? Here's what experts suggest.

Nomura has a slightly conservative outlook and is 'neutral' on the counter with a target price of Rs 12,455. The brokerage highlighted ongoing challenges, including demand softness and Q2 margin pressures. Elevated discounts might persist in the short term, although improving CNG mix and rising ASPs (average selling prices) offer some silver linings. Management expects festive sales to see a 14 percent YoY increase, which could ease inventory pressure, reducing the likelihood of discounting in the upcoming quarter.

HSBC reiterates 'hold' with a slightly higher target of Rs 14,000. The brokerage views Maruti’s Q2 margin weakness as a result of a challenging demand environment and high discounts. While they anticipate Q3 could be more difficult, HSBC remains hopeful for a turnaround by FY26, driven by demand recovery and new product launches. A tax cut for hybrids is also considered an upside risk to Maruti’s valuation.

Investec also has a cautious stance on four-wheeler major as it retained 'hold' but slashed the target to Rs 12,385 from Rs 14,030, attributing this to operational challenges primarily impacting margins. While mid-single-digit growth for FY25 is expected, the brokerage sees continued weakness in demand for entry-level cars, partially due to a consumer shift towards premium vehicles. Concerns around the EV transition and Maruti’s reliance on Toyota for tech amplify Investec’s cautious tone.

On the contrary, UBS continues to see value in Maruti, maintaining a 'buy' recommendation but lowering its target price to Rs 14,800 from Rs 15,200. UBS acknowledged the company’s Q2 miss, citing gross margin contractions that weighed on EBITDA. However, the brokerage found the overall demand outlook encouraging, buoyed by strong festive demand and controlled inventories and discounts, suggesting things may not be as bleak as initially feared.

The company also unveiled plans for its all-new electric vehicle launch scheduled for January 2025. In a post-result analyst call on October 29, the Maruti Suzuki management said that the new car will be built on a high-spec platform designed exclusively for EV use rather than a retrofit of an existing internal combustion engine (ICE) model.

Maruti Suzuki shares have tanked 18 percent in the past 1 month.

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