Bullish calls on Maruti after UP's hybrid tax break sends stock to all-time high

The registration waiver by UP govt could reduce the on-road price of hybrid cars by up to Rs 4 lakh. Maruti Suzuki is expected to benefit significantly, as the company offers hybrid features in many of its models.

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Shares of Maruti Suzuki extended gains on July 10 after a solid 6.5 percent surge on Tuesday, as several brokerages sounded bullish on the stock following Uttar Pradesh government's registration fee waiver on hybrid cars.

The stock rose over 3 percent to hit an all-time high of Rs 13,285 on the National Stock Exchange (NSE).

Analysts at Citi said the tax waiver on hybrid vehicles is a positive development for Maruti, Toyota, and Honda. The note added that the move is expected to benefit Maruti significantly, potentially leading to more hybrid model launches, backing it with a Buy rating with a target price of Rs 15,100 per share.

Citi maintains Maruti as its top sector pick, anticipating further volume growth if other states follow the UP government's lead.

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Morgan Stanley has an overweight call on Maruti with a target price of Rs 14,105 per share. The brokerage said the policy support points to having a diversified portfolio of powertrains as the best strategy in the automotive sector.

The sizable incentive by the State government for hybrid cars is a notable boost, it noted. "This move by UP could inspire other states to adopt similar incentives. Consequently, a portfolio of powertrains, including hybrids, deserves a premium valuation," Morgan Stanley added in its note.

Macquarie has maintained a Neutral call on Maruti with a target price of Rs 11,565 per share. The reduction in road tax on strong hybrid vehicles by the UP government is seen as a sentiment-positive for the company.

This policy reduces the price premium for strong hybrids over internal combustion engine (ICE) vehicles to 10 percent from 20 percent, Macquarie said.

Some estimates suggest that the registration waiver could reduce the on-road price of hybrid cars by up to Rs 4 lakh. Maruti Suzuki is expected to benefit significantly as the company offers hybrid features in many of its models.

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UP's Tax Relief For Hybrids

In an effort to promote green mobility, the state government announced a 100 percent registration fee waiver on strong hybrid electric vehicles (HEVs) and plug-in hybrid electric vehicles (PHEVs).

It noted that Uttar Pradesh contributed 10 percent to passenger vehicle sales in India in FY24, compared to 11 percent of Maruti's domestic sales, where the company's market share in the state was 44 percent versus 42 percent nationally.

In the previous session, Maruti Suzuki shares ended 6.5 percent higher at Rs 12,807 on the National Stock Exchange (NSE). So far this year, the stock has soared 24 percent, beating Nifty's returns of 12 percent during this period. In the last one year, the stock has risen 31 percent. In comparison, Nifty delivered returns of 26 percent during this period.

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