Moneycontrol
Last Updated : Oct 26, 2018 10:38 AM IST | Source: Moneycontrol.com

Maruti Suzuki Q2: Brokerages feel long-term story intact; Credit Suisse cuts target price

Credit Suisse, however, believes competitive intensity to weigh on the stock, going forward.

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Shares of Maruti Suzuki traded lower amid a subdued performance by the company for the September quarter. Brokerages believe that while there are some bumps for now, the long term story is still intact.

The company reported a 9.8 percent on year degrowth in second quarter profit to Rs 2,240.4 crore, dented by weak operational performance and subdued sales volume.

Profit in corresponding period last fiscal stood at Rs 2,484.3 crore.

However, bottomline grew by 13.4 percent sequentially with EBITDA rising 2.4 percent and margin expansion of 37 bps QoQ.

Revenue from operations for the quarter increased 3 percent year-on-year to Rs 22,433.2 crore despite fall in sales volume, driven by higher average selling price (ASP) due to a better product mix.

Sales volume during the quarter was subdued as the company sold 4,84,848 vehicles, down 1.5 percent year-on-year. Domestic sales degrew by 0.4 percent and exports fell 15.2 percent YoY.

Brokerage: Macquarie | Rating: Outperform | Target: Rs 9,000

The global research firm said that the company faced significant cost headwinds in Q2, leading to operating profit decline. Having said that, the company is best play in Indian automobile space. It expects the company to add to its market share. It expects a CAGR for PAT Of 17% Over FY18–21. There are multiple levers to mitigate cost inflation in medium-term. Long-term growth potential outweighs near-term uncertainty, it said.

Brokerage: Credit Suisse | Rating: Neutral | Target: Cut to Rs 7,000

Credit Suisse said that demand stress and competitive intensity will affect valuations or the stock. It cut FY19-21 EPS estimate by 15-18% on lower volumes. It also cut margin estimates by 50 bps on account of higher discounts. A forex impact of 80 bps can be seen on margin from Q4. The stock ahead could derate as competitive intensity picks up.

Brokerage: Jefferies | Rating: Buy | Target: Cut to Rs 8,200

Jefferies said that Q2 was in-line with muted expectations. It has been a weak festive season so far. Margin pressure is likely to continue in second half of this fiscal as well. The brokerage also cut FY19-20 EBITDA & EPS estimates by 6-10%. Jefferies is still positive on the stock, noting large long term passenger vehicle opportunity in India.

At 10:30 hrs Maruti Suzuki India was quoting at Rs 6,687.20, down Rs 37.50, or 0.56 percent, on the BSE. It touched a 52-week low of Rs 6,501.65.
First Published on Oct 26, 2018 10:34 am
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