Sharekhan is bullish on Maruti Suzuki has recommended buy rating on the stock with a target price of Rs 6925 in its research report dated July 29, 2020.
Sharekhan's research repor on Maruti Suzuki
However, higher other income led to company posting lower than expected loss. Going ahead, the company is witnessing strong pick up in the demand with retails reaching 85-90% of Pre-COVID levels. Moreover, demand shift towards entry level cars is likely to benefit Maruti which has stronghold in the segment.. We have raised our earnings estimates to factor in the demand recovery and also raised our target multiple from 25x to 27x. At CMP, stock is trading at 24.1x FY22 earnings which is close to its long-term historical average. However, given the early recovery cycle scenario in which Maruti currently is in, valuation multiples can expand above historical averages.
We upgrade our recommendation on Maruti Suzuki to “Buy” from “Hold” earlier with PT of Rs 6,925. Maruti’s Q1FY21 operating results were lower than estimates impacted by negative operating leverage due to steep fall in volumes & higher fixed cost incidence due to lower production.
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