Citi sees 45% upside in Maruti Suzuki on market share gains

Maruti Suzuki's new SUV Fronx is expected to be launched in the market in May 2023.

Maruti Suzuki may have an upside of over 45 percent on gains in market-shares and easing concern over supplies, according to Citi.

The brokerage, which has a 'buy' call on the stock, has given a target price of Rs 12,500. The stock was trading at Rs 8,561 at 12 noon on the BSE on March 15. It opened which opened 1.2 percent higher than yesterday’s close.

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The auto major’s share has been falling over the past three fiscals, from 51.2 percent in FY19 to 43 percent in FY22 and one of the reasons was its late catch-up with the SUV-buying trend. The market share of SUVs had gone up from 26 percent in 2019 to 42 percent in 2022, showing a marked preference among customers for the higher-end models.

According to CLSA, Maruti Suzuki’s market share has bottomed out and the company’s new utility vehicle (UV) models should boost it.

While the company’s electric vehicle (EV) launches should start from FY25, its key focus areas will be hybrids, flex fuel and compressed natural gas (CNG), according to the analysts.

While releasing its February volume numbers recently, the company said that there were some supply-side troubles. The management had said that shortage of electronic components had a “minor impact” on the production of vehicles that are primarily sold in the domestic market. CLSA analysts said that Maruti’s semi-conductor supply chain should ease out over the “slightly longer term”.

Also read: Maruti Suzuki expects chip-shortage to continue for a new more quarters

With the new energy-efficiency and emission norms set to roll out from April 1, the analysts believe that the auto maker is well equipped for the transition. Corporate Average Fuel Economy (CAFÉ) norms set fuel-efficiency standards for automotives to reduce carbon footprint and on-board diagnostics (OBD-II) norms require vehicles to have a device to measure their emissions real-time.

There might be a rise in vehicle costs with the possible introduction of mandatory six-airbag norms, they pointed out.  Last September, the Union Road Transport and Highways Nitin Gadkari said that safety norm for the M-1 category (carrying not more than eight passengers, or nine including the driver) will be rolled out from October 2023.