Morgan Stanley overweight on Maruti but cuts target & EBITDA

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26 Aug, 2025 12:21

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Moneycontrol Bureau

Morgan Stanley has maintained overweight rating on Maruti Suzuki, citing passenger vehicle segment recovery. However, the company slashed target price to Rs 4,310 (from Rs 4,770) following cut in earnings per share and EBITDA estimates due to recent duty hikes, slow pace of volume recovery and adverse forex movements.

It reduced its earnings per share estimates for FY16, FY17 and FY18 by 3 percent, 11 percent and 8 percent, respectively after cutting FY17 EBITDA estimates by 8 percent and FY18 by 6 percent.

According to the brokerage, pace of passenger vehicle segment recovery is slow but car cycle should trend up in coming years. Rolling five-year CAGR for passenger vehicle segment is 2.1 percent for FY11-16 – this is the lowest in the last 20 years.

Morgan Stanley says Maruti is in the midst of a very strong model cycle, which it thinks can keep company's volume growth ahead of segment growth rates.

The company started deliveries for its first compact SUV (Vitara Breeza) on March 25 and already has 20,000 bookings against estimate of 60,000 sales for FY17. The brokerage expects 11 percent YoY growth in volumes in FY17, largely in line with company guidance of around 10 percent YoY growth, and the growth to pick up in FY18 to 15 percent YoY.

Key risks are any further Japanese yen strengthening against rupee and failure of new launches to gain market share.

Meanwhile, the country’s largest car manufacturer will announce its March sales data on April 1. In FY16 (year-to-date – till February), it sold nearly 13 lakh vehicles, higher by 10.1 percent over 11.8 lakh vehicles sold in same period in last year.

At 14:38 hours IST, the scrip of Maruti Suzuki India was quoting at Rs 3,765.30, up Rs 127.10, or 3.49 percent on BSE.Posted by Sunil Shankar Matkar