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Last Updated : Jan 28, 2015 04:37 PM IST | Source: Moneycontrol.com

Why is Maruti at record high post Q3 earnings miss?

Macquarie maintains outperform rating on the stock with an increased target price of Rs 4500 (from Rs 3650) per share. It has also raised FY15-17 EPS by 1-6 percent on better margin outlook and hopes that Maruti is best placed to benefit from the cyclical upturn in auto demand in India.

 
 
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Moneycontrol Bureau


Incase you are wondering why Maruti stock is still at a record high despite December quarter earnings missing street expectations, read on. 


Brokerages are still bullish on the auto major and raised target price hoping for an outperformance ahead. Shares of Maruti jumped 2 percent to a new high at Rs 3758 intraday on Wednesday.

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Macquarie maintains outperform rating on the stock with an increased target price of Rs 4500 (from Rs 3650) per share. It has also raised FY15-17 EPS by 1-6 percent on better margin outlook and hopes that Maruti is best placed to benefit from the cyclical upturn in auto demand in India.


Maruti Suzuki missed street expectations with the third quarter net profit rising 18 percent year-on-year to Rs 802 crore, led by higher volumes, material cost reduction initiatives and favourable forex. According to a CNBC-TV18 poll, profit was expected at Rs 875 crore for the quarter.


Revenue increased 15.4 percent to Rs 12,576 crore during October-December quarter compared to Rs 10,894 crore in the year-ago period, which was slightly ahead of estimates of Rs 12,352 crore due to higher sales volume.


Margin growth was restricted due to higher other expenses that jumped 24 percent year-on-year to Rs 1782 crore due to new launch costs. Other expenses also included exceptional loss related to excise duty demand on sales tax subsidy.


Meanwhile, Nomura has also increased target price by 9 percent from Rs 4210 largely due to a 7 percent increase in our FY17 EPS. Maruti is Nomura's top pick among auto stocks. The brokerage believes further margin expansion is possible as a large part of benefit of the Japanese yen depreciation may reflect in Q4FY14. According to Nomura’s estimates Maruti is likely to end FY15 with volume growth of 12.5 percent which may further improve by 17 percent in FY16 and FY17 with improvement in economic growth and a slew of new launches.


Barclays also prefers Maruti with a raised target price of Rs 4194 per share. "Its profitability has seen an improvement despite discounts being largely unchanged quarterly and higher advertising costs. This reflects strength of its franchise and re-enforces our view of further margin expansion in FY16 and FY17," it says in a note.


At 10:41 hrs Maruti Suzuki India was quoting at Rs 3,735.00, up Rs 49.80, or 1.35 percent on the BSE.


(Posted by Nasrin Sultana)
 

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First Published on Jan 28, 2015 11:22 am
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