Hold Maruti Suzuki India Ltd For Target Rs.8,545 - ICICI Direct
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Healthy performance, sustenance holds key...
About the stock: Maruti Suzuki (MSIL) is the market leader in the domestic passenger vehicle (PV) space with market share pegged at ~43.4% with popular models being Alto, WagonR, Swift, Brezza, Baleno, Ertiga, etc, among others.
Market leader in each sub-segment - cars (63.6%), UV (19.5%), vans (95.7%)
Strong b/s; ~| 42,000 crore cash and investment on books as of FY22
Q4FY22 Results: The company posted a robust performance in Q4FY22.
Total operating income rose 15% QoQ to | 26,740 crore
EBITDA margins at 9.1% surprised, up 237 bps QoQ
Consequent PAT at | 1,839 crore was up ~81.8% QoQ
What should investors do? MSIL’s stock price has grown at ~3.9% CAGR from ~| 6,500 levels in April 2017, outperforming the Nifty Auto index in this time
We retain our HOLD rating on MSIL tracking healthy demand prospects but are constrained by its conservative stance on electrification
Target Price and Valuation: Upgrading our margin estimates, we now value MSIL at | 8,545 i.e., 30x P/E on FY24E EPS of | 285/share (previous target | 7,750).
Key triggers for future price performance:
Riding on pent-up demand & exciting product launch, we build 14%, 17.7% FY22-24E volume, sales CAGR, respectively; FY24E margins seen at 9.5%
Elevated fuel prices, awareness on cleaner fuel, government’s push for CNG infra to accelerate CNG penetration to result in outsized gains for MSIL
Aggressive new product launch pipeline, especially in UV space to make good the lost market share. Groundwork for captive EV launch in 2025
Management intent to regain ~50% market share domestically thereby implying industry leading volume growth, going forward
Alternate Stock Idea: Leaving aside MSIL, in our OEM coverage we like M&M
Focused on prudent capital allocation, UV differentiation & EV proactiveness
BUY with target price of | 1,045
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