Add Maruti Suzuki India Ltd for the Target Rs 15,500 by Emkay Global Financial Services Ltd
We downgrade MSIL to ADD from Buy and cut TP by ~8% to Rs15,500 (from Rs16,900), at 25x Jun-28E core PER + Rs3,460 cash/share (28x earlier). MSIL’s revenue was up 36% yoy, led by 29% yoy volume growth, while ASPs were flattish yoy. EBITDA was down 7% yoy and EBITDAM fell by 350bps qoq to 8.2%, led by 350bps qoq drop in gross margin. MSIL indicated that growth momentum is healthy (small cars/UV volumes up 34%/28% yoy in 1Q ), with ~130k units orderbook as of 1QFY27 (vs 190k as of 4QFY26). The 2 lines at Kharkhoda/Hansalpur (250kpa units capacity each) are expected to ramp up over next 5-6M. Factoring this in, MSIL retained its 10% FY27 volume growth guidance. To offset the commodity-led margin impact, MSIL took a ~50bps price hike in Jun-26, with another lined up from Aug-26 (up to Rs30k). On exports as well, diversifying across end-markets is aiding MSIL sustain growth despite geopolitical headwinds. Our expectations of sharp growth moderation in 2H as the base catches up (expect flattish volumes vs 2HFY26) and gradual margin improvement from 1Q on limited pricing power drive our downgrade. We cut FY27-28E EPS by 5-9% to factor in aforementioned headwinds. We prefer HMIL (1Q likely a bottom quarter; new launches to aid 2H growth) and M&M
Weak 1Q; in-line revenue performance; weaker-than-expected profitability
MSIL’s revenue was up 36% yoy, led by 29% yoy volume growth, while ASPs were flattish yoy. EBITDA was down 7% yoy, with EBITDAM falling by ~350bps qoq to 8.2%, led by 350bps qoq gross margin drop. Adjusted PAT was down 11% yoy to Rs33.5bn.
Earning call KTAs
1) MSIL stated that growth momentum is healthy (small cars/UV volumes up 34%/28% yoy) with ~130k units orderbook as of 1QFY27 (vs 190k as of 4QFY26). The 2 lines at Kharkhoda/Hansalpur (0.25mnpa units each) are expected to ramp up over next 5-6M. Hence, MSIL retained its 10% FY27 volume growth guidance.
2) MSIL transitioned from a quarterly to a monthly reset cycle with its suppliers (expected to continue for a couple of quarters till commodities normalize) amid high volatility in commodity prices which helps it overcome supply chain disruptions.
3) To offset commodity-led margin impact, MSIL took a ~50bps price hike in Jun-26, with another lined up from Aug-26 (up to Rs30k).
4) On exports, diversifying across end-markets is aiding MSIL sustain growth despite geopolitical headwinds.
5) EBITM declined by ~360bps qoq, led by 300bps commodity pressure (of which 100bps stemmed from a change in commodity settlement terms for suppliers; expected to gradually normalize to quarterly settlement); other adverse factors included employee costs (40bps), inventory depletion/FC absorption (30bps), forex (30bps), depreciation from new plants (20bps), and higher gas costs (20bps), partly offset by lower opex (30bps) and higher operating income (30bps).
6) Addition of the 4 th line makes the Hansalpur plant among the top-10 plants globally in terms of capacity; MSIL has invested Rs39bn in the 4th line (largely dedicated to MSIL’s E-PV, the E-Vitara); the next EV will be showcased at the Bharat Mobility Expo in CY27, with hybrids also under development.
7) The management expects greater clarity over the next few quarters on cost increases arising from CAFE III norms.
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