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Market share revival seems back on track

Maruti Suzuki (MSIL)’s underperformance in 2HFY26 has largely been a function of its capacity constraints even as demand remained strong. This is visible in 1QFY27, wherein it outperformed the industry as soon as its Kharkhoda Phase 2 capacity came on stream. Among the biggest positives for MSIL, post-GST rate cut, has been the fact that car demand has also revived. We expect MSIL to sustain its outperformance in the coming quarters as well, aided by its healthy launch pipeline, revival in small car demand, lean inventory, and ramp-up of its two plants. Even in the medium term, it is looking to launch seven new SUVs by 2031, which should help sustain its outperformance. Further, despite the ongoing tensions in the Middle East, exports have remained healthy for MSIL. Exports are likely to be a key growth driver as MSIL continues to move towards its medium-term goal of 750-800k units by FY31. Further, following a relatively weak 1QFY27, margins are expected to normalize given the cooling of raw material costs and steady volume growth. Overall, we expect MSIL to record a 20% earnings CAGR over FY26-28E. We reiterate our BUY rating with a TP of INR17,059, valued at 26x FY28E EPS.

A healthy launch pipeline and revival in cars to help recoup market share

The most notable positive for MSIL following the GST rate cut has been the revival in demand for the small car segment. Further, after the Kharkhoda SOP and even before the launch of the new Brezza, MSIL outperformed the industry in 1Q. Given that Gujarat plant 4 will be commissioned soon and aided by its healthy launch pipeline and a lean dealer inventory, we expect MSIL to sustain its industry outperformance in the coming quarters. We now expect MSIL to post a volume growth of 16% YoY in the domestic market in FY27 (and 7.5% in FY28), translating to a monthly run rate of 238k for 9MFY27. Thus, MSIL’s domestic volume growth forecast for FY27 appear realistic given it has aleady clocked 240k+ in Apr-May26.

Exports to remain a key growth driver

For FY27, MSIL successfully mitigated the impact of tensions on export volumes in the Middle East due to its well-diversified presence across more than 100 countries. Consequently, despite the crisis in West Asia, the company achieved a robust 28% YoY growth in exports in 1QFY27. However, given the uncertain geopolitical dynamics, MSIL has conservatively provided guidance of at least flat growth in exports for FY27E. However, given a very healthy start to the fiscal year, we factor in MSIL to post a 14% volume CAGR in exports over FY26-28E (7.5% growth in FY27E). On a longer-term basis, the company has guided for exports of 750-800k units by FY31, which translates to a 15% volume CAGR

Valuation & view: Market share recovery key to stock re-rating

As highlighted above, we expect MSIL to sustain its outperformance in FY27, aided by a healthy launch pipeline, revival in car demand, lean inventory, and ramp-up of its two new facilities. A sustained market share recovery is likely to, in turn, drive the stock re-rating, in our opinion. Further, after a relatively weak 1Q, margins are expected to normalize given the moderating raw material costs and steady volume growth. We expect MSIL to deliver a 20% earnings CAGR over FY26-28. We reiterate our BUY rating with a TP of INR17,059, valued at 26x FY28E EPS.

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