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Margins maintained QoQ due to improved mix

Targets eight new SUV launches by 2031

* Maruti Suzuki (MSIL)’s 2QFY26 PAT was in line, while EBITDA margin came in better than our estimate due to an improved mix.

* The GST rate cut has helped revive small car demand. This coupled with the launch of the new Victoris, as well as the e-Vitara, is likely to help drive market share gains for MSIL from here on. Further, the company anticipates exceeding its exports growth guidance of 400k units (+20% YoY) in FY26. Overall, we project MSIL to deliver a 17.5% earnings CAGR over FY25-28. Reiterate BUY with a TP of INR18,712, valued at 28x Sep’27E EPS.

Margins ahead of our estimates; PAT in line

* MSIL’s revenue grew 13% YoY to INR421b, outperforming our estimate of INR401b. This growth was driven largely by an 11.3% improvement in average realizations to INR764k per vehicle, reflecting a richer product mix in favor of higher SUVs, as well as improved exports.

* Volumes rose 2% YoY to 551k units, with domestic sales down 5.1% (to 440k units) due to customer postponement of purchases in anticipation of GST-related price cuts, while exports surged 42.2% to an all-time quarterly high of 110k units.

* Strong revenue growth led by an improved mix, and tighter control on operating costs led to an EBITDA of INR44.3b (flat YoY, +11% QoQ), exceeding our estimate of INR39.2b.

* EBITDA margin stood at 10.5%, a dip of 140bp YoY, but still ahead of our estimate of 9.8%. Margins remained stable sequentially despite higher discounts and promotional spending, supported by cost reduction initiatives and improved mix.

* Adjusted PAT stood at INR32.9b, broadly in line with our estimate of INR33.1b, up 7.3% YoY. Upside to earnings was limited by lower nonoperating income and higher depreciation, attributed to the ramp-up of the Kharkhoda plant and the new Victoris launch.

* For 1HFY26, CFO came in at INR62.8b, while capex stood at INR42.1b. MSIL’s FCF for 1HFY26 was INR20.7b.

* MSIL’s 1HFY26 were +11%/-6%/+4.3% at INR805b/ INR84.3b/INR70b. We expect MSIL revenue/EBITDA/PAT to post 18.5%/20%/14% to INR938b/ INR107b/INR82b in 2HFY26.

Key highlights from the management commentary

* Buoyed by GST rate cuts, retail sales during the festive period (22nd Sep to 31st Oct’25) have been very strong, with MSIL recording 400k units, up sharply from 211k units YoY. Within this, small cars contributed about 250k units, reflecting 100% YoY growth.

* MSIL has also seen strong bookings in the festive period. Total bookings reached 500k units compared to 350k units YoY. Outstanding bookings currently stand at ~200k units.

* For 2HFY26 and beyond, management expects the overall PV industry to grow about 6% YoY, while the small-car segment is projected to grow by around 10% YoY (on a small base).

* MSIL expects to exceed its FY26 export guidance of 400k units, having already exported over 200,000 units in 1HFY26.

* Management reiterated that reaching a 50% market share in PVs remains its long-term objective. MSIL earmarked eight new SUV launches until 2031 (excluding Victoris), which will help the company move towards this target. Further, it would also be working to achieve a 10% EBIT margin in the long run, which is Suzuki Motor Corporation’s guidance for the whole group as well.

Valuation and view

* The GST rate cut has helped revive small car demand as vehicles are now much more affordable for price conscious consumers. This coupled with the launch of the new Victoris, as well as the e-Vitara, is likely to help drive market share gains for MSIL from here on.

* Also, the company anticipates exceeding its exports growth guidance of 400k units (+20% growth YoY) in FY26. Further, any favorable policy for hybrids by the government may drive a re-rating, as MSIL would be the key beneficiary of the same.

* Overall, we expect MSIL to deliver a 17.5% earnings CAGR over FY25-28E, driven by new launches and strong export growth. Reiterate BUY with a TP of INR18,712, valued at 28x Sep’27E EPS.

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