Reduce Maruti Suzuki India Ltd For Target Rs. 15,800 By Choice Broking Ltd
Domestic Recovery and Strong Export Growth to Drive Future Prospect :
The company is poised to benefit from a domestic demand recovery propelled by GST rate rationalisation, sustained festive season momentum and launches in the premium segment. Exports in the quarter reached 110,487 units, posting a robust 42.2% YoY growth over Q2FY25. MSIL retained its leadership with a 45.4% share of India’s total passenger vehicle exports. We expect H2FY26E to outperform the first half, supported by GST-driven volume growth and resilient export performance. In the long term, with eight new SUVs planned by 2030E, MSIL is well-positioned to sustain growth through premiumization, electrification and export expansion.
View and Valuation: We remain cautiously optimistic about the company’s longterm prospects, driven by upcoming launches, premiumization, and export expansion. However, margin pressures, slower recovery in the key segment (Mini), and continued market share decline warrant a conservative stance. Accordingly, we revise our FY26E/27E EPS estimates downward by 3.8%/5.0%. We maintain our ‘REDUCE’ rating on the stock with a revised target price of INR 15,800 (earlier 15,200). Given the favorable macroeconomic conditions, we revise our PE multiple to 26x (earlier 24x) with an implied PEG ratio of 1.8 on average FY27/28E EPS.
Q2FY26 Results: Strong Top Line Beat, but Miss on Earnings
* Net revenue was up 13.2% YoY and up 9.6% QoQ to INR 4,21,008 Mn (vs CIE est. at INR 3,88,748 Mn), led by 10.9% YoY growth in ASP and 1.7% YoY growth in volume.
* EBITDA was up 0.4% YoY and up 11.0% QoQ to INR 44,341 Mn (vs CIE est. at INR 41,207 Mn). EBITDA margin was down 134 bps YoY and up 13 bps QoQ to 10.5% (vs CIE est. at 10.6%).
* PAT was up 7.3% YoY and down 11.3% QoQ to INR 32,931 Mn (vs CIE est. at INR 34,906 Mn).
New Plant Depreciation Constrains Margin Upside Potential:
EBIT margin expanded sequentially from 8.3% in Q1FY26 to 8.5% in Q2FY26, driven by a favourable product mix and lower operating expenses. However, on a YoY basis, margin expansion was limited by higher sales promotion expenses, temporary price corrections on select models, adverse movements in forex (JPY) and commodity prices. Additionally, higher depreciation expenses weighed on margins, primarily due to the new Kharkhoda plant (in Sonipat, Haryana) and the launch of the Victoris model. We expect EBIT margin to improve gradually as the new plant scales up operations.
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