1. Maruti Suzuki shares gain on expansion plans; should you invest?

Maruti Suzuki shares gain on expansion plans; should you invest?

Maruti Suzuki shares jumped over 2 per cent in the morning trade on Thursday after the car major said that it is planning to expand the number of NEXA outlets to 250 by March 2017.

By: | New Delhi | Updated: July 28, 2016 4:41 PM
maruti suzuki shares Maruti Suzuki shares jumped over 2 per cent in the morning trade on Thursday after the car major said that it is planning to expand the number of NEXA outlets to 250 by March 2017.(Website)

Maruti Suzuki shares jumped over 2 per cent in the morning trade on Thursday after the car major said that it is planning to expand the number of NEXA outlets to 250 by March 2017. NEXA is one of the important initiatives by Maruti Suzuki and has enabled the company to attract new categories of customers in the past one year. In a BSE filing, the car major said, ” NEXA is expected to contribute 15 per cent of Maruti Suzuki sales by 2020.”

At 10.54 am, shares of the company were trading 2.19 per cent up at Rs 4,658. The scrip opened at Rs 4,570 and has touched a high and low of Rs 4,664 and Rs 4,570, respectively, in trade so far. Sensex was up 115 points at 28,139. At present, NEXA showrooms sell premium cars like cross-over, S-Cross and Baleno.

NEXA has 150 outlets across 94 cities. The company has sold over 1 lakh cars through NEXA which is about 10 per cent of Maruti Suzuki’s total domestic sales.

Of late, the company had reported 23.02 per cent rise in net profit at Rs 1486.20 crore for the quarter ended June 30, 2016 against Rs 1,208.10 crore in the corresponding quarter a year ago. Net sales of the company grew by 12.05 per cent year-on-year to Rs 14,654.50 crore during the quarter under review. It had reported net sales of Rs 13078.30 crore in the same quarter last year.

Reliance Securities has ‘Reduce’ rating on Maruti Suzuki shares with targe price of Rs 4,157. The brokerage house in a research report said, “Operating performance of Maruti Suzuki came in broadly in line with estimate except its reported net profit exceeded our estimate owing to higher-than-expected other income and lower than expected depreciation charges. Other income was 112 per cent higher than estimate due to adoption of Ind AS and depreciation was 17 per cent lower than estimate due to change in estimated life of dies from 4 years to 5 years (benefit Rs83 crore).”

However, KR Choksey Shares and Securities said, “We remain positive on Maruti on expectations of market share gains and good demand growth driving revenues. The brokerage house is expecting pick up in spending due to good monsoon and 7th Pay Commission which are likely to be key trigger for the company. The Gujarat plant will be commissioned in January 2017 and will contribute in terms of volumes for FY17E (around 10,000 units in Q4FY17E). The plant will see full ramp up in about six months. We believe shares can touch Rs 5220 in coming quarters.”

Later, shares of the company closed 4.47 per cent up at Rs 4,762.70 on Thursday.

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