HDFC Securities retains buy rating on Maruti Suzuki with a target price of Rs 8,478 due to factors such as strong volume growth owing to successes of Ciaz, Brezza and Baleno, increasing Average Selling Price led by expanding portfolio in premium segment and fresh capacity addition from the Gujarat facility. The report added that it expects an uptick in rural demand. The macroeconomic variables seem favourable with falling interest rates and growing incomes which will lead to an increase in demand. The 7th Pay Commission payouts, urbanisation and a growing Indian middle class augurs well for the four wheeler manufacturer. The stock was trading at Rs 7,600 in NSE.
The company released the first quarter results for the quarter ended June 2017 today. As per the report, Maruti Suzuki india Limited (MSIL) delivered in line revenues which were up by 18% when compared on a year on year basis while the EBIDTA margin which stood at 13.3%, fell by 156 basis point when compared to the reported figures for the same period in the previous year. Further, it came in lower than the figure estimated by HDFC Securities earlier of 14.4%. Impacted by higher commodity prices, as indicated by a 2.21% increase in the raw material cost, the EBITDA stood at Rs 2,331.2 crores, below the estimate by 9%. The APAT (adjusted profit after tax) stood at Rs 1,556 crores, 8% below HDFC Securities’ estimate. The increase in dealer compensation due to input tax credit on GST led to rise in the effective tax rate. The higher than expected other income, which was up by 41% on a year on year basis was slightly offset by the earlier mentioned rise in effective tax rate.