Why are global brokerages bullish on shares of Maruti Suzuki even at all-time high levels?

By: | Updated: December 15, 2017 4:41 PM

Shares of India’s largest car-maker Maruti Suzuki India hit fresh all-time high of 9,237 rising more than 1.3% intra-day, after global brokerage firm Citi raised its target price. We take a look at why global brokerages are bullish on the shares even at record high-levels.

Maruti Suzuki shares have had a dream run at the bourses so far, having returned more than 71% since January. (Image: Reuters)

Shares of India’s largest car-maker Maruti Suzuki India hit fresh all-time high of 9,237 rising more than 1.3% intra-day, after global brokerage firm Citi raised its target price. Maruti Suzuki shares have had a dream run at the bourses so far, returning more than 71% since January. Notably, Maruti Suzuki India overtook SBI, to become India’s sixth most valued company last week, given the recent rally in share prices. The company currently commands a market capitalisation of 2.75 crore as compared to SBI’s mcap of 2.73 crore. Notably, in the recent times three large global brokerages have reiterated their bullishness on the shares. We take a look at why these research houses are bullish on the shares.

Track live stock price: Maruti Suzuki India

Morgan Stanley

Morgan Stanley has increased the target price on the shares to Rs 10,563 from Rs 9,102 earlier. Morgan Stanley’s target price implies an upside of more than 15% from the current market prices. In its report, the global firm observed that end- market opportunity and superior RoCE support valuation. Morgan Stanley sees 22 per cent EPS CAGR over FY18-20 for Maruti and it further believes that the stock can touch Rs 14,400 in the bull case.

Citi

Global firm Citi has also raised the target price on the shares to Rs 10,600 from Rs 9,400 per share earlier. Maruti Suzuki India shares closed at Rs 9,150 on NSE on Friday afternoon. Citi’s target price implies an upside of more than 15.8% from the current market price.The research house also raised earnings per share estimates by 3-5 percent. Top market expert, Deven Choksey says that the company has good earnings visibility in the near future. “The current positioning of Maruti suggests that they have got good visibility at least for next two to three years on the launch of the models and sustaining the market share that they are basically enjoying currently,” Deven Choksey, MD of KR Choksey Investment Managers told ET Now earlier this month.

CLSA

CLSA has a target price of Rs 10,000 on the shares, and says that the company is in a sweet spot as easing of competition in small cars and entry level sedans is a positive. Further, the global firm observed that the company is likely to broaden its SUV portfolio in the coming years. CLSA says that the valuation looks justified given higher results visibility, and better longer-term outlook.

The company has registered a strong volume increase in domestic utility vehicles segment under by 34% to 23,072 units. This increase is backed by an increase in demand for Vitara Brezza, S-Cross, Ertiga and others. The overall domestic sales under all categories grew by 15% to 1,45,300 units in November, 2017 from 1,26,220 units in November, 2016. The export sales remained stable as compared to corresponding month of previous year at 9,300 units.

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