Maruti Suzuki shares decline over 2% after Q1. Morgan Stanley, Motilal Oswal decode the road ahead
Shares of Maruti Suzuki declined over 2% to Rs 13,903 on the BSE on Monday after the country's largest carmaker reported an 11% year-on-year (YoY)
Shares of Maruti Suzuki declined over 2% to Rs 13,903 on the BSE on Monday after the country's largest carmaker reported an 11% year-on-year (YoY) decline in standalone net profit for the April–June quarter. Profit came in at Rs 3,352 crore, compared with Rs 3,758 crore in the corresponding quarter last year, broadly in line with Street expectations.Revenue from operations, however, rose 36% YoY to Rs 52,456 crore. The company said rising material costs weighed on profitability during the quarter. While input costs had already begun increasing, the situation worsened significantly during the war, offsetting the benefits of strong sales growth.Buy, sell or hold Maruti shares after Q1?Morgan Stanley has maintained its Overweight rating on Maruti Suzuki while lowering its target price to Rs 16,381, implying a 15% upside. The brokerage believes the company's FY27 domestic volume growth guidance of around 10% is conservative and expects growth to be in the mid teens.
It highlighted low dealer inventory, a strong order book, additional production capacity and the updated Brezza as key growth drivers, and has raised its volume estimates for FY27.Although first-quarter EBITDA missed estimates because of higher-than-expected commodity costs, Morgan Stanley believes margins have bottomed out. It sees the August price hike and easing aluminium and precious metal costs as key catalysts, though it has lowered FY27 and FY28 earnings estimates due to weaker near-term margin assumptions.Also read:Carmakers partly absorb commodity shocks to keep production on trackNomura has maintained a Neutral rating on Maruti Suzuki with a target price of Rs 14,071. While the brokerage remains positive on the demand outlook, it believes margin risks persist after weaker-than-expected first-quarter profitability. It expects lower commodity costs and 1-2% price hikes over the rest of FY27 to support margin recovery.
Nomura also believes Maruti could ramp up production faster than its guidance, but cautioned that higher vehicle prices may hurt demand for small cars. Faster-than-expected EV adoption remains a medium-term risk to market share.Motilal Oswal has reiterated its Buy rating with a target price of Rs 17,064, implying a 20% upside. The brokerage expects Maruti to outperform in FY27, supported by new product launches, a recovery in passenger vehicle demand, lean dealer inventories and the ramp-up of its two new manufacturing facilities. It believes sustained market share gains could trigger a re-rating, while easing raw material costs and steady volume growth should help normalise margins. Motilal expects the company to deliver a 20% earnings CAGR over FY26–FY28.Read more: Maruti Suzuki clocks record monthly production in July at 2,48,845 unitsMaruti Suzuki Q1 highlightsMaruti posted its highest-ever quarterly sales volume of 6,82,724 units, up 29% from a year ago.
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