On Thursday, Maruti Suzuki India Ltd (BSE:MARUTI) received a Sell rating from Ambit Capital, with a price target set at INR 12,038. The analysis by the firm indicates that Maruti Suzuki's significant underperformance compared to the NSE Auto index over the past five years is largely due to a shift in the passenger vehicle (PV) market towards the SUV segment and a decline in demand for small cars.
Maruti Suzuki, which has historically dominated the Indian PV industry, may face challenges maintaining its market position as the industry moves towards more premium and electric vehicle (EV) offerings. Ambit Capital notes that while Maruti Suzuki has adopted a balanced approach to CO2 reduction, including cleaner fuels for internal combustion engines, hybrids, and EVs, the competitive landscape is intensifying.
The report also suggests that any revival in the small car segment, which is currently uncertain, could bolster Maruti Suzuki's market share and profit margins. Additionally, a potential reduction in the Goods and Services Tax (GST) on hybrids could significantly benefit Maruti Suzuki, although the likelihood of such a tax cut is deemed low.
Despite these factors, Ambit Capital anticipates that Maruti Suzuki's earnings per share (EPS) compound annual growth rate (CAGR) will be approximately 11% from the fiscal year 2024 to 2027. The price target of INR 12,038 is derived from a discounted cash flow (DCF) analysis.
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