NEW DELHI: Disappointing March quarter results have made brokerages cut FY21
earnings estimates for
Maruti Suzuki by up to 40 per cent.
A few brokerages have downgraded the stock to ‘sell’, suggesting up to 33 per cent potential downside on the stock. Others, who expect the largest car maker to make a strong comeback in the second half of FY21 or FY22, have targets of up to Rs 5,700.
ICICI Securities has downgraded the stock to ‘sell’ from ‘reduce’ with a target of Rs 3,381 as it believes that a likely 17 per cent volume decline in FY21 will put Maruti back to the volume levels once seen in FY11.
“It signals a lost decade, delivering a fierce blow to the decadal growth-low penetration bull hypothesis,” it said.
For March quarter, the company sold 3.60 lakh vehicles in the domestic market, down 16 per cent YoY.
Kotak Institutional Equities has maintained its ‘sell’ call on the stock with a revised target of Rs 4,300 from Rs 4,900 earlier. This is even as the scrip is ruling nearly 35 per cent lower than 52-week high levels.
On Thursday, the auto scrip was trading flat at Rs 5,048.
“Maruti’s March quarter result is a mere reflection of the 10 days of lockdown in March, with the worst yet to come in H1FY21,” warned Motilal Oswal Securities.
The Covid 19 pain would result in a weak FY21, the brokerage said. This brokerage, however, expects Maruti to recover faster than peers.
“Volume recovery in H2FY21 is critical to the stock’s performance,” said Motilal Oswal Securities. This brokerage has a target of Rs 5,850.
On Wednesday, Maruti Suzuki a posted 28 per cent year-on-year (YoY) drop in standalone net profit at Rs 1,291.70 crore for March quarter, hurt by lower sales volume and higher sales promotion expenses.
The recovery this time is likely to be mellow and protracted, said Edelweiss Securities.
“A strong and fresh product portfolio is of great salience. A strong franchise would surely aid MSIL gain market share, but it may come at the cost of margins,” it said.
For the quarter, gross margin at 30.4 per cent, adjusted for an Rs 125 crore write-off of BSIV inventory, rose 130 basis sequentially
Phillip Capital has a target of Rs 6,000 on the stock. But the brokerage has kept its FY21 estimates for Maruti largely unchanged.
“We expect the Covid-19 disruption to be a temporary blip in otherwise robust structural theme. Given Maruti’s position as industry leader and potential high growth beyond FY21, we value Maruti at 25 times FY22 EPS with target of Rs 6,000,” it said.