HDFC Securities is bullish on Maruti Suzuki has recommended buy rating on the stock with a target price of Rs 6980 in its research report dated July 30, 2020.
HDFC Securities' research report on Maruti Suzuki
While Maruti reported a loss of Rs 2.5bn in 1QFY21, impacted by COVID and constrained production, the outlook is encouraging as demand has returned to ~85% of pre-COVID levels currently. While the company has ramped up production to 4,000 units/day, the OEM remains constrained for supply due to the limited activity at the Gujarat plant. Maruti is benefitting from its entry-level portfolio as customers are turning towards the use of personal mobility in the current environment. The share of first-time buyers has risen by ~5% (from 45% in 4QFY20). Further, the OEM’s strategy of exiting the diesel segment is working as gasoline and diesel fuel prices have levelled off in Delhi/substantially narrowed in other regions. Reiterate Maruti as our top pick in the sector.
Outlook
Maintain BUY with a revised target price of Rs 6,980 at 25x Jun-22E EPS (~15% premium to the long-term historic trading multiple). Key risk: An increase in competitive intensity.
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