Motilal Oswal bets on this auto major! Should you consider?

Brokerage house Motilal Oswal has maintained its bullish stance on auto major Maruti Suzuki India Limited (MSIL). It believes that MSIL’s product lifecycle is turning favorable, and on other hand, supply-side and RM costs are stabilising.
 
"After operating in a head-winded environment for the last two years, without the support of new product launches, Maruti Suzuki India Ltd (MSIL) is gradually getting back on course for market share and margin recovery," it said in a recent report.
 
The stock opened a tad higher at Rs 8,520 against the previous close of Rs 8,516.75 on BSE. It rose 3.24 per cent in early trade to become the top gainer on Sensex.
 
With a market capitalisation of more than Rs 2,62,000 crore, the shares stand higher than 5 day, 20 day, 50 day, 100 day and 200 day moving averages.
 
Long-term investors have made big gains by investing in this stock as it has surged over 600 per cent in the last ten years. 
 
"While EV disruption is a risk, we see an inflection point for e-PVs to be back-ended and MSIL to launch its EVs just in time by CY25E. MSIL is our top pick in Autos. The stock trades at 34.3x/22.3x FY23E/FY24E consolidated EPS. We maintain Buy, with a target price of Rs 10,300 (~27x Mar’24E consol. EPS)," Motilal Oswal said.
 
It expects MSIL to see recovery in market share by 550bp to ~49 per cent by FY25E (the first full-year benefit of all product launches).
 
"While FY21 witnessed the full impact of COVID-19 on operations; 1HFY22 was marred by a second lockdown and the semi-conductor shortage. Demand recovery would be supported by a favorable product lifecycle as well as the continued shift to personal mobility," it added.
 
The brokerage house noted that strong demand, softening commodity inflation, and the improving chip shortage situation would support margin recovery. It expects a recovery in 2HCY22 in both market share and margins, led by improvement in supplies, a favorable product lifecycle, the mix, price action/cost-cutting, and operating leverage.
 
The country's largest carmaker Maruti Suzuki India witnessed a marginal year-on-year increase of 408 units in January production volume owing to the shortage of electronic components.
 
In a regulatory filing, the auto major reported total production of 1,61,383 units in January 2022 as compared with 160,975 units in January 2020.
 
"The shortage of electronic components had a minor impact on the production of vehicles during the month," it noted.