Maruti Suzuki
shares hit a 52-week high on Wednesday as the street and many
brokerages gave a big thumbs up to its second quarter performance and
road ahead.
The India's largest passenger car maker had reported a net profit of Rs 227.5 crore in the second quarter, down 5 percent year-on-year due to a month-long closure of its Manesar plant following a labour riot and higher discounts offered to boost sluggish sales of petrol cars. Its net sales rose 9 percent to Rs 8,070 crore.
Analysts had expected Maruti to report a net profit of Rs 215 crore on revenue of Rs 8,050 crore, according to a CNBC-TV18 poll.
Nomura Financial Advisory and Securities and HSBC upgraded the stock to "buy" and "overweight" respectively. HSBC raised its target price of Rs 1,600 from Rs 1,450, while Nomura raised its target to Rs 1,617.
"With peak competition and labour issues behind the company, we expect growth and operational performance to improve in the coming quarter...Maruti has the highest exposure to first-time buyers in India and is well positioned to benefit from any revival in the car market in 2013-14," HSBC's Yogesh Aggarwal and Karthik Subramaniam said.
ICICI Direct.com, the retail broking of ICICI Securities said that the topline performance was better despite an adverse product mix in the quarter and high incidence of discounts, and margins were better due to sales of the Ertiga, which continues to attract volumes.
"With labour problems finally appearing to be over after two years, new product launches, diesel capacity expansion are all positives and we
expect growth to be better, going forward. With a positive start to the festive season, we anticipate second half will witness better volume growth," ICICI Direct analyts Nishant Vass and Venil Shah said. They have a "buy" rating on the stock, with a target price of Rs 1,532.
"Despite the near term headwinds (production disruptions, commodity cost push etc), restoration of production at peak levels, falling interest rates as well in commodity prices augur well for Maruti's long term demand and profitability outlook," Sachin Gupta and Ashish Poddar of Edelweiss Securities said.
Last five quarters have been very challenging for the company due to production disruptions and higher input costs, which led to lower margins of 7 percent, compared with 10 percent earlier, the Edelweiss analysts said. They expect margins to pick up and normalise over 9.5 percent next financial year due to superior product mix, lower discounts and other cost reduction measures by Maruti.
Edelweiss too advises a "buy" with a target price of Rs 1,595. Among other brokerages, Antique Stock Broking also reiterated a "buy."
However, some analysts have a contrary view.
"We remain concerned on Maruti’s ability to record strong volume growth in FY13. The demand for petrol engine based vehicles also continues to remain soft. Also, forex exposure on account of raw material imports and the royalty payments will exert pressure on operating margins," Abhishek Banerjee of Asian Markets Securities said.
Petrol prices still remain high and that is affecting sales of petrol engine powered vehicles in the A2 segment, which constitute largest chunk of Maruti's total volumes, he said. Banerjee estimates Maruti's volume growth this financial year will be flat at 1.2 percent, and will grow 14.7% in FY14. He recommends investors "sell" Maruti shares.
Maruti shares hit a 52-week high of Rs 1,439.20 on NSE in morning trade on Wednesday. In noon trade, the stock was up 2.8% at Rs 1,429.30.
The India's largest passenger car maker had reported a net profit of Rs 227.5 crore in the second quarter, down 5 percent year-on-year due to a month-long closure of its Manesar plant following a labour riot and higher discounts offered to boost sluggish sales of petrol cars. Its net sales rose 9 percent to Rs 8,070 crore.
Analysts had expected Maruti to report a net profit of Rs 215 crore on revenue of Rs 8,050 crore, according to a CNBC-TV18 poll.
Nomura Financial Advisory and Securities and HSBC upgraded the stock to "buy" and "overweight" respectively. HSBC raised its target price of Rs 1,600 from Rs 1,450, while Nomura raised its target to Rs 1,617.
"With peak competition and labour issues behind the company, we expect growth and operational performance to improve in the coming quarter...Maruti has the highest exposure to first-time buyers in India and is well positioned to benefit from any revival in the car market in 2013-14," HSBC's Yogesh Aggarwal and Karthik Subramaniam said.
ICICI Direct.com, the retail broking of ICICI Securities said that the topline performance was better despite an adverse product mix in the quarter and high incidence of discounts, and margins were better due to sales of the Ertiga, which continues to attract volumes.
"With labour problems finally appearing to be over after two years, new product launches, diesel capacity expansion are all positives and we
expect growth to be better, going forward. With a positive start to the festive season, we anticipate second half will witness better volume growth," ICICI Direct analyts Nishant Vass and Venil Shah said. They have a "buy" rating on the stock, with a target price of Rs 1,532.
"Despite the near term headwinds (production disruptions, commodity cost push etc), restoration of production at peak levels, falling interest rates as well in commodity prices augur well for Maruti's long term demand and profitability outlook," Sachin Gupta and Ashish Poddar of Edelweiss Securities said.
Last five quarters have been very challenging for the company due to production disruptions and higher input costs, which led to lower margins of 7 percent, compared with 10 percent earlier, the Edelweiss analysts said. They expect margins to pick up and normalise over 9.5 percent next financial year due to superior product mix, lower discounts and other cost reduction measures by Maruti.
Edelweiss too advises a "buy" with a target price of Rs 1,595. Among other brokerages, Antique Stock Broking also reiterated a "buy."
However, some analysts have a contrary view.
"We remain concerned on Maruti’s ability to record strong volume growth in FY13. The demand for petrol engine based vehicles also continues to remain soft. Also, forex exposure on account of raw material imports and the royalty payments will exert pressure on operating margins," Abhishek Banerjee of Asian Markets Securities said.
Petrol prices still remain high and that is affecting sales of petrol engine powered vehicles in the A2 segment, which constitute largest chunk of Maruti's total volumes, he said. Banerjee estimates Maruti's volume growth this financial year will be flat at 1.2 percent, and will grow 14.7% in FY14. He recommends investors "sell" Maruti shares.
Maruti shares hit a 52-week high of Rs 1,439.20 on NSE in morning trade on Wednesday. In noon trade, the stock was up 2.8% at Rs 1,429.30.
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