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Brokerages cut earnings estimates for Maruti Suzuki on weak Q4 numbers

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Brokerages have cut earnings estimates for Maruti Suzuki (India) by 3-13 per cent for the ongoing financial year after the auto maker reported a weak set of numbers for the March quarter. “MSIL’s strong brand, wide distribution, apt portfolio for India and low penetration of cars in India keep us constructive on MSIL in the long term.

However, given near-term pressure on volumes and elongated margin recovery, we cut our EPS estimates by 7-13 per cent for FY20/21,” said Investec, downgrading the stock to ‘hold’. Edelweiss also downgraded the stock to ‘reduce’, saying that the 25 per cent dip in EBITDA in the fourth quarter reflects concern over a weakening revenue profile in a subdued demand and competitive environment. Nomura believes that Maruti Suzuki India is best positioned to capitalise on the long-term growth of India’s passenger vehicle industry but the they too have downgraded the stock given the subdued near-term demand outlook for the industry and the company’s ability to fully pass on the regulatory costs. CLSA has also cut EPS estimates for FY20 by 3 per cent but it has maintained buy rating on the stock.

While CLSA is cautious on Indian auto space, but it is bullish on Maruti given its solid franchise, benign competition and good longterm growth outlook. Bloomberg data shows that 36 of 55 analysts tracking the stock have a buy rating on it, while 11 have hold rating and eight analysts have a sell rating.

The consensus target implies an upside of 7.7 per cent to the stock’s current price.

The stock ended down 1 per cent at Rs 6,832.15 on Friday.




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