Buy Maruti Suzuki; target of Rs 13,750: Prabhudas Lilladher

Moneycontrol • 4 days ago

Original source

Key Investment Pillars

  • Volume growth: Maruti Suzuki's domestic sales are expected to grow by ~10% YoY in H2FY27, driven by favorable demand and new product launches, such as the Victoris and the new Brezza.
  • Margin recovery: The company's operating EBITDA margin increased from 8.6% to 9.4% sequentially, due to higher ASP, cost reduction, and favorable fixed cost incidence.
  • Product launches: Maruti Suzuki plans to launch an EV in the Bharat mobility show in 2027, and has seen strong bookings for its 1-litre turbo petrol and underbody CNG variants.
  • Cost discipline: The company has taken price hikes in 3 tranches totaling over 1% and will be cautious of taking any further price hikes, expecting some commodities to cool off in the future.

Thesis Validation Checklist

To validate the 'Buy' thesis, investors should watch for:

  • Sustained volume growth: Maruti Suzuki's ability to maintain its volume growth momentum, driven by favorable demand and new product launches.
  • Margin expansion: The company's ability to expand its operating EBITDA margin, driven by cost reduction efforts and favorable fixed cost incidence.
  • Successful product launches: The success of Maruti Suzuki's new product launches, including the EV launch in 2027.
  • Commodity price trends: The trend of commodity prices, particularly steel and copper, which could impact the company's margins.