Maruti Suzuki: Your Ticket to 15% Growth in 12 Months

Recommend Price	Rs 11,392
Target (Rs)	Rs 13,124
Potential Upside (%)	15.20%
Investment period	12 Months

Maruti Suzuki India Ltd. - BUY

Maruti Suzuki India Limited (MSIL), founded in 1981, is the biggest car manufacturer in India, holding more than half of the market. It’s well-known for making affordable and fuel-efficient small cars, hatchbacks, sedans, and SUVs, dominating in eight out of 14 car categories.

With factories in Gurgaon and Manesar and a new one from Suzuki in Gujarat, MSIL can make about 2.25 million cars a year. They’ve also teamed up with Toyota, which helps them offer more car types like the popular SUV, Grand Vitara. For over 20 years, Maruti Suzuki has kept its top spot in the market by focusing on cars that are cheap to run and buy, making it the first choice for many new car buyers in India.

Why invest in MSIL?

Strategic business moves aimed at capitalising emerging trends in the automotive industry

MSIL is making big moves to keep up with changes in what cars people want in India, shifting focus towards SUVs and electric vehicles (EVs). In February, their sales went up by 14.6% to nearly 1.98 lakh cars, with a massive jump in cars sold abroad, hitting a record of almost 29,000 exports that month

They’re planning to launch six new EV models with Toyota in the next seven years, showing their commitment to greener cars. This strategy is expected to help them sell around 25 lakh vehicles by 2026, with prices and demand for their cars likely to rise, especially because they’re adding more SUVs and EVs to their lineup.

Maruti Suzuki is also becoming a top car exporter, beating Hyundai in shipping cars to over 60 countries. They’re expanding their factory in Haryana to make more cars, getting ready for more sales. Plus, with India’s new Scrappage Policy making older cars obsolete, MSIL is in a great position to sell more new cars, expecting a big boost in sales.

Fostering resilience through a multi-faceted tech-agnostic approach

MSIL is leading the car industry by quickly adapting to new technologies, making it a key player in the changing car market. Back in 2010, MSIL was the first in India to sell cars that come with a natural gas option, and sales for these cars have grown five times in the last five years.

Now, MSIL is focusing on various types of green technologies, like electric cars, hybrids, and cars that can run on biogas, showing its flexibility and readiness for the future. The company is planning to launch several hybrid car models soon, which could become more popular thanks to potential tax benefits and changing customer interests.

Even with the competition getting tougher and the company spending big on marketing (around 12-14 billion rupees in the next year), MSIL is expected to keep making a good profit. This is because of a mix of selling more high-end cars, stable prices for materials like steel, and recent price increases for its cars.

Valuation and Outlook

MSIL looks set to do well despite slow growth predictions for the car industry in the coming year. This positive view is due to MSIL’s strong orders, not much unsold stock, and continued interest in SUVs and cars that use compressed natural gas (CNG).

The company’s sales to other countries are also doing well, adding to its growth chances. MSIL is expected to see benefits from launching new products and a possible boost in small car sales because of increased demand from smaller cities and rural areas.

They’re also planning to start selling electric vehicles (EVs) in 2024 and focus on more upscale cars for both Indian and overseas customers. After buying Suzuki Motors Gujarat, the company’s profits are looking better than expected. With all these positive signs, including new car releases and more production, we suggest buying MSIL shares. We think the company’s share price could go up by 15.2% to Rs. 13,124 within a year.