New Ertiga launch to be a near-term trigger for Maruti Suzuki shares, says HSBC; should you buy stock?

Even as India’s largest car-maker Maruti Suzuki is gearing up for the launch of its Ertiga automatic spied, global research firm HSBC says that the development will be a near-term trigger for Maruti Suzuki’s shares. Notably, the new 2018 Maruti Suzuki Ertiga MPV is likely to be launched in the month of October and is already up for sale in Indonesia since April 2018.

HSBC noted that the company faces commodity and currency headwinds. However, that is offset by a better mix, HCBC noted in its report. In the latest quarter, Maruti Suzuki India reported Q4 results below street expectations as net profit came in at Rs 1,882.1 crore, up 10% on year, pulled down due to a higher tax expense in the quarter.

The company noted that improvements made in operating margins were partially offset by adverse commodity prices. According to HSBC the price increase could pose an upside risk to volume growth. The company has reported a 14.4% increase in net sales to Rs 20,594.3 crore in January-March quarter. The sales volume has also seen a 14.4% rise to 4,61,733 vehicles in the quarter. HCBC notes that volume traction remains solid with limited visibility on competition.

Maruti Suzuki shares were trading at Rs 8,961 on Tuesday morning. HSBC has a target price of Rs 10,000 on the shares. The global firm’s target price implies an upside of 10% from the current market prices. In the last month, market leader Maruti Suzuki sold 1,63,200 units in the domestic market, registering a 24.9% growth, on the back of traction in compact SUV and UV vehicles.

Maruti Suzuki India Limited