Maruti shares were trading flat in early trade on September 26 even as brokerage HSBC raised its target price on the shares of the carmaker to Rs 12,000, implying an upside of more than 13 percent from September 25 closing price.
The market share of India’s largest carmaker has peaked in the short-term, the British brokerage said, adding that the ‘hybridisation’ of more models can push the firm’s market share further in the medium term.
The analyst commentary comes at a time when Maruti Suzuki's market share stood at nearly 43 percent in the private vehicles segment in August, as per data released by the Federation of Automobile Dealers Association (FADA) earlier this month.
HSBC believes that Maruti’s recent hike in reinvestment rate is not necessarily negative for shareholders.
The firm is planning to invest Rs 450 billion to double its annual production capacity to four million vehicles by 2031. The car manufacturer expects its revenue to double following the output ramp-up, Chairman RC Bhargava said at the company’s annual general meeting last month.
Maruti is building a factory in Haryana to produce one million cars a year and selecting a second site for another plant, Bhargava said in a report published earlier in August.
On the stock market front, the company’s valuation premium to Nifty has shrunk to 33 percent compared to the historical 50 percent, HSBC noted.
The brokerage also pointed out that slowdown in demand or failure to launch electric vehicles (EVs) in the coming quarters are downside risks for the firm.
HSBC, which has a buy rating on Maruti Suzuki stock, is not the only one that expects upside and has raised its target price.
Last week, brokerage firm Citi gave the stock its highest price target on the street at Rs 13,600 with a buy call while Morgan Stanely has given it an overweight rating and set the target price at Rs 11,963.
At 10:27 am, Maruti Suzuki shares were trading at Rs 10,564.30, a decline of 0.21 percent from the previous close. In 2023 (year-to-date), the stock has given a return of more than 25 percent to investors as against the benchmark Sensex which has risen about 8 percent during the period.
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