This auto stock may surge up to 90% in 2 years, says brokerage. Do you own?

By Livemint, Asit Manohar
The brokerage report estimates company’s revenue to grow at a CAGR of around 18 per cent from FY21 to FY25E. 

Stocks to buy today: In stock market, money is not in buying or selling, but in wait. According to Marwadi Financial Services, if an investor buys Maruti Suzuki shares today and holds it for next 48 months, the investor may expect to get up to 90 per cent return on one's investment. The brokerage report has predicted that in next two years time-horizon, Maruti Suzuki share price will appreciate up to 12,860 per equity share mark. Listing out the triggers that may attract the market bulls, the brokerage report says that India's auto major has managed to increase its market share from 38.5 per cent in FY12 to 47.7 per cent in FY21 and it will continue to dominate the Indian auto market.

Highlighting the Maruti Suzuki India Limited or MSIL moves to keep up with new industry trends, the brokerage report says, "The company has collaborated with Toyota for hybrid and electrification technology leveraging Toyota’s know how and Maruti manufacturing expertise, launched “Maruti Suzuki Subscribe" leasing program to keep up with the industry and discontinued diesel power trains as they became unaffordable with BSVI for the entry level segment. Measures like these keep the company in a position to keep up with new industry trends."

Big bet on new launches and CNG portfolio

"Some of the expected launches are Jimny, Wagon R electric, XL 5, Swift Hybrid, Grand Vitara, Celerio 2021. Besides the company would continue to facelift and introduce CNG variants combined with expanding product portfolio and acceptance of its BS-VI models has solidified the dominant market position of Maruti," the report highlights.

The running costs of CNG variants are substantially lower than their petrol or diesel counterparts. Maruti Suzuki has a portfolio of 8 models that come with factory-fitted CNG kits which is largest amongst the competitors.

Reduction in GST may boost small car sales

Recently industry has demanded and the Government is favorably considering a cut in GST rates on small cars from 28 per cent. It would result in lower cost of ownership and higher demand. Maruti being the leader in the entry level segment would be a major beneficiary of this demand.

Recommending long-term investors to buy Maruti Suzuki shares; "We estimate the company’s revenue to grow at a CAGR of around 18 per cent from FY21 to FY25E and estimate the operating margins of the company to improve by 440 bps in the same period. At CMP the stock is trading at 15x times FY25E consolidated earnings. We initiate our coverage on Maruti Suzuki Ltd with a buy rating and a target price of 12,860 per share."

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.


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