Mumbai: Maruti Suzuki India Ltd., the nation’s biggest carmaker, is likely to emerge from the coronavirus crisis stronger as the economic crunch will lead to buyers favoring cheaper hatchbacks and shifting to personal cars from shared transportation, analysts said.
Maruti posted a 28% decline in quarterly net income after a nationwide lockdown forced automakers to shut their factories and migrant workers to return to their villages. The company’s profit for the three months ended in March was Rs 12.9 billion ($171 million), compared with the Rs 12.7 billion mean estimate of 18 analysts in a Bloomberg survey.
The carmaker’s fortunes are set to turn around as changing buyer behavior favors Maruti’s dominance in cheap hatchbacks. “Maruti could emerge as the biggest beneficiary of demand recovery in the post-Covid era considering its stronghold in the entry-level segment,” Motilal Oswal analyst Jinesh Gandhi wrote in a note.
While Maruti has reopened one of its three plants, it sees production volume remaining “very low” for as long as two months due to a labor shortage. The pandemic paralyzed India while automakers were already facing their worst-ever slump in sales. Maruti had zero local sales last month because of the lockdown.
“The near-term outlook remains weak amid Covid, but demand shift toward small cars and preference for personal mobility provide silver linings,” Jefferies analyst Nitij Mangal wrote in a note.
Here’s a roundup of brokerage views:
Jefferies (Nitij Mangal)
We are deeply grateful to our readers & viewers for their time, trust and subscriptions.
Quality journalism is expensive and needs readers to pay for it. Your support will define our work and ThePrint’s future.
- The auto industry will see a strong rebound in 2022 on a low base after two years of plunging sales
- Replacement cycle will kick in given the rising age of vehicles
- Estimates earnings per share will grow 35% in 2022
- Maintains buy; PT of Rs 6,000
Motilal Oswal (Jinesh Gandhi)
- Sees increase in company’s market share driven by shift toward petrol vehicles
- Estimates margins to rebound 11.5% in 2022 on cost-saving initiatives, reduction in operating leverage and lower discounts owing to higher share of new products
- Maintains buy; PT of Rs 5,850
Dolat Capital (Abhishek Jain)
- Strong balance sheet and rural presence will help Maruti tide over coronavirus-led disruption and provide financial support to vendors, dealers
- Healthy grain output will benefit Maruti, which derives 40% of volume from the rural market
- Expects earnings to recover in 2022, thanks to an estimated 250 bps margin expansion and 13% volume growth
- Recommends accumulate; PT of Rs 5,570
NOTE: Stock has 35 buy, 8 hold, 7 sell ratings; average price target of Rs 5,594 implies 10% upside: Bloomberg data – Bloomberg
News media is in a crisis & only you can fix it
You are reading this because you value good, intelligent and objective journalism. We thank you for your time and your trust.
You also know that the news media is facing an unprecedented crisis. It is likely that you are also hearing of the brutal layoffs and pay-cuts hitting the industry. There are many reasons why the media’s economics is broken. But a big one is that good people are not yet paying enough for good journalism.
We have a newsroom filled with talented young reporters. We also have the country’s most robust editing and fact-checking team, finest news photographers and video professionals. We are building India’s most ambitious and energetic news platform. And we aren’t even three yet.
At ThePrint, we invest in quality journalists. We pay them fairly and on time even in this difficult period. As you may have noticed, we do not flinch from spending whatever it takes to make sure our reporters reach where the story is. Our stellar coronavirus coverage is a good example. You can check some of it here.
This comes with a sizable cost. For us to continue bringing quality journalism, we need readers like you to pay for it. Because the advertising market is broken too.
If you think we deserve your support, do join us in this endeavour to strengthen fair, free, courageous, and questioning journalism, please click on the link below. Your support will define our journalism, and ThePrint’s future. It will take just a few seconds of your time.