Maruti Suzuki Buy Recommendation
The recent move into the alternative fuel segment and the introduction of diesel versions for some models will help the company combat the spike in petrol prices.
We recommended a ‘buy’ on Maruti Suzuki in early February at Rs 904. At that time, the company’s strong sales numbers in the backdrop of rising interest rates, its market leadership position in the compact cars segment and improved product mix in the A2 (compact) and A3 (midsize) segment, were expected to translate into good earnings prospects for the company.
These positives notwithstanding, the stock has shed about 20 per cent since our recommendation. The fall (partly due to broader market volatility too) is attributable to three reasons — a moderation in growth in monthly sales numbers since December, fall in net profits in the fourth quarter and apprehensions over a further rise in interest rates and fuel prices. At the current market price of Rs 727, the stock trades at an inexpensive PE of 12 times its trailing 12-month earnings.
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