Buy Maruti Suzuki India; target of Rs 13,500: Choice Institutional Equities

What happened

Choice Institutional Equities lowered its Maruti Suzuki India target price to Rs 13,500 from Rs 15,350 but upgraded the rating from ADD to BUY after a recent stock price correction. Maruti reported record quarterly sales of 696,654 units and net sales over INR 506 Bn.

Confirmed

Global impact / market context

A lower target price signals reduced profit expectations, yet the upgrade suggests the analyst sees the share price drop as an opportunity. For investors, near-term profit pressure from commodity inflation and investment losses may already be reflected in the stock price.

Analyst inference

The report notes weaker-than-expected profitability in the quarter, commodity inflation and margin pressure, which led to lower earnings estimates for future years. The rating change rests on the recent stock price correction rather than improved business results, so the call depends on how much bad news is already priced in.

Analyst inference

What to watch

1. Watch whether commodity inflation continues to pressure Maruti's profit per sale, since the report cites it as a reason for weaker profitability and lower earnings estimates. Confirmed
2. The analyst values Maruti at 22 times average FY28/29E earnings per share, a valuation that would need future profit estimates to hold for the Rs 13,500 target to be supported. Proposed
3. Track whether the stock price correction continues, because the upgrade to BUY depends on that correction making the shares cheaper relative to the analyst's reduced earnings estimates. Analyst inference

Evidence

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