The share price of Maruti Suzuki India, the country's largest passenger car manufacturer, fell over 2 percent on Friday, a day after the company reported its December quarter earnings.

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Maruti Suzuki posted a 24.1 percent on-year growth in net profit at Rs 1,941.4 crore for the quarter ended December 2020, but the operational performance of the auto major missed Street estimates.

The company's revenue from operations in Q3FY21 rose 13.3 percent to Rs 23,458 crore from Rs 20,706 crore, when compared to the same period a year ago.

During the quarter, the company sold a total of 495,897 vehicles, higher by 13.4 percent compared to the same period the previous year.

On the operational front, EBITDA rose 5.9 percent to Rs 2,226 crore from Rs 2,102 crore, YoY. However, EBITDA margin disappointed as it declined by 70 bps to 9.5 percent from 10.2 percent in the year-ago period impacted by adverse commodity prices and unfavourable product mix.

Here’s what brokerages have to say about the company’s Q3 earnings:

CLSA

Maruti 3QFY21 operating results were below CLSA's expectations.

"Management indicated a reluctance to fully pass along commodity pressure going forward despite strong retail trends and low channel inventory. In the face of competitive pressure, Maruti has prioritised market share over margins; we expect this to continue in the coming quarters," it said.

CLSA maintained a Sell rating and reduced the target price to Rs 6,880 per share from Rs 7,000 earlier and cut FY21-23 EPS estimates 1-5 percent.

UBS

The brokerage is of the view that the demand is strong but rising commodity prices are a headwind. UBS expects new SUV launches and re-introduction of diesel vehicles to lift market share. It also expects premiumisation in passenger vehicles (PV) and a 15 percent industry value CAGR over FY20-25.

UBS maintained a Buy rating with the target at Rs 9,400 per share.

Goldman Sachs

The global research house maintained a Buy call on the stock with a target at Rs 9,126 per share. "The company was cautious in passing on costs, which was surprising in a highly inflationary environment. The industry may see more pricing actions as demand sustainability improves," the brokerage said.

Citi

The brokerage firm has maintained a Buy rating with a target at Rs 8,700 per share. The Q3 was marred by high commodity costs. It retains volume estimates but has cut gross margin estimates.

The EBITDA estimates over FY21-23 is cut by 4-18 percent, while profit estimates for FY21-23 were cut by 0-5 percent.

Motilal Oswal

"While the company has seen a strong demand recovery, commodity cost inflation has delayed the margin recovery. We expect a gradual margin recovery as the cost is absorbed over the next two or three quarters. Strong demand and stable competitive positioning would drive convergence of P/E towards its five-year average of ~30x," Motilal Oswal said.

It maintains Buy with a target price of Rs 9,000 per share.

ICICI Direct

"In our view, lack of sufficient margin expansion triggers puts already stretched valuations under further strain (trades at ~33x FY23E EPS). We also await decisive commentary from the company on the EV front," the brokerage said.

It maintains its cautious stance on stock and values it at Rs 7,000 i.e., 30x P/E on FY23E EPS (earlier target price Rs 6,450). ICICI Direct assigns Reduce rating on the stock.

At 10:50 am, the shares of Maruti Suzuki India were trading 2.70 percent lower at Rs 7,381.50 apiece on the BSE as compared to a 0.03 percent loss in the benchmark Sensex.

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First Published:Jan 29, 2021 11:48 AM IST