India's largest passenger car manufacturer Maruti Suzuki reported a one percent rise in September quarter standalone net profit at Rs 1,371.6 crore from Rs 1,358.6 crore in the year-ago period. In Q1FY21, the company had posted a loss of Rs 249.4 crore.

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Revenue from operations increased 10.34 percent to Rs 18,755 crore from Rs 16,997 crore, YoY. Maruti sold 3.93 lakh units in July-September quarter 2020, registering a 413 percent growth over the previous quarter and 16 percent over the year-ago period.

Higher sales volume, lower sales promotion expenses, lower operating expenses and cost reduction efforts supported the operating profit, but increase in commodity prices and adverse foreign exchange movement limited growth, Maruti said in its BSE filing.

Maruti Suzuki India said it expects the pent-up demand for cars to last at least till December this year. Though growth is certainly back, it is yet to reach the levels the company has seen in the last couple of years, R C Bhargava, Chairman of the company, said.

Read here: Expect pent-up demand for cars to last at least till December: Maruti Suzuki's R C Bhargava

Here’s what brokerages have to say:

CLSA

Maruti’s 2QFY21 operating results were in line with our and consensus forecasts. While its volume growth was over 16 percent YoY in 2Q, its Ebitda/vehicle improvement (+4% YoY) lagged other OEMs. The key positive from the result is the commentary around festival retails (+28% YoY in phase one), which reflects continued momentum in the near term.

CLSA factors Maruti’s volume outperformance in its forecasts and increases its FY21-23 EPS by 5-10%. However, it believes that Maruti’s margin trajectory may not be in line with volumes due to a weaker mix, a tapering model cycle and a resurgence of new launches by the competition.

The brokerage maintains a 'Sell' rating and raised its target price to Rs 6,300 from Rs 5,675.

ICICI Direct

Maruti Suzuki posted steady Q2FY21 results. Margins uptick is seen being sedate, with our estimates building in ~11.2% by FY23E on the back of better operating leverage and focus on costs. Our previous concerns over volume visibility have been allayed, to an extent, but the stock remains richly valued, in our view.

The brokerage values Maruti Suzuki at Rs 6,335 i.e. 30x P/E on average of FY22E, FY23E EPS.

Phillip Capital

The demand momentum has been very strong. We believe the impending launch of a compact SUV and other launches (including facelifts and hybrids) should be able to sustain growth momentum going into the next year.

The brokerage remains optimistic on the stock as it is of the view that Maruti is most likely to benefit from trend reversal away from shared mobility and shift towards entry-level hatchbacks, robust rural demand on strong agri economy, concerns around diesel addressed through product interventions including mild-hybrid and CNG and healthy dealer finances, will aid retails as demand picks up.

Phillip Capital expects 20 percent volume growth for the rest of FY21 and values Maruti at 25x average of FY22 and FY23 EPS at Rs 8,135 and maintains 'Buy' rating.

HDFC Securities

Maruti reported double-digit margin (10.3%) in 2Q, which was 80 bps higher YoY due to improved operating leverage. The festive season has received an encouraging response with retails up 27% YoY to 96,700 units over the Navratri period. Maruti continues to benefit from its dominance in the entrylevel segment, with the share of first-time buyers increasing to 48% (from 43% YoY). System inventories remain comfortably below the normalised level of 30 days.

We reiterate Maruti as our preferred pick in the auto sector. Our estimates largely remain unchanged. We maintain Buy with a target price of Rs 8,145.

At 12:10 pm, the shares of Maruti Suzuki were trading 2.68 percent lower at Rs 6,923.00 apiece on the BSE as against a 0.84 percent fall in the benchmark Sensex.

First Published:Oct 30, 2020 1:03 PM IST