Brokers bet on Maruti's growth story, will you buy?

After nine months, a glimmer of hope for petrol-engine cars whose sales rose from the same period last year.

That can only mean good tidings for Maruti Suzuki, says Credit Suisse, which upgraded India’s largest car maker to ‘outperform’ from ‘underperform’. The brokerage raised the target price to Rs 1,671 from Rs 1,021, which is about 25 percent higher than consensus expectations.

[caption id=“attachment_236126” align=“alignleft” width=“380” caption=“Maruti has maintained its leadership position in the market. Hyundai was the biggest loser, since it has no diesel variant of its car model ‘i10’. Aalphaa/NareshSharma”]  [/caption]

The research firm says the increase in availability of diesel engines from 20,000 to 33,000 per month will mean a 40 percent growth in diesel car units in the next financial year. Adding petrol car sales, Maruti Suzuki’s sales could grow by around 25 percent. That’s also higher than market expectations, which is about 15 percent growth.

More from Investing

MSMEs are breaking the traditional convention. Look who’s funding them Scale-up your startup without an investor! Here’s how

In the premium hatchback car market, there have been a slew of new launches like Ford Figo, Volkswagen Polo, Nissan Micra, Volkswagen Vento, Hyundai Eon, Honda Brio, Hyundai Verna and Maruti Dzire (New). Still, Maruti has maintained its leadership position in the market. Hyundai was the biggest loser, since it has no diesel variant of its car model ‘i10’.

[caption id=“attachment_235860” align=“alignnone” width=“314” caption=“Source: Credit Suisse”]  [/caption]

While the Budget could announce a tax on diesel cars, Credit Suisse believes that might actually turn out to be a positive for the company, since the main strength of Suzuki lies in making fuel-efficient petrol engines.

With the yen-rupee equation improving as well in favour of the rupee, operating margins are expected to improve as well (Maruti imports a portion of its car parts from Japan).

Credit Suisse is not alone in feeling upbeat about Maruti Suzuki. Standard Chartered has also rated the stock an ‘outperform’, with a target price of Rs 1,381. Both brokerages are optimistic of strong unit sales for Maruti on the back of new launches – the new Swift, new Swift Dzire, Ertiga and another expected launches. In addition, a new plant will also be operational this year.

Finally, an expected cut in interest rates is also expected to stoke demand.