MSIL can put the pedal to rerating metal on volume, market gains

Maruti Suzuki India (MSIL) reported weaker-than-expected financial performance for the January-March quarter of FY23, with revenues of ~32,048 crores missing Street estimates despite a 20% YoY increase and 10% sequential growth. While volumes grew 10.5% sequentially, semiconductor unavailability affected the sales of premium models and top-end variants, leading to lower realizations. The company’s order book stands at a healthy 412,000 units. It expects to outperform the passenger vehicle sector’s 5-7% growth rate in FY24, driven by the SUV portfolio and higher sales of compressed natural gas (CNG)-powered models. However, margins contracted by 60 bps to 26.7% sequentially, and MSIL may face potential negative impacts from commodity costs, chip shortages, and forex movements soon. Despite this, most brokerages have a ‘buy’ rating on the stock due to MSIL’s strong product basket, likely margin expansion, export potential, and market-share gain after utility vehicle launches.