Motilal Oswal maintains ’buy’ rating on Maruti Suzuki, expects automaker to continue PV market dominance

Domestic brokerage firm Motilal Oswal has stated that Maruti Suzuki India, the country's leading car manufacturer, is poised to maintain its dominance in the passenger vehicle (PV) industry and continues to outperform industry growth in FY25.

According to the brokerage, the company's strong lineup of recent model launches, diverse product portfolio, and range of powertrain technologies will enable it to continue outperforming the industry. It noted that SUVs now make up approximately 50 percent of the PV market, a significant increase from 23 percent in FY19. Maruti Suzuki has expanded its utility vehicle (UV) segment with new product launches, including the Invicto, Grand Vitara, Jimny, Brezza, and Fronx.

While demand for hatchbacks and sedans has been weaker, the company aims to revitalise this segment with exciting refreshes, such as the new Swift with the Z series engine, which offers improved fuel efficiency and lower emissions.

The brokerage pointed out that, despite the growing adoption of electric vehicles (EVs), customers should be encouraged to consider vehicles with strong hybrid technology, CNG, ethanol, and biogas options.

As part of Suzuki’s growth strategy for India, Maruti Suzuki plans to diversify its powertrain mix by FY31, with battery electric vehicles (BEVs) expected to account for 15 percent of domestic PV sales, hybrids 25 percent, and the remaining 60 percent from CNG, biofuels, and internal combustion engines (ICEs). The brokerage added that Maruti Suzuki's first BEV is slated for launch in 2025, with a target of launching six BEVs by 2031.

Maintains strong export growth and market leadership

The company reported approximately 10 percent YoY growth in export volume, reaching around 2,83,000 units in FY24, compared to a 2 percent YoY growth in exports for the overall industry. The brokerage highlighted that Maruti retains its market leadership in exports, holding a substantial 42 percent market share.

The brokerage also noted that the share of export volume to total sales for MSIL stood at approximately 13 percent in FY24, similar to the previous fiscal year. This year, the company exported new models such as the Jimny, Fronx, and Grand Vitara. Motilal Oswal emphasized that MSIL’s top export destinations in FY24 included Africa, Latin America, the Middle East, and the ASEAN regions.

Additionally, the brokerage remarked that with strong support from Suzuki Motor in technology and access to its extensive global distribution network, Maruti Suzuki aims to maximise medium- to long-term opportunities.

Aims for 4 million annual capacity

In its ambitious growth strategy for FY31, Maruti Suzuki aims to scale up its production to 4 million units annually. The company has already commissioned an additional production line of 1,00,000 units per annum at its Manesar plant. Furthermore, the construction of a fourth production line at Suzuki Motor Gujarat (SMG) will add 2,50,000 units to its capacity. Maruti Suzuki also plans to establish a new greenfield manufacturing facility in Gujarat with a capacity of one million units.

Additionally, the brokerage highlighted that the construction of a new manufacturing facility at Kharkhoda in Haryana is progressing well. The initial phase, with a capacity of 2,50,000 units, is expected to be commissioned in FY25, with plans to eventually expand this facility to one million units.

India's PV market is now the third largest in the world, yet car ownership still accounts for just 3 percent of the population, so it offers significant growth potential.

Target price set at ₹15,160

Motilal Oswal projects that while the majority of input cost benefits are likely to be over, Maruti Suzuki India Ltd is expected to achieve a 140 basis point margin improvement to approximately 13 percent by FY26. This improvement is largely attributed to an enhanced product mix and is anticipated to drive a steady 15 percent CAGR in earnings over FY24-26E.

Additionally, Motilal Oswal notes that any reduction in GST or favourable government policies for hybrids could lead to a rerating of the stock, with MSIL being a key beneficiary. Currently, the stock trades at a multiple of 25.5x for FY25E and 21.9x for FY26E consolidated earnings per share (EPS).

The brokerage maintains a 'buy' rating with a target price of ₹15,160 per share, based on a 26x multiple of June 2026E consolidated EPS.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.