Mumbai: Maruti Suzuki India Ltd (MSIL) is the second-best performing auto company among the top 15 stocks in the sector, as India’s largest car maker by market share continues to zoom ahead to record new highs.
Maruti shares have jumped 53.32% so far this year, falling behind only Tesla Inc.’s 70.20% gains in the same period, in the global auto market.
On Tuesday, Maruti shares touched a record high of Rs8,200 apiece. They later pared some gains and closed 0.20% higher at Rs8,161.10 per share.
Maruti is now the 11th largest auto maker in the world with a market capitalization of $38.49 billion, racing ahead of peers such as Audi AG, Renault SA, Subaru Corp. and Hyundai Motor Co., which have a market cap of $35.23 billion, $27.31 billion, $26.7 billion and $26.46 billion, respectively, data from Bloomberg showed.
“‘Is it time to sell Maruti?’ That’s the question we get asked most often these days," HSBC Securities and Capital Markets (India) Pvt. Ltd said in a note on 16 August when Maruti shares closed at Rs7,701.60.
“We acknowledge it is not in a very comfortable position now and the stock is likely set for a short-lived correction in the near term," the note said, adding that the earnings revision cycle is largely over.
“Importantly, however, the downside risk is limited for MSIL and the stock may still offer better returns than the market over the next 12 months and so we remain positive," HSBC analysts said, while maintaining their “buy" rating on the stock, but raising their target price to Rs8,500 from Rs7,800 earlier.
Currently, Maruti trades at 32.80 times one-year forward PE (price-to-earnings), according to Bloomberg estimates. Earlier, it used to lag behind Tesla in terms of valuation. The comparison is not valid right now, as Tesla is reporting losses. Its adjusted loss was $1.33 per share in the second quarter of 2017.
Among Sensex stocks across sectors, Maruti was the second-best performing stock so far this year. It has risen 53.32% for year-to-date, after steel maker Tata Steel Ltd which has gained 74.67%.
Other brokerages were also optimistic on the long-term prospects of Maruti.
“Long waiting periods for key products, a structured launch programme, superior franchise and solid financials are likely to enable MSIL sustain premium valuations," Edelweiss securities said in a note on 31 August, while maintaining its buy rating on the stock.
Of all the auto stocks in the country, analysts preferred top utility vehicle maker Mahindra & Mahindra Ltd the most, with as many as 41 “buy", 5 “hold" and one “sell" rating, data from Bloomberg showed.
Maruti followed next, with 38 analysts rating it a “buy", 14 brokerages giving a “hold" rating, and two recommending “sell".