Shares of Maruti Suzuki continued their winning streak for the third consecutive session on Thursday, January 16, registering a rise of over 5 per cent in this period. This rally follows an upgrade by BofA Securities, which lifted the stock’s rating to 'Buy' and raised the target price to ₹14,000, implying a potential upside of nearly 16 per cent from the day's high of ₹12,090.
BofA Securities identified several growth drivers that could support Maruti Suzuki’s performance through 2025 and beyond. Among these are new value-accretive utility vehicle (UV) launches, increased export growth, further ramp-up of its Toyota alliance, and a strong foray into the electric vehicle (EV) market.
The brokerage highlighted Maruti's resilience and market dominance, which place it in a favourable position to capitalise on evolving industry trends. At 22x FY26 earnings, the risk-reward ratio for the stock remains attractive, providing significant upside potential, said BofA.
However, it noted some uncertainties regarding the mass segment recovery, especially in entry-level cars, which is not factored into its base case.
BofA Securities expects volume growth trends in the auto sector to stabilise at 5-7 per cent annually across sub-segments, supported by evolving market dynamics and structural tailwinds:
Passenger Vehicles (PVs) and Trucks: Growth rates are anticipated at 4-5 per cent year-on-year, with a gradual recovery expected after a softer FY25.
Two-Wheelers (2Ws): The segment is projected to see volume growth of 6-7 per cent in FY26, marking a slowdown from 11 per cent in FY25.
Tractors: Growth in the tractor segment is likely to continue in mid-single digits, reflecting the second year of an upcycle.
The brokerage outlined five pivotal factors shaping the future of the auto sector:
Exports: Indian automakers are leveraging scale to drive export growth. Africa and Latin America have emerged as strong markets for two-wheeler exports, benefiting players like Bajaj Auto and TVS Motor. Global manufacturers such as Suzuki and Hyundai are also capitalising on India’s scale for production and export growth.
Electric Vehicles (EVs): The year ahead is set to be pivotal for EVs, particularly in the PV segment. Upcoming launches, such as those by Mahindra & Mahindra (M&M), are expected to provide significant momentum.
Economic Recovery: A long-overdue recovery in the mass PV segment is taking shape, with hatchback volumes bottoming out and affordability improving due to softer car prices.
Alliances and Value Unlocking: Strategic partnerships, such as Maruti-Toyota, continue to unlock growth opportunities in India’s rapidly expanding market. The country remains a rare global market with both scale and growth, attracting interest from global automakers and investors alike.
Global Risks: Challenges such as weakness in the European market, competition from Chinese EVs, and uncertainties in tariff policies pose risks for Indian suppliers, emphasizing the need for diversification.
Mahindra & Mahindra (M&M): BofA reiterated its 'Buy' rating on M&M, with a target price of ₹3,650. The company's strong execution in the SUV segment and steady earnings from the tractor cycle remain key strengths.
Tata Motors: The brokerage retained its 'Neutral' stance with a target price of ₹850, citing headwinds in Jaguar Land Rover (JLR) operations and increasing competition in the EV market.
Ashok Leyland: BofA reaffirmed its 'Buy' rating, with a target price of ₹250, driven by a decisive recovery in the commercial vehicle (CV) cycle.
Bajaj Auto: The brokerage identified Bajaj Auto as its top pick in the two-wheeler segment due to its strong valuation, high export exposure, and progress in EVs. It maintained a 'Buy' rating with a price target of ₹11,000.
TVS Motor: TVS Motor was upgraded to 'Neutral' with a target price of ₹2,625. The brokerage pointed to commendable market share gains, rising scooterization trends, and a less demanding valuation after recent corrections.
Bharat Forge: Downgraded to 'Underperform,' Bharat Forge has a target price of ₹1,100. Slowing core business growth and continued losses from European subsidiaries remain key concerns.
Samvardhana Motherson: The company was rated 'Neutral' with a target price of ₹62, as significant EU exposure and muted growth outlook weigh on its performance.
In summary, while challenges like global risks and segment-specific slowdowns remain, the sector’s broader stabilization and focus on innovation are expected to sustain momentum in the coming years, making it an attractive space for investors.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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