Maruti Suzuki shares jump nearly 2% as concern mounts over demand for low-cost cars

Shares of Maruti Suzuki were up over 2% at Rs 11,394 on October 29, during early morning deals. Brokerages didn’t present a unified view of the stock immediately after the Q2 numbers. Views were mixed, as there is a sense of caution about future growth trajectory in light of the existing demand dynamics in India’s car market.

Quarterly Performance and Key Financials

The largest car maker in India posted a 17 percent YoY decline in the bottom line to Rs 3,103 crore, below what analysts had projections. It posted revenue from operations marginally higher at Rs 37,449 crore. The main factor for the lower net profit was a Rs 1,018 crore deferred tax liability due to regulatory changes impacting indexation benefits and tax rates on capital gains on debt mutual fund investments. The company stock has lost 18% in the past one month led by investor concern over softening demand and pressure on margin.

Brokerages Weigh In – Buy, Sell, or Hold?

Here’s a look at how key brokerages are viewing Maruti Suzuki’s current market position and future prospects:

• Nomura: Reiterate ‘Neutral’; target price Rs 12,455

  Nomura remains cautious on Maruti Suzuki with a rating of ‘neutral’. The brokerage said that demand is still weak at the entry level and margins stayed under pressure for the company in Q2. While Nomura said increased discounts might persist, a better mix of CNG products and increasing ASPs could provide some cushion. Management guidance on 14% YoY growth during the festive season could result in easing inventory pressures and, subsequently, a reduction in deep discounts in the next quarter as well.

• HSBC: ‘Hold’ with Target Price of Rs 14,000

  HSBC maintained its rating at ‘hold’, albeit with a slightly higher target of Rs 14,000. The brokerage said Q2 margin pressures were largely on account of a challenging demand environment and high discounts. While Q3 appears challenging, too, HSBC is optimistic for a possible rebound by FY26. They believe that a mix of demand recovery and strong lineup of new product launches could help growth. Besides, any tax relief towards hybrid vehicles could support Maruti’s valuation in the longer term.

• Investec: ‘Hold’ with Target Price Slashed to Rs 12,385

  Indeed, another cautious stance was brought into play when Investec maintained its ‘hold’ rating but cut its target to Rs 12,385 from Rs 14,030. The brokerage said operations challenges due to sustained demand weakness in general, particularly for entry-level cars, would hurt Maruti’s margins. Besides, Investec highlighted a consumer shift to premium vehicles and said Maruti depends on Toyota with regard to electric vehicle technologies.

• UBS- ‘Buy’, with target price revised to Rs 14,800

  On the other hand, UBS maintained its ‘buy’ rating on Maruti Suzuki but lowered the target price to Rs 14,800 from Rs 15,200. UBS acknowledged the shortfall in Q2 and margin pressures but still remained upbeat on strong festive demand seen of late and decent inventory levels of stocks at dealers. The research firm said these factors point towards a less negative tone than estimated earlier, hinting that Maruti will be resilient in performance despite headwinds.

Upcoming EV Launch and Growth Potential

Beyond its conventional ones, Maruti Suzuki not so long ago announced that it would launch its first all-electric vehicle by January 2025. During an analyst call on 29 October, the management updated that the new model would have a dedicated platform, specially designed for EVs and not just an adaptation from any internal combustion design. Coming as it does in the wake of Maruti’s plans for state-of-the-art EV and a relatively new, therefore fast-growing market, this development may also make up for at least part of the trepidation about the leap to EV and the competition from other car-makers.

Challenges Ahead: Entry-Level Demand and Margin Pressures

A key challenge highlighted by various brokerages is the weakening demand for entry-level cars, a space in which Maruti Suzuki has conventionally enjoyed a strong market lead. With marked consumption shift towards premium models, Maruti has the twin task of correcting the product mix and ensuring better inventory management. The high level of discounts also dented margins, which analysts say could continue in the near term. The upcoming festival season would provide temporary relief, provided the sales targets are met. Long-term corrective measures would involve addressing changing consumer preferences and fine-tuning cost structures.

Stock Performance and Investment Outlook of Maruti Suzuki:

The stock of Maruti has fallen 18% in the last one month. It is said that with new product launches, a shift in strategy toward electric vehicles, and expected revival in demand starting FY26, analysts are still conservative regarding the company, which is continuing to battle sector-specific issues.

On the outlook, Maruti’s management seems resolute in steadying revenue growth through its evolving product portfolio-addition of CNG and future EV models. However, brokerages hint said that it would have to balance product expansion with disciplined cost management to ensure steady profitability amid still skittish consumer demand.

Should Investors Buy, Sell, or Hold Maruti Suzuki?

Investment decisions in the stock of Maruti Suzuki are a mixed bag for the investors. While Nomura and Investec maintain a neutral and cautious view, HSBC and UBS view it as a stock that could offer potential upside in the future, particularly if market conditions improve and Maruti executes well on its EV strategy. This could be a hold or buy in Maruti scrip for investors looking for stability, with a long-term view as the company transitions to electric vehicles and adjusts its product mix. On the other hand, the one looking at short-term gains should also be prepared for the near-term headwinds that might dent the stock performance.

Conclusion: Steer into Transformational Phase

Maruti Suzuki addresses demand pressures in entry-level and opens up premium cars and the EV Sector. With brokerages divided on views over the stock, clarity is brought over the fact that though headwinds would confront Maruti, growth levers too are available with fresh product launches and new market focuses. The road ahead will be required to be tread with mills controlled for inventory, new consumer trends, and strategic investments in the EV sector. Long-term investors who can appreciate the resilience in Maruti’s market, the potential for innovation, and who could take or gradually build good positional shares while the company is overcoming short-term hurdles in this evolving automotive landscape, may find value.