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Why Maruti Suzuki is among key stocks to watch out for in 2018

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While brokerages and analysts are busy forecasting Sensex and Nifty’s maximum levels for the next year, the stock of country’s largest carmaker Maruti Suzuki India Ltd is firmly heading toward the 10,000 mark. The car market player (in terms of sales) is the current market leader in market capitalisation when it comes to the BSE auto index. Also read: Why Maruti Suzuki is among key stocks to watch out for in 2018 The carmaker is 6th among India’s top 100 firms by market capitalisation (Rs 2,75,921.44 crore) on the BSE. The stock hit a fresh all-time high of 9167 on the BSE today and crossed the key 9,000 mark on Friday.The sudden rise in stock comes after the firm on December 1 reported a 14.1 per cent increase in total sales at 1,54,600 units in November as against 1,35,550 units in the year-ago month. The company’s domestic sales stood at 1,45,300 units, up 15 per cent from 1,26,325 units in November last year. Exports in November grew marginally to 9,300 units as compared with 9,225 units in the same month last year. During the last five trading sessions, the stock is up 7.29 percent or 622 points.  The stock is up 71.69 percent since the beginning of this year. On an yearly basis, the stock is up 74.6 percent or 3910 points.Here’s what top brokerage houses and experts are saying: 1. Global brokerage house CLSA hiked its target price for the stock to Rs 10,000 per share while maintaining a ‘Buy’ call last week. “Valuations seem rich, but justified given high earnings visibility and improving outlook,” the research house said. 2. Morgan Stanley has raised its target price to Rs 10,563 from Rs 9,102 per share, denoting a 16.8 percent potential upside from Friday’s closing price. The global financial services firm said Maruti is one of the most profitable car original equipment manufacturers (OEMs) globally. End-market opportunity and superior return on capital employed justified the current valuation, it added. “Maruti is a key beneficiary of coming turn in demand. Suzuki-Toyota alliance will help set Maruti up for electric vehicles,” it said. In case of bullish market conditions, the stock could even reach Rs 14,400, a potential upside of 60 percent over its Friday’s closing price, the research house said. 3. Brokerage Sharekhan in October recommended ‘Buy’ rating on Maruti Suzuki stock with a target price of Rs 9,265 in its research report. “Given better-than-anticipated margins in Q2FY2018, we have raised our FY2018 and FY2019 earnings estimates by 7% and 2%, respectively. We retain our ‘Buy’ rating on the stock with a revised price target of Rs 9,265 (earlier PT of Rs 8,500),” it said. 4. The car maker would continue to post rise in year-end sales owing to discounts on various models such as Alto, Wagon R, the outgoing Swift, Ertiga and among others, analysts said. Maruti sold 1.5 million cars (including exports) in fiscal 2016-17, an increase of 10% from the previous year, and double sales in less than a decade. 5. Brokerage Axis Direct too raised its target price to Rs 9,522 (Rs 9,298 earlier) on order backlog of 3-5 months for new models. Rising share of new models also lowers discounts (currently 3.3%) and royalty (INR terms + India R&D). Capacity constraints might restrict FY18/19E volume growth to 12%, but should demand exceed supply substantially, we foresee discounts coming down further, it said in a note.

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