Shares of Maruti Suzuki rose over 2% in early trading on Wednesday, showing unexpected strength after the company reported weaker-than-expected second-quarter results. The stock rose 2.23% to Rs 11,293.65 as of 11:02 am on the Bombay Stock Exchange (BSE); This reflects a mixed but cautiously optimistic reaction from brokers despite ongoing challenges.

In the previous trading session, Maruti Suzuki shares fell over 5%.

Maruti Suzuki’s quarterly report revealed that net profit fell 17% year-on-year to Rs 3,103 billion, falling short of market expectations.

Income from operations rose slightly to Rs 37,449 crore, but deferred tax liability of Rs 1,018 crore impacted net profit due to regulatory changes affecting indexation benefits and tax rates on capital gains from debt mutual funds.

BUY, HOLD OR SELL?

Nomura took a conservative stance on Maruti and maintained a neutral outlook with a target price of Rs 12,455, citing continued demand softness and margin pressures as possible short-term constraints. The brokerage expects discounts to remain high in the near term, although improvements in Maruti’s CNG mix and rise in average selling prices (ASPs) are positive.

Maruti’s management is optimistic about a 14% year-on-year increase in festive season sales; This could ease inventory pressure and reduce the need for discounting in the coming months.

HSBC reiterated its cautious outlook, reiterated its ‘hold’ rating and adjusted its target to Rs 14,000. He attributed Maruti’s margin squeeze in Q2 to the challenging demand environment and increased discounts; Some pressures are likely to be seen in the 3rd quarter as well. However, HSBC remains hopeful of recovery by FY26, driven by recovery in demand and new product launches. A possible tax cut for hybrid vehicles could also support Maruti’s future valuation.

Investec also remained cautious, maintaining its ‘hold’ rating but lowering its target to Rs 12,385 from Rs 14,030. He cited operational challenges, particularly around margins, as demand for entry-level models declines as consumers shift towards premium vehicles. The brokerage also highlighted concerns regarding Maruti’s EV transition, given its dependence on Toyota in terms of technology.

On a more optimistic note, UBS maintained its ‘buy’ recommendation with a target of Rs 14,800, down slightly from Rs 15,200. UBS acknowledged Maruti’s Q2 earnings miss and noted margin pressures weighed on EBITDA, but said festive season demand and controlled inventories were encouraging signs that could offset near-term concerns.

Maruti Suzuki also announced plans to launch a dedicated electric vehicle in January 2025. Management emphasized that this EV will be built on a high-spec platform designed specifically for electric use, unlike the retrofit internal combustion engine (ICE) models seen in some rivals.

Maruti’s share performance has been mixed this year. The stock is down 15% in the last month and about 12% in the last six months, but remains up about 10% year-to-date, reflecting both market concerns and some optimism as evolving consumer preferences and the EV push drive. transition.

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