CLSA retains ‘sell’ tag as Maruti’s momentum from new products slows down

During the course of the year, Maruti has just one SUV launch, while rival Tata Motors has five launches in the CY24. Moreover, Mahindra and Mahindra and Hyundai have four each.

Intense competition in the SUV cars space and the fading momentum of new vehicle launches will keep Maruti Suzuki India stock under pressure, according to CLSA. Maruti Suzuki stock has gained nearly 11 percent in the last one month, seeing renewed momentum and making record highs.

However, global brokerage CLSA has maintained a ‘sell’ rating on Maruti Suzuki stock, raising the target price from Rs 8,796 to Rs 9,417. CLSA’s revised target price implies an 11 percent downside on Maruti Suzuki share price from its last close of Rs 10,587 on NSE.

Here’s why CLSA is bearish on Maruti Suzuki stock

Also read: Maruti Suzuki receives show cause notice from GST Authority

Maruti facing fierce competition in SUV space

While the broking firm believes that FY24 will be a ‘fabulous’ year for the company, it doesn’t see Maruti carrying the same momentum in FY25 because of new launches by the competition. “MSIL launch share in SUV segment will decline to low single-digits,” CLSA said in a note. The firm forecasts Maruti’s SUV launch share to fall to 4-5 percent in CY24 and CY25 from 19 percent in CY23.

Maruti’s new launches getting old

During the course of the upcoming year, Maruti has just one SUV launch (electric vehicle), while rival Tata Motors has five launches in CY24. Moreover, Mahindra and Mahindra and Hyundai have four each. Analysts at the firm suggest that the only way Maruti will retain its market share in the coming quarters is by giving discounts on Brezza and Fronx, segments where competition is on the rise. This, they also suggest, will come at the expense of a drop in margins.

Also read: Maruti Suzuki’s total sales up 3% to 181,343 units in September, hits 1 mn-mark in H1FY24

In its report, CLSA compared Maruti’s Brezza and Tata Motors’ newly launched Tata Nexon. It suggests that even though the Brezza is cheaper, the Nexon offers many more features and power. “Brezza is on the waiting period because MSIL prioritises Fronx and Grand Vitara.

Also read: Strategic pricing, advanced features to help Tata Nexon rule SUV space: Nomura

Lastly, EBITDA margins are expected to fall in FY25 and FY26, and competition in the compact SUV segment will start hurting.

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