Maruti Suzuki gains 2% after promoter buys 3.45 lakh shares via open market

ICICI Securities said this is sentimentally positive for the company and a confidence boosting measure

Shares of Maruti Suzuki India (MSIL) were up 2 per cent to Rs 8,700.65 on the BSE in Wednesday's trade after the company said its promoter, Suzuki Motor Corporation, has bought over 3 lakh shares of the company, worth about Rs 300 crore, via open market.

As per SAST disclosures to stock exchanges, the promoter of MSIL, Suzuki Motor Corporation, has bought 3.45 lakh shares in the company from the open market during March 10-13, 2023.

The stake purchase represents 0.11 per cent stake with total stake purchase amount pegged at Rs 296 crore. Post this stake purchase, promoter holding in the company increased marginally from 56.37 per cent to 56.48 per cent.

According to ICICI Securities, this is sentimentally positive for the company and a confidence boosting measure. Suzuki Motor Corporation had last increased stake in the company by 0.1 per cent way back in June-September 2020. With impressive model launches in the SUV space, healthy pending order book and underpenetrated nature of domestic PV market, the brokerage firm expects MSIL to report healthy financials, going forward.

In the past six months, MSIL has underperformed the market by falling 8 per cent, as compared to 3 per cent decline in the S&P BSE Sensex, till Tuesday.

However, analysts at Nirmal Bang Equities remain confident about market share gains by MSIL as, historically also, it has demonstrated its ability to regain lost market share, led by new product launches and network expansion (Baleno and Brezza despite late entrants became market leaders in their respective category, facilitating market share gains).

"Moreover, Maruti Suzuki India has also addressed the concerns around premiumisation and safety in its recent launches in addition to sticking to its existing value proposition. We are thus factoring in volume CAGR of 15 per cent over FY22-FY25E, along with an increase in ASP, led by higher share of SUVs," the brokerage firm had said in a December quarter result update.

Furthermore, it expects margin improvement of 220bps from the current level, aided by operating leverage benefits, cost-control initiatives, and an improving product mix (higher share of SUVs and premium variants). The brokerage firm sees demand for MSIL holding reasonably well, as indicated. On the EV front, we believe that MSIL is lagging its competitors and is trying to navigate the transition through Hybrids.