Maruti Suzuki shares pared gains after rising over 2 per cent in a lacklustre market on Monday. The stock was the top gainer on the 50-share Nifty in early trade.
Major brokerages have upgraded Maruti after India's biggest car manufacturer said quarterly profit rose for the first time in 18 months on Friday. Some like CLSA and UBS believe that Maruti shares could hit Rs 2,000 mark this year.
Maruti's profit for the October-December quarter was Rs 501 crore, up from Rs 205 crore in the same quarter of 2011. Sales rose 46 percent to Rs 10,957 crore. The growth in profit was primarily due to higher sales of new car models like utility vehicle Ertiga and Swift DZire low-cost sedan.
Bullish commentary from the management is likely to support the stock in the short term. Maruti Suzuki is targeting double digit margins for fiscal year 2013-14 even though volume growth is likely to be between 6-7 per cent, the management said.
Maruti shares closed 0.54 per cent higher at Rs 1,608.15 on the NSE.
Near term positives:
Maruti had announced a 1.5 per cent price hike across its models earlier this month. Raw material costs have been flat or declining in the three months to March. Average discounts have come down from Rs14,750 to Rs12,100 (quarter-on-quarter). Direct imports and royalty have been fully hedged at yen-dollar 83 levels for the fiscal fourth quarter ending March.
CLSA maintains "buy" on Maruti while increasing its target price on the stock from Rs 1,915 to Rs 2,020 per share. Margins will climb further over fourth quarter and fiscal 2013-14, CLSA said. It expects Maruti's earnings per share to grow at a strong 44 per cent compound annual growth rate over FY13-15.
UBS upgraded its ratings on Maruti to "buy" from "neutral," and raised its price target to Rs 2,000 from Rs 1,500, noting the weakening Japanese yen over the past three months would boost earnings. Maruti Suzuki is also well positioned to benefit from improvements in petrol car sales, UBS added.
JP Morgan has raised its target price to Rs 1,650 from Rs 1,450.
Nomura has raised its target price to Rs 1,937 from Rs 1,617.
(With inputs from Reuters)