Target: ₹10,700

CMP: ₹8,781.75

Maruti Suzuki’s Q3 EBITDA grew 82 per cent y-o-y to ₹2,830 crore, standing 8 per cent above our estimate owing to gross-margin beat. Gross margin expanded 260 bps y-o-y, on account of better net pricing, improved mix and favourable currency movement.

Revenue increased 25 per cent to ₹29,040 crore, coming in 2 per cent above our estimate on better realisation. The large pending order-book at about 3.63 lakh units, along with the recently-launched products, provides strong sales visibility for subsequent quarters.

We expect FY23 revenue growth to be robust at 32 per cent, and the uptrend is likely to endure with FY23-25 revenue CAGR at 14 per cent. Driven by better scale and pricing, we expect EBITDA margin to expand, from 6.5 per cent in FY22 to 9.3 per cent in FY23 and to 11.3 per cent in FY25.

We increase FY23E EPS by 7 per cent to ₹263 on higher margin and other income assumptions, and slightly nudge up the FY24/25 EPS by 1 per cent to ₹380/₹428. We retain Buy with TP of ₹10,700/share (from ₹10,500), based on 27x core P/E on FY25E EPS (Dec-24E EPS earlier) and cash of ₹1,260/share (0.80x book).

Key downside risks include macro slowdown, lower-than-expected volumes in new products, higher competitive intensity and adverse movement in commodity/currency rates.