Kotak Institutional Equities in its latest note on automobile sector said the passenger vehicle wholesale volumes may decline 1 per cent this ongoing financial year against a 3 per cent growth in FY24 due to weak demand trends in entry-level segments, moderation of growth in the SUV segment and elevated inventory levels.
It expects market share of Maruti Suzuki India Ltd (MSIL) to decline to 40-40.5 per cent for FY25, while it sees Mahindra & Mahindra Ltd (M&M) to gain 220 basis points market share. The domestic brokerage is factoring in a muted demand for global luxury car market in the near term, dragged by China and EU regions.
“We expect Tata Motors market share to remain stable around 13-14 per cent whereas M&M is likely to gain 200 bps market share led by successful newer launches in the SUV segment (Thar Roxx and XUV3XO) and upcoming BEV/ICE launches,” it said.
Kotak said the festive season witnessed low to mid-single-digit growth during the initial period and that any deceleration in the coming days will weigh on wholesale volume trends, given elevated inventory levels.
It expects the SUV segment to continue to outperform industry growth mainly driven by growing consumer preference and newer launches by various OEMs.
The domestic brokerage expects Maruti Suzuki’s market share to remain steady at 40-40.5 per cent over the coming years owing to decline in hatchback, sedan segment industry volumes where the company is the market leader and decline in market share in the MUV segment, partly offset by market share gain in CNG, hatchback and SUV segments.
The brokerage has a fair value of Rs 11,800 for Maruti Suzuki shares against Rs 11,750 earlier. It finds Tata Motors stock Rs 1,050-worthy. For M&M, Kotak has a target price of Rs 3,300.
“We have cut our FY2025-27 EPS estimates for Maruti Suzuki (lower volume assumptions for domestic PV market) and Tata Motors (lower volume and margin estimates for all the three business segments). However, we have marginally increased our FY2025-27 EPS estimates for M&M (ADD rating) driven by strong performance of the SUV portfolio,” Kotak said.
Overall, the brokerage retained a ‘Sell’ rating rating on Maruti Suzuki as the company may lose market share in FY2025, before stabilising. This would be due to newer launches by competitors. While near-term headwinds persist for Tata Motors, inexpensive valuations drove Kotak’s our ‘ADD’ rating.
