Maruti Suzuki shares continue to decline for second straight session; here’s why

Shares of Maruti Suzuki India Limited declined 2.5 per cent to hit an intraday low of Rs 7,025 on the Bombay Stock Exchange (BSE). The stock has been in a downward spiral after brokerage house CLSA downgraded the stock to ‘sell’ from ‘underperform’ and cut the target price to Rs 6,420 per share.
 
The stock opened 0.25 per cent higher at Rs 7,220 against the previous close of Rs 7202.15. However, it failed to hold the mild gains and slipped into the red territory.
 
With a market capitalisation of Rs 2,12,841 crore, the shares stand lower than 5 day, 20 day, 50 day, 100 day and 200 day moving averages.
 
CLSA noted that the auto major is losing market share in the highly profitable SUV segment. The company may lose 600 bps market share over FY20-22 in the Passenger Vehicles (PV) segment. We continue to forecast market share loss amid a weak model launch pipeline, it added.
 
“Passenger Vehicles (PVs) and Commercial Vehicles (CVs) performed relatively better, but volumes were below broader expectations. In PVs, we see demand momentum sustaining, led by easing supply-chain constraints, new launches, increased preference for personal mobility and improving consumer sentiments. We see scope for regaining lost volume (due to relatively weak festivals) during the leaner months post festivals, led by sustained demand and improving supply chain dynamics,” Nirmal Bang said in Automobile Sales Monthly Report.
 
“Maruti’s domestic PV sales were affected due to supply chain constraints. We note improving supply chain issues while underlying demand drivers will be intact,” it said.
 
India’s largest automaker reported its total sales of 139,184 units in November 2021, down 9.2 per cent year-on-year. The automaker had reported total sales at 153,223 units a year-ago.
 
The total domestic passenger vehicle sales came at 109,726 units versus 135,775 units year ago, while it reported total domestic sales at 117,791 units versus 144,219 units year ago.
 
Recently, the company said that it will hike the prices of its vehicles from January next year. It added that the cost of vehicles has been adversely impacted due to COVID-19 and, hence, the impact will be passed on to customers. The auto giant had increased prices in September, and before that in April and January.
 
“Over the past year, the cost of company’s vehicles continues to be adversely impacted due to increase in various input costs. Therefore, it has become imperative for the Company to pass on some impact of the above additional costs to customers through a price hike,” it stated in a filing.
 
“The price rise has been planned in January, 2022. The increase shall vary for different models,” said Maruti Suzuki.