Morgan Stanley stays bullish on Maruti, cites superior RoCE

Morgan Stanley has reiterated its bullish stance on India’s largest carmaker Maruti SuzukiBSE 0.03 % India, raising its target price on the stock to Rs 10,563 — the highest on the Street. The target price was Rs 9,102 earlier.

Its best-case scenario pegs target price for the carmaker at Rs 14,400, implying a 57.5% upside potential from the current levels.

Maintaining its ‘overweight’ rating on Maruti Suzuki IndiaBSE 0.03 %, Morgan Stanley cited end-market opportunity an superior return on capital to justify the premium valuation.

The stock hit a record high of Rs 9,167.7 in Monday’s session on the back of the report, before closing at Rs 9,141.35, up 1.1% from Friday’s close.

“We maintain our forecast of 22% F18-20 EPS CAGR and roll forward our price target to March 2019 (as against September 2018 previously). Given our base case assumption that MSIL (Maruti SuzukiBSE 0.03 % India) will maintain a stronghold on the India market, we believe MSIL’s high multiple is justified by the opportunity size. Further, with 22% return on capital em in FY17, MSIL is one of the most profitable car OEMs globally,” said Morgan Stanley.

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