Maruti Suzuki Set to Gain as GST Cut Fuels Small Car Demand

The GST rate on small cars has been reduced from 28% to 18%, which will create strong demand for the car industry. According to brokerage firm ICICI Securities, companies like Maruti Suzuki are likely to benefit.

New Delhi: In the past one month, Maruti Suzuki has delivered an 18% return, keeping its investors happy. Now, due to the GST reform, Maruti Suzuki shares may see further upside. Yes! That’s the view of well-known brokerage ICICI Securities, which has projected a 17% upside from the current levels.

According to ICICI Securities, the recent GST rate cut will help revive strong demand in the auto sector, which will benefit carmakers like Maruti Suzuki India. The brokerage further adds that demand in the auto sector can also rise due to several other factors such as — tax relief given by the government leading to higher household savings, interest rate cuts by the central bank increasing market liquidity, and the upcoming revision in the 8th Pay Commission.

₹17,000 Target Price

ICICI Securities has set a target price of ₹17,000 for Maruti Suzuki’s stock and has maintained its ‘Buy’ rating. On Friday, Maruti Suzuki’s share closed 1.59% higher at ₹14,895.

The brokerage also said that Maruti Suzuki has launched its mid-size SUV, Victoris, which will act as a catalyst for the company. With this model, Maruti Suzuki aims to strengthen its presence in Tier-2 and Tier-3 cities.

Risks Highlighted by ICICI Securities

Along with the positive outlook, the brokerage has also highlighted some risks:

• Uncertainty at the geopolitical level could affect exports.
• Lower customer response to Maruti Suzuki’s new car models could slow down sales momentum.
• Aggressive discounting by rival companies may force Maruti Suzuki to offer discounts as well, putting pressure on margins and potentially impacting overall profitability.

On September 4, after the GST Council meeting, the Government of India reduced the GST rate on motorcycles up to 350cc and small-segment cars from 28% to 18%. This GST rate cut is expected to boost fresh demand in the market.

Source: https://hindi.economictimes.com/markets/share-bazaar/brokerage-icici-securities-bullish-on-maruti-suzuki-share-given-big-target-price-after-gst-reform/articleshow/123721122.cms