Maruti Suzuki demand, capacity and exports support growth despite Q1 FY27 margin pressure

Investment View and Growth Outlook

In its August 3, 2026 result update, Anand Rathi Research maintained its BUY rating on Maruti Suzuki. The broker’s core investment case is that robust domestic demand, market-share gains in small cars following GST changes, 500,000 units of incremental capacity and increasing exports should support growth over FY26-28E.

Anand Rathi expects total volume, revenue and EBITDA to deliver CAGRs of 10 per cent, 14 per cent and 10 per cent respectively over FY26-28E. Domestic volume is projected to grow at a 9 per cent CAGR, while exports are expected to grow faster at a 13 per cent CAGR, supported by Toyota/Suzuki’s global network and portfolio expansion, including e-Vitara.

Q1 FY27 Financial Performance

Maruti Suzuki’s Q1 FY27 standalone revenue rose 36 per cent year-on-year to Rs 5,24,557 million, broadly in line with Anand Rathi’s estimate of Rs 5,12,849 million. Volume rose 29 per cent to 6,82,724 units and realisation increased 5 per cent to Rs 76,830 per unit.

Gross margin fell to 23.1 per cent, reflecting high raw-material prices, inventory depletion and adverse foreign-exchange movement. Adjusted PAT was aided by other income of Rs 18,737 million, which rose 275 per cent year-on-year.

Demand, Capacity and Operating Indicators

Management maintained its guidance for about 10 per cent overall volume growth in FY27 based on available capacity. Retail volume matched wholesale volume, with growth in both urban and upcountry markets. The order book stood at 130,000 units and dealer inventory was 13 days at the end of Q1 FY27. The new Brezza was receiving about 2,000 bookings daily.

Hansalpur Line IV, with annual capacity of 250,000 units, commenced in July 2026 for EV production and is expected to ramp up over the following four to six months. CNG represented 40 per cent of Q1 FY27 volume, while first-time buyers increased to 54 per cent from 51 per cent in Q4 FY26.

Margin Pressures and Management Commentary

Management attributed the sequential EBIT-margin decline primarily to commodity inflation of 300 basis points, including a 110-basis-point temporary impact from monthly rather than quarterly supplier settlements for aluminium, plastic and rubber. Other pressures included higher employee, fixed, gas, foreign-exchange and depreciation costs. Discounts were broadly sequentially flat.

Maruti Suzuki took a 50-basis-point price hike in June 2026 and announced another increase from August 2026. West Asia exports were affected by geopolitical conflict, although diversification across 120 countries mitigated the impact. Key Q1 FY27 export markets were South Africa, Japan and Europe.

Estimates, Cash Flow and Valuation

Anand Rathi cut FY27E and FY28E EBITDA estimates by 23.2 per cent and 7.4 per cent, and EPS estimates by 29.1 per cent and 11.2 per cent, chiefly due to elevated commodity costs that are being passed on gradually through price increases. The broker expects FY27E EBITDA margin to remain under pressure before rebounding in FY28E.

The broker forecasts post-tax RoIC above 25 per cent and average annual free cash flow of Rs 94,000 million over FY26-28E. At the report CMP, the stock traded at 37 times FY27E EPS and 24 times FY28E EPS.

Anand Rathi’s revised sum-of-the-parts target price of Rs 16,250, reduced from Rs 17,800, values the core business at 32 times March 2028E core EPS of Rs 458 per share and adds cash of Rs 1,583 per share.

Key Risks

• Slower domestic industry volumes
• Intense competition
• Unfavourable foreign exchange
• Adverse commodity prices