MARUTI SUZUKI (Buy, Target Rs.1225)
Ø Maruti has been feeling the pain in its petrol portfolio due to the wide gap between petrol and diesel prices and this coupled with the fact that its diesel portfolio has been facing constraints on account of diesel engine capacities has kept the stock depressed at levels of 1100
Ø Now with the merger of Suzuki Powertrain which to our mind would ensure better operational efficiencies and supply chain management we believe that the diesel portfolio constraint should get addressed and improve margins
Ø Given its huge distribution network spanning across India and fuel efficient products , we believe that cooling of interest rates makes Maruti trading at 14x current years expected earnings a profitable trade at current levels with a price target of 1225
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TECHNICAL VIEW
Ø Technically, Maruti is witnessing consolidation after a sharp downtrend from 1400 levels to 1050 levels.
Ø The weekly charts indicate that the stock is still in a trading band and has a high probability of bouncing from these strong support levels. Also, the stock is trading very close to its 200 DMA of 1150 levels, a break above which can signal a fresh buying from long term investors.
Thanks and Regards
LKP Advisory
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