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Buoyed by strong earnings for the October to December quarter, the shares of Maruti Suzuki India closed 3.31% higher at ₹ 8696.00 apiece on the National Stock Exchange (NSE). 

The auto major’s net profit for the December quarter more than doubled to ₹ 2391.5 crores, up 129.55% against ₹ 1041.8 crores reported in the same quarter last year. Its total revenue from operations came in at ₹ 29057.5 crores, up 24.96% from 23253.3 crores in the corresponding quarter a year ago. Its operating margin improved by a sharp 304 basis points to 9.75%. 

The company sold a total of 4,65,911 vehicles during the quarter, up 8.2% year on year (YoY). It said that pending customer orders stood at about 363,000 vehicles at the end of the December quarter out of which about 119,000 orders were for newly launched models. 

BNP Paribas India has a buy call on Maruti Suzuki India with a target price of ₹ 11800. This translates to an upside of 35.96% as compared to its share price. 

The brokerage said that it had expected the company’s EBITDA margin at 9.4%, on the back of lower commodity prices, cost control, rupee depreciation and price hikes, and a superior mix, partially offset by negative operating leverage. 

Maruti Suzuki is a large-cap company with a market capitalization of ₹ 2,54,264 crores. It has a low return on equity of 7.20% and an ideal debt-to-equity ratio of 0.01. Its shares were trading at a price-to-earnings ratio (P/E) of 41.91, which is significantly lower than the industry P/E of 14.21, indicating that it might be overvalued as compared to its peers. 

Its promoters hold a 56.37% stake in it, FIIs hold 21.84%, mutual funds hold 10.59% other domestic institutions hold 6.27% and retail investors hold a 4.93% stake in the company. 

Written by Simran Bafna 

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