Maruti Suzuki hits over 2-year low; down 10% in three days

Shares of Maruti Suzuki India hit an over two-year low of Rs 5,911, down 2 per cent on Tuesday. The scrip has fallen 10 per cent in the past three trading days, after the country's largest car maker cut vehicle production for the fifth consecutive month in June. The stock of passenger vehicle Company was trading at the lowest level since March 9, 2017.

The auto major said it slashed total vehicle production, including Super Carry LCV, by 15.6 per cent last month to 111,917 units as compared to 132,616 units in the year-ago month.

Analysts at Deutsche Bank forecast flat volumes for Maruti in FY20 (vs. the industry forecast of +3 per cent), and expect the company to lose 200 basis points (bps) of market share.

The brokerage firm believes that a loss of market share in a weak demand environment could lead to higher discounting pressure as well. The bulk of the market share loss was driven by the success of the competition's models. A similar scenario could play out over the next 12-18 months.

“We expect Maruti to lose 200bps of market-share in FY20, after a long period of gains (1,300bps during FY13-19). Maruti has been able to launch a number of successful new models over the last five years, strengthening its leadership position (51 per cent market-share) across categories. Most of these models were in segments in which Maruti had no presence. Hence, they expanded the addressable market for the company,” the brokerage firm said with ‘hold’ rating on the stock.