Maruti: Growth in high gear mix but margins hit a bump

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Maruti

Growth in high gear but margins hit a

bump

Reiterate Rating: NEUTRAL | PO: 14,700 INR | Price: 14,234 INR

Margin miss on low bar, recovery back key to EPS growth

01 August 2026

Maruti’s Q1 EBIT margin at 4.8% (BofAe: 5.7%), down 3.6pp Q/Q, missed even low

expectations. Admittedly, Q1 faced multiple headwinds, led by a 3pp commodity hit,

new-plant start-up costs, bonus payouts (40bps) and other FX/inventory depletionrelated impacts (80bps). Company has accrued accelerated impact of metal basket

following shift in supplier settlement cycle to one month (vs. 3 months) for suppliers.

This suggests that full RM drag for MSIL is reflected in Q1 & any moderation here-on

(as seen in June) should benefit from Q2 itself, no lag. That said, we struggle to bridge

EBITm back to 8%+ given limited pricing action taken (~1% so far, BofAe). Overall,

management commentary on demand outlook, order backlogs (130K) & lean channel

stock (13 days) were positive, offering comfort on volume growth. Margin miss drives

EPS cuts of 4% in F27 & marginal in F28; we are 5-6% below consensus. Reit Neutral,

valn at 24x PE F28E seems fair. PO Rs14700 (vs. 14K) on new ests & roll over by 3M.

Equity

Capacity + demand strength = upside to 10% growth guide

Management sounded confident on the volume growth outlook, highlighting recovery in

small cars led by rising first-time buyer demand (54%), alongside healthy offtake for its

new SUVs. Demand optimism is reflected in aggressive capacity expansion, with 0.5m pa

units added (20% capacity boost). Recent Brezza refresh with new powertrain

configuration (1L turbo), ADAS, under body CNG strengthens pricing (lower GST slab)

and model competitiveness. Overall vols for MSIL were up 29% y/y in Q1 and Q2 (>30%

y/y) should also be strong as new capacity ramps up, though base will catch up from Oct.

Given the demand momentum, we see upside risk to co’s 10% volume growth guide in

F27. Focus remains on plugging SUV whitespace with 7 more new models due by F30.

Exports acceleration led by EV model

2025A

92,329

293.7

-30.1%

2026A

106,474

319.8

8.9%

135.0

319.3

48.5x

0.9%

19.1x

2.2%

(Rs)

Previous

Current

Price Obj.

14,000.00

14,700.00

…