Maruti Suzuki shares fall over 2% as Jefferies downgrades stocks to ‘underperform’

Maruti Suzuki shares declined over 2 per cent in the morning trade on Monday after Jefferies downgraded the carmaker’s stocks to ‘underperform’ from ‘buy’. According to the global investment bank, Maruti’s strong outlook is in the price and its stock is trading at all-time high multiples.

At 11.41 am, Maruti Suzuki shares were trading 2.22 per cent down at Rs 4478 a piece. The scrip opened at Rs 4,572 and had touched a high and low of Rs 4,572 and Rs 4,475, respectively, in trade so far.

“The stock trades at peak multiples when profitability is also at peak. The company is stepping out of areas of core competence – focusing on larger cars, outsourcing manufacturing but raising investment in R&D, land and parallel distribution – with risks associated,” said, analysts Govindarajan Chellappa and Apurva Kumar at Jefferies.

Shares of Maruti Suzuki India are trading at 21.83 times of 1 year forward earnings compared to 18.6 times of rivals. Stock has 44 buy, 5 hold and nil sell ratings.

For the quarter ended June 2015, Maruti Suzuki posted net profit of Rs 1,192.92 crore, up 56.49 per cent against Rs 762.28 crore in the corresponding quarter a year ago.

For the April-September period, the domestic sales for the company stood 12.7 per cent higher at 6,28,963 compared to 5,58,330 units in the same period last year.

Maruti Suzuki India Limited