HSBC has expressed reservations about Maruti Suzuki India Ltd.'s seven-year growth target of 10%, forecasting a more modest compound annual growth rate (CAGR) of 6-7%. The bank also anticipates an extended capital expenditure (capex) period of 10-12 years for the car manufacturer, according to information released on Thursday.
The banking giant highlighted potential roadblocks in Maruti Suzuki's efforts to increase its market share in the utility vehicle and car sectors. HSBC underscored the strategic necessity for Maruti Suzuki to expand its product portfolio to overcome these challenges and maintain competitiveness.
InvestingPro data reveals that Maruti Suzuki has experienced a significant decrease in its price total return over the past year. The 1-year price total return stands at 15.7%, while the YTD price total return is down by 43.14%. Despite this, the company has managed to maintain a healthy dividend yield of 7.2%, which is expected to be paid out on August 25, 2023.
From the InvestingPro Tips, it is evident that Maruti Suzuki is a prominent player in the Automobiles industry and has managed to maintain dividend payments for 20 consecutive years. This consistency in dividend payments, coupled with the fact that the company has been profitable over the last twelve months, underscores Maruti Suzuki's financial stability.
Despite their concerns, HSBC maintained its 'buy' rating for Maruti Suzuki shares. It also increased the price target from its previous level to Rs 12,000 per share. The bank's actions indicate that while it sees potential challenges for Maruti Suzuki, it continues to view the company as a good investment opportunity.
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