---
endpoint: analytics
pattern: Autos
status: done
latency_ms: 164872
conversation_id: 4c58946a-d872-44ab-a975-49415cf5aed3
citations: 10
created: 2026-05-31 21:29:40Z
---

# Is CLSA incrementally more positive/negative on Maruti Suzuki. If so, why?

## CLSA on Maruti Suzuki: Incrementally LESS Positive on Near-Term Earnings, but Rating/TP Held

**Bottom line**: CLSA's lead India auto analyst Basudeb Banerjee has become **incrementally more cautious on near-term earnings and margin trajectory** in his most recent dedicated Maruti note (27-Apr-2025) versus the prior dedicated note (29-Jan-2025), but he has **maintained the Outperform (O-PF) rating** and kept the target price essentially flat (Rs13,449 vs Rs13,446) — i.e., the headline call did not change, but the underlying numbers were cut and the margin-mix narrative softened.

### Rating / Target Price — essentially unchanged

| Metric | 29-Jan-2025 note | 27-Apr-2025 note | Delta |
|---|---|---|---|
| Rating | O-PF [6] | O-PF (maintained) [2] | Unchanged |
| Target Price | Rs13,446 (raised from Rs12,631 on roll-forward) [6][7][8] | Rs13,449 (+Rs3) [1][2] | Effectively flat |
| Implied multiple | 23x FY27CL core EPS [7] | 24x FY27CL core EPS [1] | Slight re-rate (mechanical) |
| Analyst | Basudeb Banerjee (CLSA India) | Basudeb Banerjee (CLSA India) | Same |

So at the **headline level**, the stance is unchanged. The "delta" is in the cuts to estimates and the underlying margin commentary.

### Where CLSA is incrementally MORE NEGATIVE

**1. EPS and margin estimates were cut on the April note.** This is the clearest negative delta — the January note explicitly said "Our estimates are unchanged" [7], whereas the April note cuts numbers:
- **FY26CL EBITDA margin: lowered 66bps** [2]
- **FY26CL EPS: cut 6.7%** [2][4]
- **FY27CL net profit: cut 4.9%** (per the financials table) [4]
- Revenue forecast also nudged down ~0.3–0.4% for FY26/27 [4]

**2. The 4QFY25 EBITDA-margin miss was significantly worse than 3QFY25's.**
- 3QFY25 (Jan note): EBITDA margin 11.6% — "in line with consensus but c.60bps below our estimate" [5]
- 4QFY25 (Apr note): EBITDA margin **10.5% — 140bps below consensus**; declined 113bps QoQ [1][2]

**3. New fixed-cost headwind explicitly flagged for 2–3 quarters.** April note: "We expect the negative impact of the new Kharkhoda plant (+10% increase in capacity) addition on its EBITDA margin to continue for 2–3 quarters, or the time it will take to ramp-up utilisation" [2]. This is a new structural drag — fixed costs from the new plant cost 30bps in Q4 alone, on top of 30bps advertising drag (e-Vitara launch, auto expo), 20bps raw material, 40bps adverse mix (lower exports/CNG/SUV mix), and 90bps "other expenses" (CSR, repairs, digitalisation) [2]. The Jan note's bridge was milder (20bps promotions, 40bps advertising, 10bps employee, 20bps adverse FX) [6].

**4. CLSA assumes slower top-line than management guides to.**
- Exports: MSIL guides 20% YoY in FY26; CLSA models only **12.5% YoY** [3]
- Domestic PV: CLSA builds in only **4% YoY growth** for FY26CL despite MSIL guiding to grow ahead of industry on two SUV launches [3]
- e-Vitara to 100 export destinations is explicitly **NOT** built aggressively into CLSA's 13% Cagr FY25-27CL export forecast [1]

**5. Subdued demand outlook explicitly cited as reason for cuts.** April note: "Higher fixed costs due to new plants for the next 2-3 quarters, an increase in raw material prices and the **subdued demand outlook leading to higher discounts** will impact its EBITDA margin" [2].

### Where CLSA's positive bias is reaffirmed (why O-PF was held)

- **Valuation cushion**: "MSIL is currently trading at a 15% discount to its long-term average forward PE" [1] — this is a NEW explicit framing in the April note that wasn't headlined in January and is doing the work of supporting the O-PF call even as estimates come down.
- **CNG mix as a margin cushion**: "its share of CNG-powered vehicles is on the rise where it has the lion's share, and thus this should cushion profitability amidst rising input costs" [1] — same thesis as January's CAFE-3 / TCO argument [5].
- **Discounts actually falling**: discount/unit dropped to **Rs28k** in 4Q from Rs31k in 3Q [1], reversing the prior creep (Rs30.1k in 3Q vs Rs29.3k in 2Q) [6]. This is a positive operational data point versus the January report.
- **SUV launch optionality**: "a successful SUV launch could pose upside risk to our numbers" — CLSA's domestic 4% assumption is conservative versus management's "grow ahead of PV industry" [3].
- **CL EPS now above consensus**: CLSA's FY27CL EPS at 102% of consensus, FY28CL at 106% (April note) [4] vs FY26CL at 103% in January [8] — CLSA still sits above the Street on out-years.

### The June 2025 rare-earth-magnet sector note adds nothing negative for MSIL specifically

The most recent CLSA sector note touching Maruti (25-Jun-2025) deals with China's rare-earth-magnet export curbs and concludes "with EVs contributing hardly mid-single digit revenue mix of most OEMs and being EBITDA neutral to negative, this supply chain issue from EV perspective is hardly going to impact FY26CL earnings much" [9]. Maruti's rating in that note is reaffirmed **O-PF at Rs12,806.1** [10] — i.e., no change vs the April call. The note flags **Bajaj Auto and Sona BLW (not Maruti) as the most magnet-exposed names** [9][10], because Maruti's BEV mix is small and the e-Vitara had not yet ramped.

### Synthesis — how to read CLSA's incremental stance

CLSA is **incrementally less positive on near-term earnings power** (FY26 EBITDA margin down 66bps, FY26 EPS down 6.7%, FY27 NP down 4.9%) driven by:
1. Kharkhoda plant fixed-cost drag for 2–3 quarters,
2. Higher advertising/launch spend (e-Vitara, auto expo),
3. Lower modelled domestic PV growth (4%) and export growth (12.5%) than MSIL guides to,
4. Subdued demand → sustained discount intensity.

But the **overall thesis is held at O-PF** because:
1. The stock has already de-rated to a 15% discount vs long-term forward PE,
2. The CNG mix structurally cushions margins versus peers as input costs rise,
3. There's optionality from two FY26 SUV launches and the e-Vitara export ramp that CLSA explicitly hasn't modelled aggressively,
4. The discount-per-unit data point actually improved sequentially in 4Q.

In one line: **CLSA is more negative on the print and the next 2–3 quarters, but the valuation reset has made them more comfortable underwriting the long-term call at the same TP** — the report title itself captures this ("Drive ahead & supportive valuation") versus the January title ("Margin fell QoQ despite better scale"), shifting the support for the call from operational momentum to valuation.

---
**Sources**
[1] Maruti Suzuki - O-PF (Drive ahead & supportive valuation) — CLSA, Basudeb Banerjee (28-Apr-2025) — 607957045LinqAlpha.PDF
[2] Maruti Suzuki - O-PF (Drive ahead & supportive valuation) — CLSA (28-Apr-2025) — 607957045LinqAlpha.PDF
[3] Maruti Suzuki - O-PF (Drive ahead & supportive valuation) — CLSA (28-Apr-2025) — 607957045LinqAlpha.PDF
[4] Maruti Suzuki - O-PF (Drive ahead & supportive valuation), Financials table — CLSA (28-Apr-2025) — 607957045LinqAlpha.PDF
[5] Maruti Suzuki - O-PF (Margin fell QoQ despite better scale) — CLSA (29-Jan-2025) — 607949256LinqAlpha.PDF
[6] Maruti Suzuki - O-PF (Margin fell QoQ despite better scale), margin bridge — CLSA (29-Jan-2025) — 607949256LinqAlpha.PDF
[7] Maruti Suzuki - O-PF (Margin fell QoQ despite better scale), rating reaffirmation — CLSA (29-Jan-2025) — 607949256LinqAlpha.PDF
[8] Maruti Suzuki - O-PF (Margin fell QoQ despite better scale), TP and target multiples — CLSA (29-Jan-2025) — 607949256LinqAlpha.PDF
[9] India Autos (Rarity of rare earth magnets) — CLSA (25-Jun-2025) — 607962767LinqAlpha.PDF
[10] India Autos (Rarity of rare earth magnets), Companies mentioned — CLSA (25-Jun-2025) — 607962767LinqAlpha.PDF

## Citations

- [1] **607957045LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607957045LinqAlpha.PDF>
- [2] **607957045LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607957045LinqAlpha.PDF>
- [3] **607957045LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607957045LinqAlpha.PDF>
- [4] **607957045LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607957045LinqAlpha.PDF>
- [5] **607949256LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/01/607949256LinqAlpha.PDF>
- [6] **607949256LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/01/607949256LinqAlpha.PDF>
- [7] **607949256LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/01/607949256LinqAlpha.PDF>
- [8] **607949256LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/01/607949256LinqAlpha.PDF>
- [9] **607962767LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607962767LinqAlpha.PDF>
- [10] **607962767LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607962767LinqAlpha.PDF>

