---
endpoint: analytics
pattern: Autos
status: done
latency_ms: 316406
conversation_id: c7d8a69b-7847-4499-bff9-97ed17e66996
citations: 21
created: 2026-05-31 18:55:59Z
---

# Provide a one‑year narrative of Maruti Suzuki, outlining how business performance, market conditions, and company actions shaped investor sentiment and valuation.

# Maruti Suzuki India (MARUTI) — One‑Year Narrative (May 2025 → May 2026)

The past 12 months for Maruti Suzuki India (MSIL) describe an unusually sharp U‑shape: a sluggish, margin‑compressed first half overshadowed by capacity start‑up costs, rare‑earth supply anxiety and tepid entry‑segment demand — followed by an explosive Q3 rebound triggered by India's mid‑August 2025 GST reform, capped by a record FY26 print where revenue and volume hit all‑time highs but Q4 net profit modestly disappointed Street estimates on treasury MTM losses. Sentiment moved from "cyclical drag, defensive holding" to "policy‑led structural re‑rating, supply‑constrained leader," and broker positioning reflected that swing.

---

## 1. Setting the scene: the soft H1 FY26 (April–September 2025)

Entering the new fiscal year, the Indian PV industry was visibly tired. Wholesales contracted **~1.4% YoY in Q1 FY26**, with affordability pressure crushing the entry segment and SUV share already at >55% of the market; the hatchback segment had shrunk from a 46% share in FY19 to just 21% [1]. For Maruti specifically, **domestic volumes fell 4.5%** in Q1 FY26 to 430,889 units, only partially offset by a stand‑out **+37.4% YoY surge in exports to 96,972 units**, leaving total Q1 volumes nearly flat at 527,861 [2].

Margins compressed even more than the optics suggested. **Q1 FY26 EBIT margin slipped to 8.3% of net sales, vs. 8.7% in Q4 FY25** [3], pressured by:
- a ~30 bps drag from the Kharkhoda Phase‑1 greenfield plant (commissioned end‑Q4 FY25) carrying overheads and depreciation ahead of utilisation,
- adverse steel and forex (~40 bps each),
- a seasonal employee‑cost bump of ~50 bps [3].

CLSA's "Drive ahead & supportive valuation" Apr‑27‑2025 note had already flagged exactly this trajectory: **EBITDA margin in Q4 FY25 came in at 10.5%, 140 bps below consensus**, hurt by new‑plant fixed cost (–30 bps), advertising for the e‑Vitara launch (–30 bps) and a SUV/CNG export mix that turned negative (–40 bps) [18]. CLSA kept its **OUTPERFORM rating with TP of Rs 13,449**, but trimmed FY26CL EBITDA margin by 66 bps and FY26 EPS by 6.7%, citing 2–3 quarters of plant‑drag [17]. The CLSA bull case rested on (a) MSIL trading at ~15% discount to its long‑term forward P/E and (b) the rising CNG mix (where Maruti holds the lion's share) cushioning input‑cost pressure [18].

Sitting on top of all this was an **incremental tail risk from rare earth magnets**. After China imposed export licensing restrictions on seven heavy rare earth elements from April 2025, automakers globally faced supply uncertainty. CLSA's 25‑Jun‑2025 sector note judged that "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" [20] — implicitly leaving Maruti (still overwhelmingly ICE/CNG/hybrid) less exposed than EV‑heavy peers like Bajaj Auto or Sona BLW.

## 2. Q2 FY26 (July–September 2025): the calm before the policy storm

Q2 was deceptive. Headline volumes looked weak — **domestic sales fell 5.1% YoY to 440,387 units, with exports up a robust 42.2% to 110,487** [4] — but the weakness was largely artificial. From **mid‑August through 22 September, dealer offtake essentially paused** as customers and dealers waited for the long‑rumoured GST cut. EBIT margin nevertheless improved sequentially to 8.5% of net sales from 8.3% in Q1, helped by 110 bps of operating leverage, partially offset by higher sales promotion and Victoris launch advertising [4].

The decisive event of the year landed on **15 August 2025**, when the government announced a sweeping GST reform that took small‑car tax rates to an 18% bracket. Maruti management called this "a landmark reform which has brought buoyancy not just to cars but to the overall consumption sentiment in India" [6]. PM Modi personally inaugurated **the start of e‑Vitara BEV production** the same quarter — Maruti's first electric vehicle, intended for **export to over 100 countries** including Europe and Japan [6].

Retail momentum from 22 September (Navratra Day 1 + GST cut Day 1) was extraordinary. Maruti booked **~500,000 retail bookings in the post‑22‑September festive window vs. 350,000 in the same period a year earlier**, and **retail sales of 400,000 vs 211,000 a year earlier** — with the small‑car bucket nearly doubling [5]. October retail growth was **+20% overall, +30% in cars in the 18% GST bracket** [5].

## 3. Q3 FY26 (October–December 2025): the policy bounce arrives

If H1 set up the despair, Q3 delivered the catharsis. **The PV industry, which had declined 0.4% in H1 FY26, swung to +20.5% YoY growth in Q3** — and Maruti's domestic volumes outperformed at **+22% YoY** [7]. The company printed:

- **Highest‑ever quarterly net sales of ~INR 475 billion vs. INR 368 billion a year earlier** [8],
- **Highest‑ever Q3 retail sales of ~683,000 units** with network inventory falling to just 3–4 days and an **order book of ~175,000 units** [7],
- Net profit of ~INR 38 billion vs. INR 36.5 billion, suppressed by a **one‑time INR 5,939 million provision tied to India's new Labour Codes** which alone cost the EBIT margin ~125 bps [9],
- Sequential EBIT margin of 8.1% vs. 8.4% in Q2 — the optical step‑down entirely explained by the labour‑code one‑off and rare‑earth/raw‑material headwinds, partially offset by 190 bps of operating leverage [9].

The Victoris (launched in Q2) crossed 50,000 cumulative bookings, won Indian Car of the Year, and pulled Maruti meaningfully back into the mid‑SUV segment that had previously been Mahindra/Hyundai/Tata territory. Suzuki's chairman publicly committed to **eight more SUV launches by 2030–31** [7]. Management guidance for *sustainable* industry growth was modest (~6–7%) — a deliberate hedge against the possibility that GST‑driven Q3 contained preponed/festive demand — but the order book and capacity expansion told a less cautious story.

## 4. Q4 FY26 and FY26 (January–April 2026): a record year, but with a Q4 catch

Maruti closed FY26 with results that, on the annual scoreboard, were the best in the company's history:

| Metric | FY26 | FY25 | YoY |
|---|---|---|---|
| Sales volume | 2,422,713 units | 2,234,266 units | +8.4% |
| Net sales | ~INR 1.74 trillion | ~INR 1.45 tn | **+20.2%** [12] |
| Net profit | INR 144.4 billion | INR 142.9 billion | ~+1% [12] |
| Dividend | **INR 140 / share (record)** | INR 135 / share | +3.7% [12] |
| Exports | 447,000 units (record) — **49% of all India PV exports** | n.a. | n.a. [13] |

The **Q4 FY26 print (28 Apr 2026)** in isolation was more nuanced:
- **Record quarterly volumes of 676,209 units, +11.8% YoY** with domestic 538,994 and all‑time‑high exports of 137,215 [11],
- Record Q4 net sales ~INR 501 billion vs. INR 389 billion a year ago [11], with **EBIT margin expanding to 8.8% of net sales from 8.1% in Q3** as the labour‑code one‑off rolled off and discounts/forex turned favourable [3],
- **However, Q4 standalone PAT fell 6.9% YoY to ~INR 36 billion** — driven primarily by a **~INR 7.5 billion mark‑to‑market hit on the company's invested surplus** from a hardening of bond yields (about INR 1,075 crore Y/Y swing in other income) [16],
- This caused a **clear Street miss: INR 35.91 bn reported vs. StreetAccount consensus of INR 40.91 bn** [21], briefly knocking sentiment on results day.

A key piece of structural news embedded in the FY26 results was the **amalgamation of Suzuki Motor Gujarat Private Limited (SMG) into MSIL**, effective 1 April 2025 (closed 1 December 2025). This was a P&L‑neutral move at EBIT but materially restated cost‑head presentation — depreciation moved into its natural head, EBITDA was adjusted upward, and historical comparisons required restatement [9].

## 5. Company actions: capacity, products, exports

Through the year, management responded to GST‑led demand with one of the most aggressive capacity expansion programs in Indian auto history:

- **Kharkhoda Phase‑2 plant commissioned April 2026** (+250,000 units p.a.) [14],
- **Hansalpur (Gujarat) fourth production line** to go live within FY27 (+250,000 units p.a.) [14],
- A **second Gujarat greenfield facility** announced [7],
- Medium‑term capacity target: **4 million units p.a.** [14],
- ~190,000 unserved customer orders at FY26 close (130,000 of which were in the small‑car 18% GST bracket) [11].

Product cadence was equally heavy: e‑Vitara (first EV, exports to ~29/100 target countries already), Victoris (mid‑SUV, ICOTY 2026), all‑new Dzire (5‑star Bharat NCAP, top‑selling PV in FY26), and 6 airbags as standard across >99% of the lineup [13]. The first e‑Vitara shipments left Gujarat port; cumulative exports to 28+ countries reached >13,000 units by December 2025 [7].

## 6. How investor sentiment and broker positioning evolved

Reading the year through the broker prism shows the sentiment U‑shape clearly:

- **Early 2025 (CLSA, 29‑Jan‑2025)**: After Q3 FY25 EBITDA margin of 11.6% missed CLSA estimates by ~60 bps on higher discounting in a "sluggish demand for entry/compact‑level cars" environment, CLSA *raised* its TP to Rs 13,446 (from Rs 12,631) on a roll‑forward to Mar‑27CL, citing CNG and CAFÉ 3 tailwinds — but only because the stock had already underperformed the market [19].
- **Apr‑2025 (CLSA)**: Post Q4 FY25, CLSA effectively held TP at Rs 13,449 (24x core FY27CL EPS, ~15% discount to long‑term forward P/E) but cut FY26 EBITDA margin and EPS forecasts by 66 bps / 6.7% respectively, citing the Kharkhoda fixed‑cost overhang and a "subdued demand outlook leading to higher discounts" [17][18].
- **March 2026 (post Q3 surprise)**: Sentiment bifurcated. **Asian Markets Securities upgraded Maruti to Buy from Hold on 5 March 2026** [25], while **BofA went the other way on 9 March 2026, downgrading both Maruti Suzuki and Hyundai Motor India while upgrading Hero MotoCorp** — likely reflecting concerns over either valuation post the GST‑led re‑rating or rotation toward two‑wheelers [22].
- **April 2026 (pre‑results)**: **Prabhudas Lilladher upgraded Maruti, M&M, Eicher and Bajaj Auto on 10 April 2026** [23], consistent with a broader bullish posture on the PV recovery thesis.
- **May 2026 (April monthly data)**: April 2026 retail sales of **239,646 units beat StreetAccount estimate of 205,038 units** [24], reinforcing the "supply‑constrained, demand‑rich" framing management has been telegraphing.

## 7. What shaped valuation, in one paragraph

For most of mid‑2025 Maruti traded as a discounted defensive — held back by margin compression, plant‑ramp drag, weak entry segment and the rare‑earth overhang. The 15 August GST reform changed the discount rate: Q3's 20.5% PV industry print proved this is not a niche stimulus but a structural enlargement of the addressable market, which is precisely the reason management aggressively pulled forward capacity to 4 million units. The Q4 PAT miss on treasury MTM is a quality‑of‑earnings, not a quality‑of‑franchise, issue — so the dominant narrative leaving FY26 is: market leader (~40%+ share, ~49% of India PV exports), nearly 200k order backlog, ~10% domestic industry growth guided for FY27 by management [14], a fresh EV platform exporting to 100 countries, and a 10% EBIT margin medium‑term aspiration that management is willing to chase via volume rather than price. Bearish counterpoints are real — West Asia geopolitical pressure on energy/raw materials, hedging that is now only "calibrated" against spiky commodities, pending CAFE norms, and ongoing PGM/aluminum/copper inflation [16] — but they're now the residual risks of a re‑rated leader, not the central thesis. Hence the simultaneous appearance of mid‑cycle upgrades (Asian Markets, Prabhudas Lilladher) and selective downgrades (BofA): the easy gap‑to‑fair‑value has closed; from here the debate is about how much of the FY27 10% growth is already in the price.

---

### Caveats on data freshness
- CLSA RMS coverage in this workspace runs through ~25 June 2025; broker‑level updates after that date are not in the internal archive, so the second‑half broker color is sourced from StreetAccount headlines rather than full CLSA notes.
- The most recent full earnings transcript captured is the Q4 FY26 call dated 28 April 2026.

---

**Sources**
[1] Maruti Suzuki Q1 FY26 Earnings Call — 31‑July‑2025 (industry context)
[2] Maruti Suzuki Q1 FY26 Earnings Call — 31‑July‑2025 (Q1 volume detail)
[3] Maruti Suzuki Q1 FY26 Earnings Call — 31‑July‑2025 (Q1 margin walk)
[4] Maruti Suzuki Q2 FY26 Earnings Call — Oct‑2025 (Q2 volume)
[5] Maruti Suzuki Q2 FY26 Earnings Call — Oct‑2025 (post‑22‑Sep festive retail)
[6] Maruti Suzuki Q2 FY26 Earnings Call — Oct‑2025 (GST reform, e‑Vitara launch)
[7] Maruti Suzuki Q3 FY26 Earnings Call — 28‑January‑2026 (industry +20.5%, order book)
[8] Maruti Suzuki Q3 FY26 Earnings Call — 28‑January‑2026 (Q3 net sales)
[9] Maruti Suzuki Q3 FY26 Earnings Call — 28‑January‑2026 (labour code, margin walk)
[10] Maruti Suzuki Q4 FY26 Earnings Call — 28‑April‑2026 (H1 vs H2 PV industry)
[11] Maruti Suzuki Q4 FY26 Earnings Call — 28‑April‑2026 (Q4 record volumes & sales)
[12] Maruti Suzuki Q4 FY26 Earnings Call — 28‑April‑2026 (FY26 record net sales & dividend)
[13] Maruti Suzuki Q4 FY26 Earnings Call — 28‑April‑2026 (FY26 volume, export share)
[14] Maruti Suzuki Q4 FY26 Earnings Call — 28‑April‑2026 (capacity expansion, Kharkhoda Phase 2)
[15] Maruti Suzuki Q4 FY26 Earnings Call — 28‑April‑2026 (FY27 ~10% growth guidance)
[16] Maruti Suzuki Q4 FY26 Earnings Call — 28‑April‑2026 (MTM impact on other income)
[17] CLSA — Maruti Suzuki: Drive ahead & supportive valuation (O‑PF) — 27 Apr 2025 — 607957045LinqAlpha.PDF
[18] CLSA — Maruti Suzuki: Drive ahead & supportive valuation (O‑PF) — 27 Apr 2025 — 607957045LinqAlpha.PDF
[19] CLSA — Maruti Suzuki: Margin fell QoQ despite better scale (O‑PF) — 29 Jan 2025 — 607949256LinqAlpha.PDF
[20] CLSA — India Autos: Rarity of rare earth magnets — 25 Jun 2025 — 607962767LinqAlpha.PDF
[21] StreetAccount — Maruti Suzuki India Q4 standalone net profit INR35.91B vs SA INR40.91B — 28 Apr 2026
[22] StreetAccount — BofA upgrades Hero MotoCorp; downgrades Maruti Suzuki India, Hyundai Motor India — 9 Mar 2026
[23] StreetAccount — Prabhudas Lilladher upgrades M&M, Eicher Motors, Maruti Suzuki India and Bajaj Auto — 10 Apr 2026
[24] StreetAccount — Maruti Suzuki India April total sales 239,646 vs SA 205,038 — 1 May 2026
[25] StreetAccount — Maruti Suzuki India upgraded to buy from hold at Asian Markets Securities — 5 Mar 2026

## Citations

- [1] **Maruti Suzuki India Ltd., Q1 2026 Earnings Call, 31-July-2025 7** · external
- [2] **Maruti Suzuki India Ltd., Q1 2026 Earnings Call, 31-July-2025 7** · external
- [3] **Maruti Suzuki India Ltd., Q1 2026 Earnings Call, 31-July-2025 7** · external
- [4] **Maruti Suzuki India Limited, Q2 2026** · external
- [5] **Maruti Suzuki India Limited, Q2 2026** · external
- [6] **Maruti Suzuki India Limited, Q2 2026** · external
- [7] **Maruti Suzuki India Ltd., Q3 2026 Earnings Call, 28-January-2026 6** · external
- [8] **Maruti Suzuki India Ltd., Q3 2026 Earnings Call, 28-January-2026 6** · external
- [9] **Maruti Suzuki India Ltd., Q3 2026 Earnings Call, 28-January-2026 6** · external
- [10] **Maruti Suzuki India Ltd., Q4 2026 Earnings Call, 28-April-2026 8** · external
- [11] **Maruti Suzuki India Ltd., Q4 2026 Earnings Call, 28-April-2026 8** · external
- [12] **Maruti Suzuki India Ltd., Q4 2026 Earnings Call, 28-April-2026 8** · external
- [13] **Maruti Suzuki India Ltd., Q4 2026 Earnings Call, 28-April-2026 8** · external
- [14] **Maruti Suzuki India Ltd., Q4 2026 Earnings Call, 28-April-2026 8** · external
- [15] **Maruti Suzuki India Ltd., Q4 2026 Earnings Call, 28-April-2026 8** · external
- [16] **Maruti Suzuki India Ltd., Q4 2026 Earnings Call, 28-April-2026 8** · external
- [21] **Maruti Suzuki India reports Q4 standalone net profit INR35.91B vs StreetAccount INR40.91B** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4643514&_doc_date=2026-04-28&_doc_product=SA>
- [22] **BofA upgrades Hero MotoCorp; downgrades Maruti Suzuki India, Hyundai Motor India** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4590913&_doc_date=2026-03-09&_doc_product=SA>
- [23] **Prabhudas Lilladher upgrades M&M, Eicher Motors, Maruti Suzuki India and Bajaj Auto** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4624214&_doc_date=2026-04-10&_doc_product=SA>
- [24] **Maruti Suzuki India reports April total sales (units) 239,646 vs StreetAccount 205,038** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4653605&_doc_date=2026-05-01&_doc_product=SA>
- [25] **Maruti Suzuki India upgraded to buy from hold at Asian Markets Securities** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4587524&_doc_date=2026-03-05&_doc_product=SA>

