Maruti stock hits a record ₹7,000

of Maruti Suzuki India Ltd hit the ₹7,000 mark for the first time on Friday, stretching their gains to above 33% so far this year, as investors continued to buy the stock on hopes of sustainable strong sales.

The stock closed at a record high of ₹7,073.35 a share on BSE, up 1.3% from its previous close. The exchange’s benchmark Sensex index rose 0.9% to close at 31,028.21 points.

To be sure, the recently announced goods and services tax (GST) regime favours the broader car market and Maruti, with its wide range of products including sedans and compact SUVs, is well-positioned to enjoy the benefits. This too has added heft to the stock.

“Maruti’s dominance over the Indian passenger vehicle (market) with a staggering 47% market share is unparalleled in any other major growing market. We believe the company’s success can be attributed to a perfect interplay of significant cost leadership, extensive distribution reach and wide product portfolio. These factors have created several self perpetuating virtuous cycles and a strong moat for Maruti, enabling it to consistently enjoy complete monopoly over industry profit pools,” SBICap Securities said in a note to investors.

“New launches have been the main growth driver for industry volumes over the last five years, and we expect the trend to continue. Maruti plans to launch four products in FY18 and two annually by FY20. This along with the doubling of distribution network and the benign competitive environment would help the company strengthen its market share,” the SBICap Securities report added.

On 27 April, the company reported a strong 16% growth in its March quarter on the back of higher sales from its Baleno and Vitara Brezza models. Its market share inched up to 47.9% from 47.4% a year ago despite demonetisation.

“We remain positive on Maruti, as we expect strong volume growth in FY18-19 driven by implementation of the 7th Pay Commission and a strong model cycle. We expect valuation multiples to remain at the present level, as Maruti has demonstrated its ability to keep up with the premiumization of car demand and has increased its market share in higher-priced segments,” UBS said in a 28 April note to investors.