Maruti Suzuki announces production cut in September; shares fall over 1.5%

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Shares of India’s largest passenger vehicle manufacturer Maruti Suzuki India slipped as much as 1.57% to Rs 6,738.70 a piece in today’s trade after the company announced 60% cut in production for the month of September due to constraints in semiconductors supply. This is the second consecutive monthly cut seen by the company due to the chip shortage.

“Owing to a supply constraint of electronic components due to the semiconductor shortage situation, the company is expecting an adverse impact on vehicle production in the month of September in both Haryana and its contract manufacturing company, Suzuki Motor Gujarat in Gujarat,” Maruti Suzuki (MSIL) said in an exchange filing.

“Though the situation is quite dynamic, it is currently estimated that the total vehicle production volume across both locations could be around 40% of normal production,” the release added.

In a separate notification, the company will also be going for an across the board price hike for its vehicles this month to offset the increasing cost of raw materials.

Despite the production cuts announced by the company, analysts on the street are bullish on the counter. Goldman Sachs maintains a ‘Buy’ rating on the stock with a price target of Rs 9,036 apiece.

Citing production cut the global brokerage firm has reduced its FY22 EBITDA (earnings before interest tax depreciation & amortization) estimates by 5%. While keeping FY23 & FY 24 estimates unchanged.

“September production cuts due to semiconductor shortages. Volume impact will be partially offset by price hikes,” Goldman Sachs stated.

The share touched a 52-week high of Rs 8,400 on January 13, 2021, and a 52-week low of Rs 6,273.70 on September 24, 2020. It is trading 19.78% below its 52-week high and 7.41% above its 52-week low.