Goldman Sachs is of the view that chip shortage could cause sharper near-term production impact adding that August production setback could raise some concerns around pre-festive stocking.
Maruti Suzuki India | Representative image
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Maruti Suzuki India share price added half a percent at open on August 18 after Goldman Sachs retained ‘buy’ call on the stock.
The global research firm has maintained its ‘buy’ call on the stock for a target of Rs 9,036 per share. The brokerage firm is of the view that chip shortage could cause impact near-term production, adding that August production setback could raise some concerns around the pre-festive stocking, according to a CNBC-TV18 report.
“Sharp Yen appreciation, higher-than-expected sourcing costs are the key concerns. Failure of new launches, input supply volatility and rapid shift towards EVs are concerns too,” it added.
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The stock was trading at Rs 6,917.15, up Rs 28.95, or 0.42 percent at 09:17 hours. It has touched an intraday high of Rs 6,943.25 and an intraday low of Rs 6,902.75.
The scrip was trading with volumes of 405,972 shares, compared to its five day average of 28,283 shares, an increase of 1,335.38 percent.
The ongoing semiconductor shortage may reportedly force Maruti Suzuki to cut vehicle production in August by 30-40 percent, or nearly three-fourths of the 5 percent annual production cut forecast earlier. The company is now expected to produce 110,000-120,000 units this month.
The semiconductor shortage had already hit Maruti Suzuki’s contract manufacturing company Suzuki Motor Gujarat (SMG), which will shut production for three consecutive Saturdays in August.
“Production at Manesar is likely to go down to 45,000 units in August versus the average production of 65,000 units a month. At Suzuki Motor Gujarat, the output is likely to be cut by 65-70 percent to 15,000-20,000 cars,” sources added.
Moneycontrol could not independently verify the report.
Despite the hamper in production, the auto major said its total production in July increased by 58 percent on a yearly basis to 1,70,719 units.
The company had produced a total of 1,07,687 units in the year-ago period, Maruti Suzuki India (MSI) said in a regulatory filing.
“While the number of vehicles manufactured in July 2021 is higher than that of July 2020, a comparison is not meaningful because sales in July last year had a much lower base due to pandemic related disruptions,” the auto major noted.
Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol advises users to check with certified experts before taking any investment decisions.
