Maruti Suzuki Ltd delivered a mixed but strategically resilient Q3FY26 performance, as export strength and a GST-led domestic recovery offset near-term margin pressures. While revenues aligned with expectations, profitability missed estimates due to higher input costs, inventory tightness, and one-off labour provisions. Axis Securities has maintained its BUY recommendation with a revised target price of Rs 16,860, citing improving demand visibility, expanding SUV and EV presence, and sustained export leadership. With domestic affordability improving and exports acting as a structural hedge, Maruti’s long-term growth trajectory remains intact despite transient earnings headwinds.

Q3FY26 Snapshot: Revenue Holds Firm, Profitability Faces Temporary Drag

Maruti Suzuki’s top line remained resilient despite earnings pressure.
For Q3FY26, the company reported consolidated revenue of Rs 49,892 crore, broadly in line with Axis Securities’ estimates. The performance was driven by 21.2% volume growth and a 10% improvement in realisations, supported by a richer product mix tilted toward SUVs and exports.

However, EBITDA declined to Rs 5,572 crore, falling short of expectations, while adjusted PAT of Rs 3,794 crore missed estimates by 17%, largely due to elevated depreciation and interest expenses.

Domestic Market Rebound: GST Cut Revives Entry-Level Demand

A sharp GST rationalisation emerged as the key inflection point.
The government’s reduction of GST on small passenger vehicles from 28% to 18% triggered a strong recovery in domestic demand. Industry growth accelerated to ~20.5% YoY in Q3FY26, a sharp reversal from the contraction seen in H1FY26.

Maruti Suzuki outperformed the industry, recording ~22% domestic volume growth, led by renewed traction in small cars and compact SUVs. Management highlighted a notable 7% increase in first-time buyers, reflecting upgrades from two-wheelers as affordability improved.

Despite near-term demand being partly driven by prepone buying, management plans to reassess sustainable growth levels in early FY27.

Exports: Strategic Growth Engine Provides Stability

Exports continued to underpin Maruti’s growth narrative.
The company retained a commanding ~46% share of India’s passenger vehicle exports in CY25, reinforcing its global footprint. Although export volumes posted low single-digit growth in Q3FY26 due to a one-off missed shipment to South Africa, export revenues still reached ~Rs 8,200 crore for the quarter.

Maruti’s export diversification strategy now spans 100+ countries, mitigating tariff and regional trade risks. The company’s first electric vehicle, the eVitara, has already been exported to 29 countries, with cumulative shipments of ~13,000 units by December 2025. The UK emerged as the largest destination, while the domestic launch is expected shortly.

Margin Compression Explained: Transient Headwinds Dominate Q3

Multiple short-term factors weighed on operating margins.
EBITDA margins declined to 11.2%, down from 13.1% in Q2FY26. The pressure stemmed from:

Higher commodity costs (PGM, aluminium, copper): ~60 bps

Rare earth supply disruptions: ~20 bps

Inventory depletion amid historically low dealer stock levels: ~50 bps

Selective price reductions post GST cut: ~70 bps

One-time labour code provision: ~125 bps

These were partially offset by strong operating leverage (~190 bps) and favourable mix with lower discounting (~120 bps).

Management expects margin stability to improve over the medium term as scale benefits, hedging discipline, and efficiency gains begin to offset commodity volatility.

Segment Performance: SUVs and Compact Cars Drive Volume Growth

Volume growth remained broad-based across segments.
Passenger vehicle sales reached 6.68 lakh units in Q3FY26, up 21.2% QoQ and 23.3% YoY. SUVs delivered the strongest momentum, reflecting a continued shift in consumer preference.

Key Volume Metrics (Units)

Concall Insights: Inventory Tight, Capacity Expansion On Track

Operational indicators signal strong underlying demand.
Dealer inventory tightened sharply to 3–4 days, the lowest in Maruti’s recent history, underscoring robust retail traction. The company exited Q3FY26 with an order book of approximately 175,000 vehicles, while retail sales touched a record 683,000 units.

On capacity, Maruti reiterated its commitment to expansion, including the Kharkhoda plant (2.5 lakh units) and incremental lines in Gujarat. Annual capex remains guided at ~Rs 10,000 crore, supporting medium-term volume growth.

Financial Outlook: Steady Growth with Improving Mix

Axis Securities projects a stable multi-year growth profile.
Over FY25–FY28E, the brokerage expects:

Volume CAGR: ~7%

Revenue CAGR: ~12%

EBITDA CAGR: ~11%

PAT CAGR: ~9%

Improving mix, SUV penetration, and exports are expected to drive a gradual increase in average selling prices, even as pricing discipline remains intact.

Valuation, Target Price, and Investment Levels

BUY maintained with recalibrated valuation.
Axis Securities values Maruti Suzuki at 28x FY28E EPS, arriving at a revised target price of Rs 16,860, down from Rs 18,170 earlier, reflecting near-term margin pressures.

CMP (28 Jan 2026): Rs 14,876

Target Price: Rs 16,860

Upside Potential: ~13%

The brokerage continues to view Maruti as a structural beneficiary of domestic affordability recovery and India’s growing export footprint.

Key Risks and Monitorables

Faster-than-expected recovery in small cars remains the key upside trigger.
On the downside, sustained commodity inflation, export execution risks, or prolonged pricing pressure could delay margin recovery. However, Maruti’s balance sheet strength and scale provide a meaningful buffer against cyclical volatility.