Maruti shows a "royal" jump

Maruti Suzuki rose almost 4% to Rs.9647 during the opening bell session and even now, continues to remain in around the same levels. Its 52-week high stands at Rs.10,000.

The stock price is up not on the back of its Q3FY18 earnings but more on account of the revision in royalty outgo. The company will be lowering royalty payments for new models starting with the Ignis. These changes would be implemented after approval by the board of parent company Suzuki Motor Corporation. A cut in royalty bodes well as it would mean a direct positive impact on the margins.

Following this, most of the brokerage houses were upbeat, with CLSA hiking its target price to Rs.11,300 and Nomura to Rs.11,245.

But for this “royalty” news, the stock price would have actually tumbled down as the company’s performance for Q3FY18 was lackluster. It reported a 3% (YoY) rise in net profit at Rs.1799 crore. Revenue was up 14% at Rs.19,283 crore.

The fall in net profit was mainly on account of increase in effective tax rates and lower non-operating income due to mark-to-market impact on the invested surplus.