The share price of Maruti Suzuki on Wednesday plunged by over 1%, after clocking intraday low of Rs 7.143.80 per piece on Sensex. However, since then the stock has corrected and was trading at Rs 7181.65 per piece down by Rs 37.35 or 0.52% on the same index at around  1241 hours. A lot has happened with Maruti since the start of April month. Firstly, the company has increased prices by Rs 689 across its models from ex-showroom Delhi. While the company has also posted a 4.7% jump in its sales for FY19 with 1,862,449 units compared to 1,779,574 units of previous fiscal. Despite posting a positive sales number, experts are not enthusiastic about Maruti shares. In fact, many have given target price even below Rs 7,000-mark, which indicates that Maruti is set to take the downward road. 

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Giving a hold rating with a target price of Rs 6,950 per piece, Sharekhan said, "continue to advise investors to refrain from adding any fresh position in the stock."

Sharekhan highlighted that a prolonged slowdown in PV industry coupled with margin pressures have led to the risk of likely downgrades. Also, earnings are expected to remain in a declining trend for the next two quarters. Hence, they have cut their estimates by 7% for FY20 and FY21 to factor demand slowdown and margin pressures.

Last week, Maruti presented its production list for FY19, which was quite surprising. Although overall FY19 sales were in a positive note, but for the latest March 2019 month, the sales were down by 1.6% with 158,076 vehicles compared to 160,598 units sold in the same month of previous year. Not only this, Maruti's production in the same month were negative across the segment. 

In the mini segment, Maruti produced only 17,439 units of Alto and Old WagonR, which were down by 54.9% versus 38,659 units in March 2018. Also, in the compact segment including cars like New WagonR, Celerio, Ignis, Swift, Baleno and Dzire, the company made 81,163 units down by 7.5% from 87,771 units in March 2018. 

Meantime, in the mid-size segment which includes Ciaz, the production was down by 35.9% with 3,205 units in March 2019 versus 5,000 units in March 2018. Apart from this, in utility segment involving Gypsy, Vitara Brezza, Ertiga and S-Cross, production was down by 26.4% to 17,719 units versus 24,076 units in March 2018. 

That said, overall production was at 136,201 units in March 2019 below 20.9% from 172,195 units in March 2018. These total include also Eeco, Omni and Super carry production numbers. This means demand is bleak for Maruti cars. 

Raghunandhan N L and Mumuksh Mandlesha analysts at Emkay said, "Our channel checks indicate near-term demand concerns due to tight liquidity condition for the business community and increasing vehicle prices. The volume performance is expected to gradually improve after elections, and single-digit growth likely in FY20."

The duo added, "Dealer inventory days have increased to 45-50 days, in comparison with normal levels of 20-30 days, and is expected to reduce in the coming months due to lower offtake from OEMs and sequential demand improvement due to the marriage/festive season."

Apart from this, competition is also another spoiler for Maruti's vehicles. Emkay analysts said, "Competitive intensity is likely to remain high in the near term, due to launches by peers. However, MSIL is expected to sustain market share over the next 1-2 years due to new products, network expansion, and shifting customer preferences toward petrol vehicles."

Hence, Emkay said, " We cut our FY19/20E EPS by 3%/2% to Rs247.5/Rs297.4 due to a 1-3% decline in volume expectations and a 20-30bps reduction in margin assumptions. Our FY21E EPS remains unchanged at Rs347. We expect revenue/earnings CAGR of 15%/18% over FY19-21E with an average ROE of ~19% and free cash flow of ~Rs53bn. The stock trades at a P/E of 23x/20x on FY20E/21E EPS. We recommend Hold with a TP of Rs6,940, based on 20x FY21E EPS."

From the above, it can be said that Maruti is not among the potential stocks for buying, but existing investors can continue to hold till the near term pressures materialise.