Maruti overtakes SBI to become sixth most valued firm on BSE
NEW DELHI: Shares of India’s largest car maker Maruti Suzuki India Ltd jumped 2.11% to an alltime high of ₹9,072 apiece on Friday, making the auto maker the sixth most valued firm on the BSE, ahead of State Bank of India (SBI).
The list of the five most valued companies on the BSE is led by Reliance Industries Ltd, and includes TCS Ltd, HDFC Bank Ltd, ITC Ltd and Hindustan Unilever Ltd.
Maruti Suzuki’s market capitalisation on Friday stood at ₹2.74 lakh crore, marginally ahead of SBI’S ₹2.71 lakh crore.
In terms of valuation, the Indian unit of Japanese auto maker Suzuki Motor Corp. is ahead of companies such as Housing Development Finance Corp. Ltd (HDFC), Oil and Natural Gas Corp. Ltd (ONGC) and Infosys Ltd.
The reason for this appreciation in stock price can be attributed to the continuous increase in the company’s market share in the passenger vehicle segment, said Aswin Patil, sector analyst at Mumbai-based brokerage firm LKP Securities Pvt. Ltd.
“Maruti Suzuki has guided for a volume growth of 10-12% in FY18 and 12-14% in FY19. Hence, most of the brokerages have a bullish view on the stock. Also on the margin front, there is further room for improvement and the realisation per unit of the company has also been improving. The November wholesale numbers have also been good. So, this has all contributed to the growth in the stock price,” Patil said.
“We have a target price of ₹10,000 for the stock by FY19,” he added.
Maruti shares have risen 73% in the past one year.
Maruti is riding an extremely successful product cycle that has seen the introduction of models such as the Baleno hatchback, Vitara Brezza SUV and Dzire sedan.
Since July 2012, the company has gained more than 12 percentage points in market share to control more than 50% of the Indian car market, where more than three million cars are sold every year.
“Given the improvement in market share, rising rural contribution, reduced Japanese yen exposure, improving share of premium products, healthy ROE/ROCE (return on equity/ return on capital employed—26% in FY19/20E) and improving free cash flows, MSIL (Maruti Suzuki) will continue to trade at a premium,” said Abhishek Jain and Sneha Prashant, analysts at HDFC Securities.
Over the past year, all the manufacturers in the passenger vehicles market have struggled to generate volumes due to the adverse impact of demonetisation and the introduction of the goods and services tax (GST).
Maruti Suzuki’s wholesale volumes touched an all-time high of 150,000 units in July.
Between April and September, the company’s revenue increased 10.91% to ₹40,402.2 crore from the same period last year, while its net profit rose 3.8% to ₹4,040.7 crore.
“MSIL’S revenue is expected to grow at a CAGR of 19.7% in FY1719E, on the back of volume and realization CAGR of 13.3% and 5.4%, respectively. We derive confidence on the double-digit volume growth from the success of its new launches, namely Baleno, Brezza and new Dzire,” said Nishit Zota and Vidhum Mehta, analysts at ICICI Securities.