78% gain & going strong; Maruti stays a Street darling
, ET Bureau|
Updated: Dec 12, 2017, 08.55 AM IST
ET Intelligence Group: The stock of Maruti Suzuki India has gained 78 per cent in 2017 so far. At FY18 forward price-earnings (P/E) multiple of 27, it now commands 62 per cent premium to its long-term average P/E of 16. Analysts still continue to be bullish on the stock following strong demand, the company’s competitive edge over peers due to leadership position, and a slew of products catering to various price categories. On sustained buying by institutions, the stock is now the sixth most valued on Indian bourses.
The company has consistently improved market share by launching products at competitive prices. Its market share in the passenger vehicles segment improved to 50 per cent in April-November 2017 compared with 46.7 per cent in the corresponding period of the previous fiscal. Its market share in the car segment reached a multi-year high of 56 per cent, while the share of the sports utility vehicles rose by 360 basis points to 28 per cent.
Maruti has four new models in the waiting period of four to 12 weeks, which provides a high-volume visibility. Analysts expect volume growth of 15 per cent and 11 per cent for the current and next fiscal year. In FY17, its sales volumes had increased by 10 per cent to 15.7 lakh units. It has guided for sales volume of 20 lakh by 2020.
After a spurt of new models by peers since 2008, the intensity has fallen in the past two years. The number of car models plateaued at 88 in FY16 and 84 in the current fiscal, according to CLSA. The SUV segment reported higher number of new launches at 14 compared with just three in FY13. With the launch of Brezza, Maruti has become the market leader in this segment. Barring Hyundai, the Indian car market remains insignificant for global automakers with volume share of less than 5 per cent of the revenues.
The easing competitive intensity augers well for the Maruti Suzuki.
On the flip side, the company is yet to launch an electric vehicle (EV). Given that the government has rolled out the stiff target to convert to emission-free vehicles, it will be a major challenge for the company. However, a recent alliance with Toyota for EV production is a step in the right direction.
The company has consistently improved market share by launching products at competitive prices. Its market share in the passenger vehicles segment improved to 50 per cent in April-November 2017 compared with 46.7 per cent in the corresponding period of the previous fiscal. Its market share in the car segment reached a multi-year high of 56 per cent, while the share of the sports utility vehicles rose by 360 basis points to 28 per cent.
Maruti has four new models in the waiting period of four to 12 weeks, which provides a high-volume visibility. Analysts expect volume growth of 15 per cent and 11 per cent for the current and next fiscal year. In FY17, its sales volumes had increased by 10 per cent to 15.7 lakh units. It has guided for sales volume of 20 lakh by 2020.
After a spurt of new models by peers since 2008, the intensity has fallen in the past two years. The number of car models plateaued at 88 in FY16 and 84 in the current fiscal, according to CLSA. The SUV segment reported higher number of new launches at 14 compared with just three in FY13. With the launch of Brezza, Maruti has become the market leader in this segment. Barring Hyundai, the Indian car market remains insignificant for global automakers with volume share of less than 5 per cent of the revenues.
The easing competitive intensity augers well for the Maruti Suzuki.
On the flip side, the company is yet to launch an electric vehicle (EV). Given that the government has rolled out the stiff target to convert to emission-free vehicles, it will be a major challenge for the company. However, a recent alliance with Toyota for EV production is a step in the right direction.
