Maruti Suzuki’s market cap crosses that of SBI, sixth highest overall

Maruti Suzuki, Mahindra see end of road for diesel cars
Maruti Suzuki, Mahindra see end of road for diesel cars

New Delhi: Shares of India’s largest car maker Maruti Suzuki India Ltd jumped 2.11% to an all-time high of Rs9,072 apiece on Friday, making the Delhi-based automaker the sixth most valued firm on the BSE, ahead of State Bank of India (SBI).

The list of the most valued companies on the BSE is led by Reliance Industries Ltd, followed by Tata Consultancy Ltd (TCS), HDFC Bank Ltd, ITC Ltd and Hindustan Unilever Ltd.

Maruti Suzuki’s market capitalization on Friday stood at Rs2.74 trillion, marginally ahead of SBI’s Rs2.71 trillion. In terms of valuation, the Indian unit of Japanese automaker 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 share price can be attributed to the continuous increase in the company’s market share in the passenger vehicle segment, said Ashwin 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 realization per unit of the company has also been improving,” Patil said.

“The November wholesale numbers have also been good. So, this has all contributed to the growth in the stock price,” Patil added. “We have a target price of Rs10,000 for stock by FY19,” he added.

Maruti shares have risen 73% in the last one year.

The market capitalization of Tata Motors Ltd stood at Rs1.18 trillion on Friday.

Maruti Suzuki is riding a wave of an extremely successful product cycle that has seen the introduction of models such as the Baleno hatchback, Vitara Brezza SUV and the new 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 3 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 (26% in FY19/20E) and improving free cash flows, MSIL will continue to trade at a premium,” said Abhishek Jain and Sneha Prashant, analysts at HDFC Securities.

Over the last 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 1.5 lakh units in July. Between April and September, the company’s revenue grew by 10.91% to Rs40,402.2 crore from the same period last year, while its net profit rose 3.8% to Rs4,040.7 crore.

“MSIL’s revenue is expected to grow at a CAGR of 19.7% in FY17-19E, on the back of volume and realisation CAGR of 13.3% & 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.