Maruti crosses Rs3 trillion in market cap, shares hit Rs10,000 mark

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Mumbai: Maruti Suzuki India Ltd on Wednesday hit the Rs10,000 per share mark for the first time and became the country’s sixth company to cross Rs3 trillion market capitalization after its shares surged over 84% so far this year. It is the first Indian automaker to achieve this milestone.

The stock touched a fresh record high of Rs10,000 on the BSE, up 1.5% from its previous close with a market cap of Rs3.01 trillion. The Sensex index was trading marginally higher by 0.07%; year-to-date, it rose 28%.

“Maruti Suzuki is likely to enjoy a golden run over the next three to five years with limited competition, stable industry growth and as it benefits from the change in emission norms to BS-VI from BS-IV. We expect the company’s EBITDA margin to surpass historical peaks due to limited capacity and limited competition,” said Kotak Institutional Equities in a 20 December report. Ebitda stands for earnings before interest, tax, depreciation and amortization.

The brokerage house has maintained its add rating on the stock and increased its target price to Rs10,300 from Rs9,300 earlier.

“We maintain our forecast of 22% F18-20 EPS CAGR (compounded annual growth rate) and roll forward our price target to Mar ’19 (vs Sep ’18 previously). We continue to base our PT on a multiple of 25, which we apply to our Mar ‘20 EPS estimate, implying 17% potential upside,” said Morgan Stanley in a 10 December report. The brokerage house has reiterated its bullish stance on the stock raising its target price on the stock to Rs10,563 from Rs9,102 a share.

Earlier, five companies have crossed this landmark—Reliance Industries Ltd (RIL), Tata Consultancy Services Ltd (TCS), HDFC Bank Ltd, ITC Ltd and Oil & Natural Gas Corp. Ltd.

Currently, RIL is India’s most valued company with market capitalization of Rs5.84 trillion, followed by TCS and HDFC Bank at Rs4.89 trillion and Rs4.89 trillion, respectively.

Maruti is also the 12th largest auto company in the world, in terms of market capitalization. Its market cap is around 44% higher than that of its parent—Japan’s Suzuki Motor Corp.

“Strong demand for new models, benefits from market trend towards premiumisation, and healthy cash flow generation are key positives which make Maruti Suzuki our top pick in the Indian auto sectors,” said Nomura in its Global Autos outlook report on 24 November. The brokerage house has a buy rating on the stock with a target price of Rs9,843 a share from Rs8,425 a share.

Of the 54 brokers tracking the Maruti stock on Bloomberg, as many as 41 recommended a “buy” rating, one asked its investors to “sell” the stock and 12 have a “hold” rating.

Maruti Suzuki accounts for more than 55% of its revenues and is the passenger vehicle market leader, with a market share of over 50%. It does not sell an electric vehicles in India as of now.

Earlier this month, the company said it will build electric cars, with the government pushing for environment-friendly alternatives to diesel and petrol vehicles.

“We will make electric cars. We intend to be leaders in the segment as well,” chairman R.C. Bhargava said at a press conference where the company announced its quarterly earnings on 27 October.

Bhargava didn’t specify a timeline by when India’s biggest carmaker plans to start manufacturing electric cars, a segment in which Mahindra & Mahindra Ltd is the local leader.