Maruti Suzuki Share Price : Is There Any Rally Left?

Maruti Suzuki Share Price - Analysis!
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Maruti Suzuki

Maruti Suzuki India Limited (MSIL) is a subsidiary of Suzuki Motor Corporation, Japan. Formerly known as Maruti Udyog, incorporated as a JV between the Government of India and Suzuki Motor Corporation of Japan in February, 1981. The latter currently holds a 56.2% equity stake in the entity. The company is credited with having ushered the automobile revolution in the country with some of the iconic releases in the passenger vehicle segment, the Maruti 800 being the poster boy for car ownership by the elite of that time. 

Maruti Suzuki Sub-segments

The company is primarily involved in the passenger vehicle industry with sub-segments such as Mini cars, Compact cars, Mid-size, Utility vehicles, Vans, and Light Commercial Vehicles. Let’s look at the May 2022 sales from each of the mentioned segments. 


 

As is clearly evident from the above chart, Maruti Suzuki sells a bulk of its total units in the compact cars segment. This has got into the customer psyche so much that Maruti Suzuki implies affordability and compactness of cars. Among compact cars, WagonR is the leader with 16,814 total units sold. The highest YoY growth was seen in Celerio, again a compact car. Over the years, the company has been championing affordability above anything else, which has given handsome dividends in terms of market share. Following compact cars are utility or commonly called SUVs. In this, Ertiga is the leader with 12,226 cars sold. 

The industry is of the opinion that, Compact SUVs are set to overtake small or mini cars in the future. This is something that the above chart says as well. People seem to prefer the designs of SUVs, upright driving stance, and the high ground clearance which are rightly suited for Indian driving conditions. In fact, we had done a report on the latest Auto Sales of all companies, you can check that here.

 


Maruti Suzuki continues to dominate the passenger vehicles market for the reasons we had mentioned above. The company has largely remained resilient over the years, however, the release of competitive models from the likes of Hyundai, Tata Motors and some of the international biggies like Kia has affected the market share to some extent. Indian customers are beginning to realize the importance of safe cars due to the widely popularised safety tests conducted by various organizations. 

Brands like Tata Motors are starting to hinge on this feature to market their cars, an area where Maruti Suzuki falls behind. The 8-year fall in market share of Maruti Suzuki and the 13-year gain by Tata Motors further explains the above inference. 

 

Maruti Suzuki : Revenue from Operations

Cars are increasingly becoming computers on wheels. To that effect, semiconductors play an important role in the functioning of cars. They are used in controlling emissions, minimizing oil consumption, and providing infotainment capabilities. In the financial year 2019, China faced a growing number of Covid-19 cases which was soon to halt factories not just in China but worldwide. This led to the semiconductor shortage which hampered Maruti Suzuki’s production. 


Observe that the FY19 figures reflect a drop in revenues owing to the semiconductor shortage. Revenue fell close to 21% at that time. If you are aware, the automobile sector has a significant correlation with consumer sentiment. This had to be true, as positive consumer sentiment propels higher purchases. 

There was an improvement in the consumer sentiment at the end of FY20 which increased revenues. Again, there was a decrease at the end of FY22 as high commodity prices fueled by increasing crude oil prices dampened consumer sentiments. 

Maruti Suzuki: Financial Key Points


All figures are compared against Tata Motors and Mahindra & Mahindra. Source: Moneycontrol.com

  • Operating margin as compared to its peers was the highest in FY18 and FY19, but started to decline in the later years. Mahindra & Mahindra seemed to have performed better compared to other firms. 
  • The Inventory Turnover Ratio represents the rate at which a company replaces its inventory due to sales. Maruti Suzuki was the standout performer compared to its peers in all the years. Thanks to its cars which lead in almost all the segments.
  • The manufacturing Cost Component is the relationship between the cost of materials consumed and sales volumes. This is a good indicator to gauge efficiency and optimal utilization of resources. The less, the better. Maruti Suzuki beat its competitors in the earlier two years in purview. In the later years, M&M fared better despite a rise in component costs.

Maruti Suzuki : Return on Capital Employed

This measure tells us how well a company is employing its capital to generate profits. It is used especially in capital-intensive industries like automobiles. 


Maruti Suzuki has zero debt because of which its ROCE is a lot higher than competitors. Reduction implies decrease in the EBIT churned by the company. M&M overtook Maruti Suzuki in the recent past, high EBIT and low debt is the reason behind the same. 

Maruti Suzuki Share Price Movement


Check out the Maruti Suzuki share price today 

There is a mounting fear that the company might continue to lose market share as competition increases and the company falls behind the curve in the EV race. The management has assured more models in the hybrid and CNG segments where the growth is substantially less compared to EVs. However, improvement in margins can help share prices to climb. 

The company's new models for 2022 are seeing strong bookings growth which is a good sign for the near term. The auto sector is cyclical in nature and is susceptible to market booms and declines. 

Maruti Suzuki Share Price : Is there any growth left?

There is a mixed consensus given by analysts overall. Going by the latest data, 6 have issued a “sell” rating, while 9 have issued a “buy”. Taking all together, 31 analysts have subscribed to a “buy” rating with a target range between ₹11,735 and ₹5,200. 

  • How do I invest in Maruti Suzuki Share?
  • Is it right time to buy Maruti shares?
  • Will Maruti share price go up?
  • Is Maruti Suzuki a buy?
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