Cmp- 5879Rs
Maruti Suzuki India Ltd a 100% debt free, a 38 years old company is a part of Suzuki Motor Corporation a Japanese multinational corporation headquartered in Minami-ku, Hamamatsu.In 2016, Suzuki was the eleventh biggest automaker by production worldwide. Suzuki has over 45,000 employees and has 35 production facilities in 23 countries, and 133 distributors in 192 countries.
Maruti Suzuki India Ltd (formerly Maruti Udyog Ltd) is India’s largest passenger car company, accounting for over 50 per cent of the domestic car market. The company was established in February 1981 with production starting in 1983 with the Maruti 700, made entirely in India. The Japanese car major held 56.21% stake in Maruti Suzuki.
The company is engaged in the business of manufacturing, purchase and sale of motor vehicles and spare parts (automobiles). The other activities of the company include facilitation of pre-owned car sales, fleet management and car financing. The company has nine subsidiary companies, namely Maruti Insurance Business Agency Ltd, Maruti Insurance Distribution Services Ltd, Maruti Insurance Agency Solutions Ltd, Maruti Insurance Agency Network Ltd, Maruti Insurance Agency Services Ltd, Maruti Insurance Agency Logistics Ltd, True Value Solutions Ltd, Maruti Insurance Broker Ltd and J J Impex (Delhi) Pvt Ltd.
Considering huge distribution network of the cars along with its low cost annual service of cars Maruti Suzuki is a household name in the India automobile industry. It is also said that majority of the first time car buyers prefer Maruti as their first car.
Strong parent support
MSIL has effectively leveraged its association with its parent, Suzuki Motor Corporation (SMC), which has extended product development support, shared technological expertise, and provided access to a broad product range. In January 2019, SMG completed the construction of Plant II and thereby starting production. Plant II having an annual capacity of 2.5 lakh units It currently sources vehicles from SMC’s wholly owned subsidiary in Gujarat under a contract manufacturing arrangement, wherein the vehicles will be sold to MSIL at cost. Along with Plant II, the powertrain plant has also become operational. Construction of Plant III has already begun and the same is expected to come online by 2020, taking the capacity of the Gujarat plant to 7.5 lakh units annually and cumulative capacity of MSIL to 23 lakh units. Plant I at Gujarat was completed and started commercial production from March 2017 with an annual capacity of 2.5 lakh units. In January 2019, SMG completed the construction of Plant II and thereby starting production.
SMC during fiscal 2018, has approved a new method of calculation of royalty wherein for all new models starting IGNIS (i.e IGNIS, Dzire, New Swift, Breza, New Ertiga and New Wagon R), royalty will be paid in Indian Rupee. Once a particular level of volume is achieved, royalty will come down.
Also recently Maruti Suzuki India has forayed into premium automobile segment with the exclusive showroom and separate cars through its Nexa Brand. Financials-: On the financial front the company has delivered a solid Sales growth of 13% and 16% over 5 and 3 years period. Apart from that the Compounded net profit Growth rate of the company stands at 25 % over the 3 and 5 year period. Company has huge amount of investments in various other companies , Subsidies and capital markets which is around 37,000cr or approx. 1200Rs per share which creates immense value for the company & shareholders over long term.
One of the biggest concern currently is that automobile sector is not performing very well. Maruti on the other hand one of the Indias largest car manufacturer didn’t sell a single unit in domestic market in the month of April. While the pain of the COVID-19 crisis would result in a very weak FY21, it is expected that Maruti will come back stronger and recover faster than peers. Furthermore Volume recovery in 2HFY21 is critical to the stock’s performance.
Partnering Up-:
Maruti has partnered with Karur Vysya Bank to offer simpler and flexible financing schemes for new customers. Through the partnership with the bank, the company is seeking to offer prospective buyers special scheme of up to 100 per cent on road funding with six months holiday period on all models, except van EECO), loans for both salaried and self-employed customers and repayment period up to 84 months
Maruti has also partnered with IndusInd Bank for vehicle financing to help spur sales after resumption of operations following lockdown relaxations. Through the partnership, consumers can avail of low EMI scheme for the first three months starting at Rs 899 per lakh; step-up scheme with EMI starting with Rs 1,800 per lakh; up to 100 per cent on-road funding for customers with valid income proof, the company said in a statement.
Financials-:
Past Financials have not been presented for analysis since the data due to the the pandemic and complete Lockdown may be distorted . For instance due to complete lockdown the company did not sell a single unit in the domestic market in the month of april, therefore emphasis has not been made on the past financials here.
Conclusion-:
Automobile sector after Covid-19 pandemic seems to be hit the hardest. People with less income are refraining from buying the luxurious cars but on the other Han demand for mid range priced cars is expected to keep spurring. Now with this pandemic people are more scared to use public transport which in turn leads to increase in usage of private vehicle and ultimately increasing demand for private vehicles. Maruti one of the low cost automobile with extremely friendly after sales servicing and repairs costs is a household name for the Indian Market. It is also said that the first car purchased should be of Maruti only. Therefore after the pandemic along with the steps taken by the company with aggressive management for easy financing it is expected to spur the demand in the coming time and Maruti can be the biggest beneficiary.
Furthermore in order to revive automobile sector Government may also take the necessary steps if possible that is chances are may further modify or extend car scrapping policy currently applicable in Delhi to the other parts of the country by implementing policies such as it would ban the use of cars that are older than 15 years or so. This is just a view presented it may also not be the case , however users are requested to take this in due consideration and not buy based solely on the views presented since darkhorsestocks or any member of darkhorsestocks would not be responsible for any loss.
Maruti Suzuki was previously suggested at a the price of 5769 Rs and since then the stock has delivered approx. 35% returns excluding dividends in past 1 year before falling to the current levels.
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