Fundamental Analysis of Maruti Suzuki

Fundamental Analysis of Maruti Suzuki: In India, owning a car is a major achievement for anyone. The middle class section is the driving force behind the economy and politics and has a huge impact on understanding consumption patterns. As the disposable income of the middle class increases, so do their luxuries and spending. One industry benefiting from this growth is the automotive industry. In this article, we will take a look at the Maruti Suzuki.

Fundamental Analysis of Maruti Suzuki

Company Overview

In February 1981, the company, previously known as Maruti Udyog Limited, was established as a joint venture between the Government of India and Suzuki Motor Corporation of Japan. Suzuki Motor Corporation currently owns 58.19% of the company.

Maruti Suzuki India Limited (MSIL), a subsidiary of Suzuki Motor Corporation, is India’s largest passenger vehicle manufacturer. In India, the company is engaged in the business of manufacturing and selling passenger vehicles.

Currently, Maruti Suzuki has a portfolio of 16 car models with over 150 variants. Maruti Suzuki’s product line ranges from entry-level compact cars like Alto 800 and Alto K10 to luxury sedan Ciaz. Other activities include promoting used car sales, fleet management, and car financing.

The company has manufacturing facilities in Gurgaon and Manesar, Haryana and a research and development center in Rohtak, Haryana.

Segment Analysis of Maruti Suzuki

In FY23, the company generates and recognizes revenue through manufacturing, purchasing, selling and geographical locations of automobiles with a share of 87.39% domestically and 12.60% internationally. The company is leading the market in the passenger car segment of the automobile industry with a market share of 40.10%. The table below shows the sales growth in FY23.

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Suzuki Motor Gujarat (SMG) will be acquired by Maruti Suzuki India Ltd (MSIL) from its parent Suzuki Motor Corp. (SMC) for a book value of Rs 12,755 crore.

Maruti Suzuki attempted to take over the company in 2014 but failed to convince investors, including minority shareholders, of the parent company’s decision to invest in factories and cash reserves into brands and distribution.

industry analysis

The Indian automobile industry is undergoing major changes globally due to climate change initiatives. The transition from OEM to EV takes time due to investment in R&D. India’s automotive industry is expected to reach $300 billion by 2026.

India can become a leader in shared mobility by 2030, providing opportunities for electric and autonomous vehicles. By 2030, the electric vehicle industry is expected to create 5 billion jobs.

The Automotive Mission Plan 2016-26 is a joint initiative of the Government of India and the Indian automobile industry to lay out a roadmap for the development of the industry.

Fundamental Analysis of Maruti Suzuki: finance

Sales and Net Profit

The company earned a profit of Rs. 1,17,571.30 crore in FY23 compared to Rs. 88,329.80 in FY22, a 33.10% increase over the previous year. Net profit was 5 million won. 8,211 crore in FY23 compared to Rs. 3,879.50 crore in FY22, an increase of 111.65% over the previous year.

After declining sales in FY19 and FY20, sales are increasing in FY21. Similarly, net profit has also shown the same trend over the past three years, with sales and raw material costs increasing. Other income increased to 50 million won. 2,140.70 crore in FY23 from Rs. 1,744.70 crore in FY22 due to higher fair valuation gains on debt mutual fund investments. This accounts for more than 15% of net profit.

profit

OPM was 9% in FY23 compared to 7% in FY22. The five-year average was 9.4%. NPM was 6.83% in FY23 compared to 4.20% in FY22. The five-year average was 6.61%. Rising fixed costs such as raw material costs affected the company’s operating profit margin. Operating profit margin and NPM improved compared to FY22 after decline in FY21.

rate of return

The company’s RoE in FY23 increased to 13.28% from 7.01% in FY22. The average was 11.27%. RoCE was 16.02% in FY23 compared to 8.08% in FY22. The average was 13.67%.

The company’s RoE was good in FY23 but failed to reach its peak in FY19. RoCE is higher than RoE, indicating better debt utilization. The automobile business is capital intensive and return on equity is based on profitability. They are also cyclical and returns tend to fluctuate over time.

debt analysis

The company’s debt to equity ratio in FY23 was 0.02 compared to 0.01 in FY22. Interest coverage was 70.37 times in FY23, an improvement over 58.85 times in FY22.

The debt ratio has slightly increased, but it is not a cause for concern, and the interest coverage ratio is also at a good level (more than 3 times is a good level). Despite the increase in interest expenses, the ratio rose due to the increase in net profit.

key indicators

Key indicators for Maruti Suzuki are:

Maruti Suzuki Fundamental Analysis: Future Plans

• To meet the growing demand, the company plans to start manufacturing in the first half of 2025 at its new plant in Kharkoda, Haryana, with a production capacity of 2,50,000 units.
• The company expects to increase production capacity by opening new plants every year, reaching a production capacity of 1 million units by fiscal 2030-31.
• The company plans to launch its EV segment cars in FY24-25 and six different EV models by FY30-31, with 15-20% of its sales expected to come from these models.

conclusion

We’ll take a quick look at the company towards the end of the article. Maruti Suzuki is a market leader in the automobile industry and has strong financials due to new products developed through demand and R&D expenditure. Tata Motors is leading the EV segment and rapid adoption of change is required to compete in the automotive industry.

Their financial position is strong and they have little or no debt, which can help the company compete. What do you think about the company’s prospects? Can lost market share be regained? Let us know in the comments section below.

Written by Santosh

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