Fundamental Analysis of Maruti Suzuki: In India, owning a car is a significant achievement for anyone. The Middle-Class section is the driving force behind the economy and politics, and it is influential in understanding consumer patterns. As middle-class people’s disposable income grows, so does their luxury and spending; one industry that benefits from this growth is the automobile industry, in this article, we will look at Maruti Suzuki.

Fundamental Analysis of Maruti Suzuki

Company Overview

Maruti Suzuki Logo Image

In February 1981, the Company, formerly known as Maruti Udyog Limited, was formed 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 car maker. In India, the Company is in the business of manufacturing and selling passenger vehicles. 

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

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

Segment Analysis of Maruti Suzuki

In FY23, the company earns and recognises revenue from the manufacture, purchase, and sale of motor vehicles, as well as their geographic locations, with a domestic 87.39% and an international 12.60% share.  With a market share of 40.10% in the Passenger vehicle segment of the automobile industry, the company is a market leader. Below Table represents Sales Volume growth in FY23

Maruti Suzuki  -  Investor's Presentation
Source: Investor’s Presentation

Buyout

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

Maruti Suzuki attempted to acquire the company in 2014, but was unable to persuade its investors, including minority shareholders, that its decision to have its parent invest in a factory while it invests its cash stockpile on brand and distribution.

Industry Analysis

Indian Automobile Industry is undergoing a significant change in the world with climate change initiatives. The transition from OEMs to EVs takes time by investing in R&D. The Indian automotive industry is expected to reach US$ 300 billion by 2026. 

India could be a leader in shared mobility by 2030, providing opportunities for electric and autonomous vehicles. By 2030, the electric vehicle industry is expected to generate five crore jobs.

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

Fundamental Analysis of Maruti Suzuki: Financials

Revenue and Net Profit

The company earned its revenue from Rs. 1,17,571.30 crore in FY23 as compared to Rs. 88,329.80 in FY22, an increase of 33.10% YoY. Net profit was Rs. 8,211 crore in FY23 as compared to Rs. 3,879.50 crore in FY22, an increase of 111.65% YoY.

After a dip in FY19 and FY20, revenues are on the rise in FY21. Similarly, net profits followed the same trend as revenue and raw material costs increased over the last three years. Other income has increased to Rs. 2,140.70 crore in FY23 from Rs. 1,744.70 crore in FY22 on account of the higher fair valuation gain on investments in debt mutual funds. It forms more than 15% of net profit.

Particulars/ Financial YearRevenue (Cr.)Net Profit (Cr.)
2022-23₹ 1,17,571.30₹ 8,211
2021-22₹ 88,329.80₹ 3,879.50
2020-21₹ 70,372₹ 4,389.1
2019-20₹ 75,660₹ 5,677.6
2018-19₹ 86,068.50₹ 7,650.6
CAGR (4 Years)8.11%1.78%

Profit Margins

The OPM was 9% in FY23 as compared to 7% in FY22. The average over 5 years stood at 9.4%. NPM was 6.83% in FY23 as compared to 4.20% in FY22. The average was 6.61% over 5 years. The rise in raw materials cost and other fixed costs impacted the company’s OPM. OPM and NPM improved from FY22 after a dip during FY21.

Particulars/ Financial YearOPM (%)NPM (%)
2022-239%6.83%
2021-227%4.20%
2020-218%5.99%
2019-2010%7.34%
2018-1913%8.70%
Average (5 Years)9.40%6.61%

Return Ratios

In FY23, the company’s RoE was 13.28%, up from 7.01% in FY22. The average was 11.27%. RoCE was 16.02% in FY23 as compared to 8.08% in FY22. The average was 13.67%.

The company’s RoE was decent in FY23, but it did not reach its peak in FY19. RoCE is higher than RoE, indicating better debt utilisation. Automobile business is capital intensive and return on equity is based on profitability.  They are cyclical as well and returns tend to fluctuate over the period.

Particulars/ Financial YearRoE (%)RoCE (%)
2022-2313.28%16.02%
2021-227.01%8.08%
2020-218.36%9.52%
2019-2011.48%13.60%
2018-1916.24%21.16%
Average (5 Years)11.27%13.67%

Debt Analysis

The Debt to Equity ratio of the company in FY23 was 0.02 as compared to 0.01 in FY22. Interest coverage was 70.37 times in FY23, improved from 58.85 times in FY22.

The debt-to-equity ratio has slightly increased but is not cause for concern, and the interest coverage ratio is at a healthy level (anything above three times is considered good). The ratio has risen due to higher net profit despite an increase in interest costs.

Particulars/ Financial YearD/EInterest Coverage
2022-230.0270.37
2021-220.0158.85
2020-210.0151.61
2019-20053.04
2018-190138.92
Average (5 Years)0.00874.55

Key Metrics

Here are some of the key metrics of Maruti Suzuki .

ParticularsAmountParticularsAmount
CMP₹ 11,657Market Cap (Cr.)₹ 3,20,165 Cr
EPS (TTM)₹ 361.06Stock P/E (TTM)27.77
RoE (%)17.31%RoCE (%)21.24%
Price to Book Value5.11Net Interest Margin (%)6.83%
Promoters Holdings (%)56.48%FII Holdings (%)21.85%
Enterprise Value (Cr.)₹ 2,51,612.23Dividend Yield (%)0.90%

Fundamental Analysis of Maruti Suzuki: Future Plans

  • To meet the growing demand, the company is planning to start manufacturing in a new plant in Kharkhoda, Haryana, in the first half of 2025, with a capacity of 2,50,000.
  • The company expects to increase its capacity by opening new plants each year, reaching 1 million capacity by FY 2030-31.
  • The company plans to release its EV segment cars in FY24-25 and expects to have six different EV models by FY30-31, with 15-20% of sales coming from them.

Conclusion

As we near the end of the article, we will take a quick look at the company. Maruti Suzuki is a market leader in the automobile industry, and its financials are strong due to demand and new products developed through R&D expenditures. Tata Motors is leading the EV segment, and rapid change adoption is required to compete in the automobile industry.

Their financials are strong, and they have little to no debt, which can help the company compete. What do you think about the prospects of the company? Can it regain its lost market share? Let us know in the comments section below.

Written by Santhosh

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