Hello Hitesh ji,
Would appreciate your views on Maruti as a medium term bet (3-4 years) with moderate return (~20% CAGR) expectation. Below is a summary of my analysis and estimates:
• In Q2 FY 2024, company reported highest ever quarterly volume, sales and profit. Sales volume went up 6.7%, revenue up 25% and profit up 80% on YoY basis. As per concall comments, there is no one off, although some factors (commodity, forex) seems to have benefitted the company. Management is cautiously optimistic about growth and margins.
• Company is outpacing industry growth, even when its traditional bastion of small car portfolio sales is muted.
• Maruti is now at leadership position in SUV segment with 23% market share.
• Maruti’s plan of betting on CNG & hybrids in medium term also seems to be working. CNG is 21% of volume in latest quarter.
• Share price crossed 10,000 after coming out of almost 6 year rounding bottom.
In my opinion, with factors like good GDP growth, increased premiumization and growth returning in small car segment, revenue can grow at 15-20%, and profits can grow at 20-25%+ over next few years. Current valuation is also not too demanding considering the latest quarterly result.
Similar situation happened in 2014-2018 period when stock price consolidated for 5+ years and then went up 5X in next 4 years when growth was good.
| Subscribe To Our Free Newsletter |
