Maruti Suzuki is a large cap company and a fairly big large cap at that. Its market cap as of now is 3.19 lac crores… The company has done exceedingly well in the crossover car segment like the Brezza, and its colloboration with Toyota with the launch of Grand Vitara ( and to some extent Invicto) is paying it rich dividends. If it continues this kind of momentum for next 2-3 years, it can provide returns that you expect of around 20 % CAGR.
However autos are inherently a cyclical business and while the cycle once it turns tends to run for a few years, one has to consider possible disruptions that are happening in the space and how well equipped the company is to deal with these kind of situations.
The advantage Maruti has over its competitors is its distribution reach and service network all across the country. But companies like Hyundai have been very nimble in launching new versions of cars every 3-6 months and have been increasing their reach and distribution very fast. Competition in the form of Volkswagen,Toyota and Honda are also coming up with a slew of new product launches. Domestic players like M&M and Tata Motors are also showing good intent and growth.
So while Maruti seems well placed as of now to generate decent returns, one eye has to be kept on the competition and the company’s growth rate going ahead.
Personally I invest in small and midcaps and find much more lucrative options in these segments. So I don’t have a definite view on Maruti, even though the charts show a good breakout after a long period of time.
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