3 Factors that Could Trigger a Rally in Maruti's Stock Price

The March 2024 quarterly results of Maruti Suzuki (India) were keenly awaited given that the stock had hit a 52-week high of Rs 13,066 earlier this week.

While declaring its earnings, the carmaker highlighted that its performance represents its highest ever unit sales, net sales and net profit for both - fourth quarter of FY24 and for the full financial year.

Apart from that, the firm also recommended its highest ever dividend.

The board recommended a final dividend of Rs 125 per share, its highest ever.

Key Takeaways from Maruti Q4 Results

The company's sales of 4-wheelers rose 13.4% YoY to 584,031 units in the March 2024 quarter and it helped standalone operating profit rise 39.8% YoY to Rs 46.8 billion (bn).

Strong demand for higher priced models like Invicto, Jimny and S-Cross helped average price realisations per car rise 5.2% YoY to Rs 6.54 trillion in the March 2024 quarter.

It also helped the company's standalone operating profit margin rise 180 basis points to 12.3% in the quarter under review.

Maruti Suzuki had hiked prices of its vehicles in early January 2024 and coupled with better price realisations per vehicle sold, the carmaker offset higher input costs of steel and non-ferrous metals.

The company in early April 2024 had expanded its Manesar, Haryana production capacity by one lakh units annually with a new assembly line.

This is expected to increase the availability of popular models like Brezza and Ertiga. The above capacity expansion is part of the company's plan to double its production capacity to four million vehicles each year over the next 7-8 years.

As part of its expansion plans, Maruti is looking to expand its product range from 17 models currently to 28 models over the next 7-8 years with a capital expenditure of nearly Rs 1.25 trillion!

In addition, the company will be expanding its range of electric vehicles (EVs) and SUVs over the next few years.

How Maruti's Stock Price Has Performed Recently

Investor optimism has helped Maruti Suzuki share price rise 49% over the past one year vis-a-vis a 21.5% rise in the Sensex.

Maruti is also one of the best performing Nifty 50 stocks during this time period.

The company's ability to manage rising input costs like steel and non-ferrous remains key going forward. The company had hiked prices in early April 2024 too.

In 2024 so far, the stock is up around 25%.

Maruti Suzuki India trades at a P/E of 26 times estimated standalone FY25 earnings while rival Mahindra and Mahindra trades at a P/E of 18 times estimated standalone FY25 earnings.

Here's a table comparing Maruti with its peers -

Comparative Analysis

Company	Maruti	M&M	Mercury Metals
ROE (%)	14.0	22.1	5.4
ROCE (%)	17.7	14.9	4.4
Latest EPS (Rs)	387.0	89.7	0.1
TTM PE (x)	32.8	22.8	648.2
TTM Price to book (x)	4.9	4.1	17.5
Dividend yield (%)	1.0	0.8	0.0
Industry PE	26.8
Industry PB	4.4

Data Source: Ace Equity

Maruti Suzuki is the largest player in the domestic 4-wheeler segment with a market share of over 40% and it gets superior valuations on Dalal Street vis-a-vis rivals.

Maruti's low-cost manufacturing, coupled with a distinct advantage of product positioning, has helped it offer vehicles that are affordable, low on maintenance costs, and with superior fuel efficiency.

The company also boasts an impeccable sales and service network, apart from good resale value, all of which have contributed to the carmaker's success.

Since 2001, Maruti's market share has hovered around 45-50%, barring a blip in 2012. Also, in 2023 its market share went up to 43%, from 39% in 2020.

The company's chairman recently made a statement which turned the sentiment around the stock even more bullish.

RC Bhargava said that small cars may make a comeback by 2026, dismissing the argument that two-wheeler and first-time car buyers have become aspirational and are leapfrogging to mid-sized cars and SUVs.

Here's something even interesting... Maruti Suzuki currently trades at a PE multiple that's considerably lower than its 10-year average.

The company is getting battle ready with 8 new launches being planned over the next 4 years and with most of it being in the red-hot SUV space.

All the above factors indicate that this is one stock that you can certainly keep an eye out for.

For more, check out the below video where Co-head of Research at Equitymaster compares Maruti with its peer Tata Motors.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...